Smithfield, Va.-based hog processor Smithfield Foods has announced earnings of US$24.9m for the Q4 of fiscal 2002, ended 28 April, down from US$48.5m year on year. Including one-time, after-tax gains of US$5m, Q4 2001 reported net income totalled US$53.5m, or US$0.49 per diluted share.
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For FY 2002, Smithfield Foods reported record earnings of US$195.7m, or US$1.77 per diluted share, compared to US$174.9m, or US$1.59 per diluted share, prior to unusual items. Including the impact of unusual items in both periods, fiscal 2002 earnings were US$196.9m, or US$1.78 per diluted share, versus US$223.5m, or US$2.03 per diluted share, in 2001. FY 2001 unusual items included gains on the sale of IBP stock and a Canadian plant totalling US$48.6m, or US$0.44 per diluted share.
Q4 sales totalled US$2bn, 30% above US$1.5bn in the same period last year. For the full year sales were US$7.4bn, up 25% from US$5.9bn in FY 2001. The increases were due to the sales of newly-acquired companies and an improved product mix in the company’s value-added product categories.
The company attributed the lower results in the Q4 versus a year ago to sharply lower live hog prices and weak fresh pork demand as a result of the excess protein supply in the domestic marketplace. A major contributing factor was the Russian ban on chicken imported from the US.
Meat Processing Group (MPG) operating income rose 20% in the Q4 to US$59.4m from US$49.5m last year, excluding a US$5.1m pre-tax, non-recurring gain on the sale of the Canadian plant in last year’s Q4. Processed meats margins rose sharply, more than offsetting lower fresh pork margins. The improvements in processed meats margins reflected efforts to improve product mix, including pre- cooked and fully-cooked product lines, and stronger pricing discipline. Lower fresh pork margins reflected the overall environment for fresh pork in the market.
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By GlobalDataExcluding sales related to the Canadian fresh pork plant sold in the prior year, fresh pork tonnage was about equal to last year’s volume while processed meats volume increased 2%. Average unit selling prices for all of the company’s pork products declined 4% from the same quarter a year ago, directly related to the overall decline in fresh pork prices.
Smithfield Foods’ newly-formed beef processing division, also negatively affected by the excess supply of protein in the US marketplace, was marginally profitable on sales of US$557.3m. This division was formed after the acquisition of Moyer Packing Company in June and Packerland Holdings in October. These results are included in the MPG segment.
Q4 Hog Production Group (HPG) operating earnings were US$17.2m versus US$66.4m a year ago, as live hog prices fell 17% below the same period in fiscal 2001.
FY results
For fiscal 2002, the MPG reported operating income of US$198m versus US$130.2m, excluding the plant sale in the previous year, a 52% increase. MPG’s base business sales rose 4% on a 1% increase in volume, improved product mix and more favorable pricing. Base business processed meats volume grew 1% while operating income almost doubled. Including sales of acquired companies, processed meats volume grew 5%.
Fresh pork margins expanded well above a year ago as the company continued to shift more fresh pork to further processed, value-added and branded fresh pork categories. Volume declined 3% on the sale of a plant. Excluding the impact of the plant sale, fresh pork volume increased 2%. Average selling prices on all of the company’s pork products increased 4% for the year, while average live hog costs were down 2%. The company’s new beef division had sales of US$1.3bn and operating income of US$10m.
Led by a strong processed meats performance in France, the company’s international meat processing group posted improved operating performance. International results are included in the MPG segment.
Operating income in the HPG was US$271.6m, excluding a US$5m, pre-tax loss resulting from a fire at Circle Four farms, compared to US$281.3m a year ago. Live hog prices were down 2% for the year compared to fiscal 2001.
During the Q4, Smithfield Foods continued its policy of repurchasing shares when the company believes it provides value to shareholders. The company purchased 441,700 shares in the Q4 and 4,636,300 during fiscal 2002.
“We are disappointed in our Q4 results, which reflected lower fresh pork prices and live hog prices,” said Joseph W. Luter, III, chairman and CEO: “However, we are extremely pleased with our FY results, which represented the fifth year of record profits in the last six.
“The commodity side of our business will always have some volatility and profits will move with the markets. As we always have, we will continue to focus on our long-term strategy of utilizing our superior raw materials in fresh pork and further processed meats to develop our core brands, improve our product mix and expand margins,” he said.
