Source:  Lisa M. Keefe, MEATINGPLACE.COM, 4/21/10

Preparing for meetings with investors this week, Smithfield Foods Inc. noted in a news release that its fourth-quarter financial results are expected to be relatively weak in the fresh pork and packaged meat units.

The pork segment overall, however, is expected to be "solid," the company said.

Smithfield has made changes to its consumer packaged meats business, improved commodity pricing and cut costs in the hog production segment, the release said, and the meetings with investors in Boston are intended to explain these changes in greater detail. However, "the unexpected run-up in the futures curve for lean hogs for the summer and fall months of 2010" prompted "significant mark-to-market losses" on part of the company's hedge position, while higher raw material costs affected the fresh pork segment.

As a result, "Smithfield … does not expect its fourth-quarter hog production segment results to reflect the benefits of the recently and dramatically improved live hog production environment."

Analyst Ken Zaslow, of BMO Capital Markets, acknowledged that he also was caught by surprise when hog prices leapt, noting that he didn't anticipate the effects of weather and open interest as well as the surge in exports, particularly from Mexico, in a note to investors. But he maintained his rating on the stock at "market perform."

"We continue to believe that Smithfield's efforts to improve its pork operations, restructure its hog business and deleverage its balance sheet are the right courses of action," he wrote.

Smithfield reiterated its favorable outlook for fiscal 2011, as did Zaslow.

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