Smithfield Foods, the US pork processor today (Tuesday) announced net income for the third quarter of fiscal 2005 of $97.5m, compared with income from continuing operations last year of $42.1m.
Sales for the quarter, which ended on 30 January 2005, were $3.1bn compared with $2.7bn last year.
“The substantial increase in earnings is attributable to the continued success of Smithfield’s vertically integrated pork operations, enabling the company to realize improved profitability during this period of increased livestock cost,” it said.
In the quarter, the company’s hog production operations benefited from a 48% increase in live hog market prices year over year. Raising costs remained about the same as last year, but down about $1.50 per hundredweight from the second quarter.
Despite the sharply higher livestock prices, fresh pork margins remained solid as the result of continued strong export and domestic pork demand. The company’s beef segment operated at near breakeven levels due to the continuing difficult market conditions in the beef and cattle industries.
Pork exports continued strong in the quarter, running 26% ahead of the same period last year and increasing 23% in the year-to-date, after adjusting for the additional week last year. Price increases in fresh pork, however, were not sufficient to fully recover the much higher raw material costs.
Processed meats margins also were down from a year ago on considerably higher input costs. The company continued to drive volume, however, in important value-added, pre-cooked categories, including bacon, entrees and ribs, which grew at double-digit rates.
Smithfield’s beef segment earnings were at a break-even level in spite of weak demand, closed export markets, tight cattle supplies and high cattle costs. Beef volume was down four percent compared with a year ago, after adjusting for the additional week a year ago. Last year’s third quarter was adversely impacted by $11m in pre-tax costs and inefficiencies in the beef segment related to the reported case of BSE in Washington state.
Other segment earnings were slightly above the same quarter last year, led by the company’s turkey operations, which reported improved results.
For the first three quarters, income from continuing operations and diluted earnings per share were $210.8m compared to $91.6m for the 40-week period ended 1 February 2004.
“Through our vertical integration strategy, our pork processing and hog production operations combined to produce a record quarter from operations, even though we had no earnings contribution from our beef business. I am confident that this combination of businesses should produce improved fourth quarter results over a year ago, despite a relatively strong fourth quarter in fiscal 2004,” said Joseph W. Luter, III, Smithfield’s chairman and chief executive officer.
“I continue to be optimistic about our future,” he said. “It appears that the pork export market will remain at high levels, which will drive the domestic pork market and live hog markets. The futures markets confirm the positive live hog market outlook. Additionally, the US hog breeding herd remains stable. We are positioned for consistent, future growth,” he said.
