Source: MEATINGPLACE, 9/8/11
 

Smithfield Foods Inc. on Thursday reported stronger first-quarter earnings, boosted by higher pricing for its packaged meats, and said it expects U.S. pork supplies to contract by early 2012.

High feed costs have prompted hog producers to slaughter higher numbers of sows, which suggests U.S. hog herds will be smaller next year, Smithfield Chief Executive C. Larry Pope said on a conference call with analysts. "The sow slaughter has turned dramatically," Pope said.

Smithfield said hog producers have been slaughtering sows at a rate of 5 percent above last year, after trending 2 percent below the year-ago rate in the beginning of the year.

Pork supplies could contract by next spring as a result of the herd liquidation, Pope said. "It is going to be six more months before that’s going to show up in any kind of measurable way, so it’s out there...not anything this quarter, I don't think.” he said.

Higher profit, sales
Smithfield said net income rose to $82.1 million, or 49 cents per share, in the first quarter ended July 31, from $76.3 million, or 46 cents per share, a year ago.

Excluding special items, earnings were 69 cents a share. Analysts on average had expected 67 cents, according to Thomson Reuters.

First-quarter sales rose 7 percent to $3.09 billion, below the average Wall Street forecast of $3.15 billion.
Record packaged meats profit in the quarter on a 6 percent rise in sales for the segment boosted results despite higher raw material costs, Smithfield said.

In the pork business, sales climbed 7.6 percent, including 8.9 percent growth for fresh pork and 6.4 percent for packaged meats. Sales of the company's 12 core packaged-meat brands were up 9 percent by revenue and 3 percent by volume.

In its U.S. hog production business, sales rose 16 percent, while international sales jumped 19 percent on strong exports to Asia.

Smithfield expects sales volume to grow 3 percent in its packaged meats business for the current fiscal year and expects fresh pork and hog production industry trends to continue. Smithfield also expects export demand will remain robust, though commodities costs will remain a challenge, Smith said.

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