Smithfield Foods reports 63 percent drop in fourth-quarter profit
The take: Smithfield Foods Inc. reported a 63 percent drop in profit during its fourth quarter as hog prices fell, exports to Russia, China and Japan dropped and grain prices rose.
The company reported that while sales increased 3.5 percent during the quarter, the cost of feeding pigs rose after last summer’s drought. Exports to Russia and China fell because of their requirements regarding the use of ractopamine, a hormone that’s banned in both countries. Exports to Japan fell because of the weak yen.
The company is moving toward becoming more of a packaged-meats company. At the end of May, Smithfield announced that it had entered an agreement with Chinese company Shuanghui International Holdings Ltd. to be bought for $4.7 billion in cash. The deal, which would make Smithfield the largest U.S. company to be acquired by a Chinese company, is expected to close in the second half of 2013 if it receives all required approvals and customary conditions are met.
Total revenue: Total sales in the quarter grew 3.5 percent to $3.3 billion, compared with $3.2 billion during the fourth quarter of last year. Revenue for the full year grew 1 percent to $13.2 billion.
Profit: Profit for the quarter dropped 62.3 percent to $29.7 million in the fourth quarter, compared with $79.5 million during the same quarter last year. For the full year, sales dropped 49.1 percent to $183.8 million.
Earnings per share: For the quarter, Smithfield said it earned 21 cents per diluted share during the fourth quarter, compared with 49 cents per share last year. For Fiscal Year 2013, the company reported earnings of $1.26 per share, compared with $2.21.
The company’s take: “Driven by both top and bottom line growth in packaged meats, these earnings reflect our continued transformation into a more value-added consumer packaged meats compan,” C. Larry Pope, president and CEO of Smithfield, said in a statement. “Fiscal 2013 was a challenging year in hog production with higher grain prices due to last summer’s drought and, more recently, export market disruptions. For the industry, pork exports were down to nearly every major market in the fourth quarter with volumes to China and Russia falling over ractopamine certification requirements and the weakening yen resulting in lower shipments to Japan. This decline in pork exports pushed production back onto the domestic market and negatively impacted our hog production and fresh pork businesses in the fourth quarter.”