US pork processor Smithfield Foods has reported lower first-quarter net income, partly due to US$5m in operating losses associated with the brief closing of one plant in Poland.
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The company said net income for the first quarter of fiscal 2006 was $49m, or 44 cents per share, compared to $54.9m, or 49 cents per share, in the corresponding period of last year. Sales were $3bn, compared to $2.7bn a year earlier.
Smithfield said its vertically integrated pork operations enabled the company to realise solid earnings in an otherwise weak fresh pork environment. The fiscal first quarter is generally the weakest quarter of the year for pork, as demand is usually soft in summer months. In addition, the company’s beef operations, and the beef industry in general, continued to labour under difficult industry conditions.
In the pork segment, processed meats volume grew 8% year-on-year in the base business, and 9% including acquisitions, on strong gains in the pre-cooked category and increased volumes in bacon and hotdogs.
As part of a plan to improve efficiencies and fresh pork margins, the company said it will be ceasing fresh pork processing at its Smithfield Packing plant in Smithfield, Virginia at the end of October. The company expects this move to reduce its total hogs processed in the US by less than 2%, as the vast majority of the volume will be absorbed by the two remaining east coast fresh pork plants which have been operating below full capacity. An estimated pre-tax charge of approximately $8-10m will be recorded during the fiscal second quarter.
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By GlobalData“I am satisfied with the company’s performance in the current quarter, given several negative factors in the marketplace,” said Joseph W. Luter, III, chairman and chief executive officer. “I am particularly pleased with our processed meats business. We continue to focus on using all our hams and bellies internally and in growing the pre-cooked category.”
“The second and third fiscal quarters are generally the strongest quarters of the year for our pork operations. Given the current outlook, I fully expect that fiscal year 2006 will be another strong year for Smithfield Foods,” Luter added.
