Source: Chris Scott, MEATINGPLACE, 10/28/15

Smithfield Foods today reported a 46-percent decline in net income in the third-quarter, but remained optimistic for fiscal 2015 considering that year-ago results reached record levels because of uniquely higher pork prices.

Smithfield posted third-quarter net income of $83.3 million compared with profits of $155.3 million in the same period one year ago. Company officials were specific to note that last year’s results were significantly affected by higher prices stemming in part from lower pork supplies in the wake of the 2014 outbreaks of porcine epidemic diarrhea virus (PEDV), which led to “exceptional profits,” according to Smithfield President and Chief Operating Officer Kenneth Sullivan.

“The live production side of our business is cyclical and we have to live with that as well as keep that in mind when making (financial) comparisons,” Sullivan told analysts in a conference call this morning. He added that volume for the bulk of Smithfield’s operating segments all rose, despite the lower sales figures and in light of “more elusive” profits in Smithfield’s live production division.

The wholly owned subsidiary of China’s WH Group Ltd. posted sales of more than $3.4 billion in the three months ended Sept. 27, down from the $3.7 billion reported one year ago.

Sullivan noted that the company’s cost structures are improving and Smithfield is looking at new ideas and revenue streams stemming from pig products at home and internationally.

“I’m confident that we will finish 2015 on a high note,” he told analysts. “We’re going to make money raising pigs this year, although it will be at the lower end of the range between zero and $10 a head.”

Sullivan also addressed the recent World Health Organization report linking processed meat to cancer, calling the report “disappointing” considering the report came from what he described as a political organization.

“This was disappointing to all of us in this industry, especially because of the lack of balance. What people don’t know it that these are not new scientific studies. This was a U.S. study of more than 900 products and only one was found to be non-carcinogenic to humans,” he said. Sullivan added that the report suggested not participating in such “carcinogenic” activities as breathing air, using aloe vera on human skin or consuming alcoholic beverages.

He said he does not know whether the report will have any effect on demand for Smithfield products, but said he is “hoping that consumers are more discerning and will look beyond the report and (look at) the science."

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