DOW JONES NEWSWIRES
Smithfield Foods Inc. (SFD) swung to a fiscal fourth-quarter
loss as tumbling prices plagued a hog production segment that was
already stained with red ink.
The world's largest pork processor and hog producer said it
would cut its U.S. hog herd by an additional 3%, on top of a 10%
cut implemented in the past year.
Smithfield Chief Executive Larry Pope said the cuts combined
with reductions by rivals would shrink supply to a point where "the
industry can return to profitability," adding "this liquidation is
long overdue."
Pope had warned in March that the company's fourth quarter would
be difficult with continued substantial hog-production losses. But
hog prices slid after the H1N1 flu scare erupted in April, as
anxiety and bad publicity caused the market to plummet even though
the flu can't be caught from eating pork. The company had already
cut jobs, closed plants and reduced its herd amid the industrywide
softening of once-booming export demand.
For the quarter ended May 3, Smithfield swung to a loss of $78.8
million, or 55 cents a share, from year-earlier profit of $2.4
million, or 2 cents a share. Sales fell 0.6% to $2.85 billion for
the company - which sells products under the John Morrell,
Smithfield Premium, Farmland Foods and Butterball names.
On average, analysts polled by Thomson Reuters expected a loss
of 60 cents a share on revenue of $3.06 billion.
Gross margin fell to 4% from 7.2% as higher grain prices
continued to pressure results.
The hog-production segment saw its loss widen to $170.8 million
from $129 million while pork-processing earnings fell 20% and
international profit slumped 89% amid a 25% sales drop on currency
fluctuations.
Smithfield shares closed Monday at $11.18 and was down 1.6% to
$11 in premarket trading Tuesday. The stock temporarily slid in
late April after it was learned that one of the earliest-known H1N1
flu victims came from Veracruz, Mexico, where Smithfield has a pig
herd. But in May Smithfield said no flu was detected on its Mexico
farms. Tuesday, it said the virus had "no significant effect" on
the quarter's results.
-By Mike Barris, Dow Jones Newswires; 201-938-5658;
mike.barris@dowjones.com