Smithfield Foods profits chopped in half

US - Smithfield Foods reported first-quarter earnings Wednesday that came in at about half of last year's $49 million profits, due to expenses related to the sale of a business, higher hog production costs, and losses on its cattle feeding investment.
calendar icon 23 August 2006
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The nation's largest hog and pork producer posted a profit of $26.6 million for the quarter that ended July 30, compared with $49 million a year ago. The results included $14.3 million in losses related to the sale of its Quik-to-Fix foods unit, which was completed after the quarter ended.

"A strong hog market and improving fall demand should drive solid earnings for the full fiscal year," Joseph Luter, chairman and chief executive, said in a statement. Revenue for the period was $2.77 billion, compared with $2.93 billion a year ago.

The Smithfield, Virginia-based company has been rapidly expanding both here and abroad by buying other meat and livestock companies outright or with partners.

The company, in partnership with an investment group, recently bought the European meats business of Sara Lee Corp. In August, it announced a deal to buy the refrigerated meats business of ConAgra Foods Inc., which includes Butterball turkey and Armour brands.

"Our recent European investment and pending ConAgra meats acquisition were made at attractive prices and should provide momentum for the future," Luter said.

The hog unit, which produces more than 15 million hogs a year, had quarterly operating earnings of $90 million compared with $115 million a year ago. The results were hurt by production costs of $41.50 per hundredweight this year, compared with $40 a year ago.

Smithfield (down $0.13 to $27.96, Charts) sells its hogs at market prices to its own pork plants as well as to competitors. Results from the hog sales are kept separate from the company's pork sales.

The pork unit reported an operating profit of $19.3 million compared with $9.6 million a year ago, while the beef sector had an operating profit of $4.9 million, down from $7.3 million a year ago.

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