Smithfield Foods Income Dips
Last updated Thursday, December 4, 2008 4:41 PM CST in Business
By Kim Souza
THE MORNING NEWS
SPRINGDALE -- Smithfield Foods Inc. blamed high feed expenditures for its 76 percent drop in second-quarter profits Thursday, but said it is positioned to weather the storm.
The hog and turkey processor's net income fell to $4.2 million, or 3 cents per share, from a year-ago profit of $17.4 million, or 13 cents per share.
The results included a gain on the $580 million sale of its beef processing and cattle feeding operations to JBS-Swift. The sales proceeds were equal to 24 cents a share, which kept the net earnings positive despite operating losses of 21 cents per share in the turkey and pork segments.
Investors got some reassurance from Smithfield that the company has adequate liquidity. Smithfield also said if debt covenants were violated, it would be able to get waivers from its lenders.
Smithfield's stock price jumped 21 percent on the news to close at $7.44, up $1.31.
C. Larry Pope, president and chief executive of the company, said during the earnings call as the recession continues to hit consumers, Smithfield will benefit as provider of two low-cost protein sources -- pork and turkey.
In the quarter, sales for the Smithfield, Va.-based company were $3.15 billion, compared to $2.75 billion last year. Pork exports jumped 29 percent, while international operating profit increased 20 percent, the release noted.
Despite the robust sales, higher grain costs kept operating profit lower. Smithfield's loss from continuing operations of pork and turkey was $30 million. The company received $34.2 million in after-tax income from discontinued beef operations.
In an effort to return to profitability, Smithfield said it has cut its Butterball turkey production by double digits and has planned hog production cutbacks of 10 percent that should be realized by the end of January. Production cuts are needed to push prices higher on both turkey and pork.
Smithfield estimates the pork segment will likely return to profitability in two more quarters as excess hog supplies contract and grain prices stabilize.
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