Smithfield Profit Drops Amid Seasonal Weakness In Fresh Pork, Export Declines

(RTTNews) - Packaged pork and meat products maker Smithfield Foods, Inc. (SFD), which has agreed to merge with Shuanghui International Holdings Limited, Friday reported lower first-quarter profit, amid normal seasonal weakness in fresh pork and declines in key export markets.

Net income declined to $39.5 million or $0.27 per share from $61.7 million or $0.40 per share reported last year.

On average, 5 analysts polled by Thomson Reuters expected earnings per share of $0.47 for the quarter. Analysts' estimates typically exclude one-time items.

Sales climbed 10 percent to $3.4 billion from the prior year's $3.09 billion, while analysts expected $3.19 billion.

Smithfield Foods said its Smithfield, Armour, Kretschmar, Curly's, Margherita and Carando brands grew in the first quarter with Armour and Curly performing especially well with double-digit growth. Market share increased across the cooked dinner sausage, dry sausage and marinated pork categories, the firm said.

Total pork sales climbed 10 percent to $2.850 billion with growth in both Fresh pork and Packaged Meats. Hog Production climbed 20 percent to $872.4 million and International sales improved 8 percent to $376 million.

According to the company, the operating environment in fresh pork and international business was difficult in the first quarter. Apart from normal seasonal weakness in fresh pork, there were declines in key export markets, namely Japan, China and Russia.

Higher raising costs in hog production in Eastern Europe and Mexico hurt earnings in the international segment.

The hog production earnings nearly tripled from last year on higher hog prices, Smithfield noted.

Cost of sales increased to $3.089 billion from $2.759 billion.

Larry Pope, CEO, said, "The key driver of our business continues to be packaged meats where we achieved solid margins, while growing volume, as well as market share and distribution across a number of our core brands and product categories in the first quarter."

Pope added that despite the lackluster first quarter, it remains very optimistic about the future of Smithfield.

In late May, Smithfield entered into a definitive merger agreement with Shuanghui International Holdings Limited that values the pork processor at $7.1 billion, including the assumption of its net debt. The transaction is expected to close in the second half of 2013.

SFD is currently down 0.66% at $33.86.