Meat company Smithfield Foods has reported a fall in income for the second quarter ended 30 October, blaming costs associated with the restructuring of its east coast pork processing operations.
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Net income for the second quarter of fiscal 2006 was US$51.6m, versus net income last year of US$58.4m. Sales were US$2.9bn, compared with US$2.7bn a year ago.
Current quarter results include pretax charges totalling US$16.3m in connection with the restructuring of east coast pork processing operations. Last year’s second quarter included pretax charges of US$8.3m related to operating losses and shutdown costs of the Showcase Foods plant and the settlement of a civil suit.
The restructuring charges of the east coast pork processing operations include the previously-announced plan to cease fresh pork processing at the Smithfield Packing plant in Smithfield, Virginia. Additionally, the company has announced the closing of an outdated facility in Salem, Virginia. The Salem facility’s production will be transferred to other plants with no anticipated loss of volume.
The strong second quarter results reflect the combination of solid profitability in fresh pork, processed meats and hog production.
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By GlobalData“Our strategy of managing our business model as an integrated pork operation, rather than as a processor and a producer, is working well,” said Joseph W Luter III, chairman and chief executive officer. “By considering both sides of the business, we were able to better manage the total business and improve the combined profitability of the complex. Results in this quarter once again bear this out and I am pleased with our performance.”
Mr. Luter said that the company was continuing its US$350m capital expenditure plan to dramatically increase production capacity and improve operational efficiencies of the processed meats business. “This expansion programme is an integral part of our strategy to utilize all of our superior raw materials internally and significantly improve margins,” he said.
“We currently are enjoying a good quarter in both hog production and pork processing. Traditionally, the third quarter is our best in pork processing and this year should be no exception,” he said. “I am very optimistic about the second half of the year, as the outlook appears good for both hog production and pork processing. Our integrated model is solid and we are continuing to build a stronger and stronger base of business for the longer term,” he said.
