Packaged pork and meat products maker Smithfield Foods, Inc. (SFD), which is being acquired by Chinese pork giant Shuanghui International Holdings Ltd., reported Thursday a profit for the fourth quarter that plunged from last year, hurt by lower operating margins amid higher costs.
Earnings per share significantly missed analysts' expectations, while quarterly revenues topped their estimates.
"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 company," President and CEO Larry Pope said in a statement.
The Smithfield, Virginia-based world's biggest pork processor reported net income of $29.7 million or $0.21 a share for the fourth quarter, lower than $79.5 million or $0.49 per share in prior-year quarter.
Results for the year-ago quarter included a benefit of $0.06 per share related to to insurance reimbursements on the settlement of the company's Missouri litigation.
On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.44 per share for the quarter. Analysts' estimates typically exclude special items.
Sales for the quarter increased 3 percent to $3.32 billion from $3.21 billion in the same quarter last year, and topped ten Wall Street analysts' consensus estimate of $3.27 billion.
Total pork sales, including fresh and packaged, edged up to $2.75 billion from $2.73 billion last year, and hog production sales grew to $834.4 million from $755.7 million a year ago. International sales totaled $370.0, up from $340.2 million last year.
Fresh pork operating margins 100 basis points as live hog prices fell 6 percent and retail volumes were up a strong 10 percent. However, exports declined double digits on lower shipments to China and Russia due to new ractopamine certification requirements and Japan as the yen depreciated versus the dollar.
Packaged meats operating margins remained flat with last year. Volume grew 4 percent and was up across all key trade channels for the fourth consecutive quarter..
Hog production operating margins plunged 1000 basis points, with raising costs increasing 5 percent to $68 per hundredweight. International operating margins also declined 400 basis points primarily from higher feed costs in the company's hog production operations.
"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," Pope noted.
For fiscal 2013, the company reported net income of $183.8 million or $1.26 per share, sharply lower than $361.3 million or $2.21 per share in the prior year.
Excluding items, adjusted net income for the year was $640.0 million or $1.80 per share, compared to $803.0 million or $2.59 per share in the year ago. Analysts expected the company to report earnings of $2.00 per share for fiscal 2012.
Sales for the full year edged up 1 percent to $13.22 billion from $13.09 billion in the previous year. Street was looking for full-year 2012 revenues of $13.17 billion.
Smithfield agreed on May 29 to be acquired by Hong Kong-based Shuanghui for $34 per share in an all-cash deal valued at about $7.1 billion.
In Friday's regular trading session, SFD is currently trading at $32.83, up $0.02 or 0.06% on a volume of 0.12 million shares. In the past 52-week period, the stock has been trading in a range of $17.55 to $33.96.
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