Source: Chris Scott, MEATINGPLACE, 8/16/16


Smithfield Foods today reported net income of $137.8 million in the second quarter of fiscal 2016, even as the operating profit from hog production for the Chinese-owned pork processor dropped by 61 percent in the period.

Smithfield posted a 32-percent increase in overall profits compared with net income of $104.2 million in the second quarter of 2015. The increase was partly fueled by a 2-percent increase in overall sales to $3.5 billion, slightly lower cost of sales and a surge in sales of its packaged meats segment to nearly $1.7 billion from $1.5 billion one year ago.

Sales for the Smithfield, Va.-based company’s hog production segment declined by 14 percent, sparking the large decline in profits for that segment. Increased sales for Smithfield’s international business also offset the steep decline in hog production unit sales. Fresh pork profits also reached $57.9 million compared with a loss of $15.1 million in the same quarter in 2015. 

Smithfield President and CEO Ken Sullivan told analysts this morning that in addition to posting record results for the first half of 2016, highlights in the packaged meats segment included strong results for Smithfield-brand bacon, Eckrich sausage and Nathan’s Famous premium hot dogs. He added that foodservice and deli sales also increased compared with year-ago results and he expects packaged meats margins to hold double-digit gains through the rest of the year. 

Smithfield officials added that the company is most excited about the prospects for continued growth in packaged meats, which also helped first-quarter net income reach $121 million versus $97 million in 2015. Improving the product mix toward branded, value-added products should allow the company to tap into the significant growth potential in packaged meats, they noted.

The company — a unit of China’s WH Smith — is also in the middle of an organizational realignment called “One Smithfield” that moves operations to a more centralized structure designed to unify resources and brands that officials said should keep results strong for the rest of 2016. Sullivan said the effort launched in March 2015 affected the second-quarter 2016 results by “two basis” points to the positive, setting up the second half of the year to resemble the first half in terms of results.

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