Fresh meat and packaged meat products company Smithfield Foods Inc. (SFD) Wednesday reported a profit for the first quarter, compared with a loss last year, driven by higher prices in a favorable business environment. Total sales rose 7% year-over-year, but came in below analysts' forecast. The Smithfield, Virginia-based company also maintained its positive outlook for fiscal 2011.
In the first quarter, the company's net income was $76.3 million or $0.46 per share, compared with a net loss of $107.7 million or $0.75 per share last year. In the preceding quarter, the company reported a net loss of $4.6 million or $0.03 per share.
On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.45 per share in the first quarter. Analysts' estimates typically exclude special items.
First-quarter sales rose 7% to $2.90 billion from $2.72 billion in the year-ago quarter. The company attributed the year-over-year increase in sales to higher average unit selling prices in the Pork segment and higher live hog market prices. Wall Street analysts projected quarterly sales of $3.04 billion. In the fourth quarter, the company had posted sales of $2.91 billion.
Total Pork segment sales were $2.41 billion, up from $2.25 billion in the same quarter last year. The pork sales include $1.15 billion from the sales of the fresh pork business and $1.26 billion from the packaged meats business.
The company's Hog Production segment, which now comprises solely of U.S. live hog production, posted sales of $648.3 million, higher than the $476.4 million recorded a year ago. International hog production sales, which include operations in Poland, Romania and Mexico, reached $316.3 million, an increase from $294.4 million in the first quarter of 2009.
Commenting on the first-quarter results, Larry Pope, president and chief executive officer of Smithfield Foods, stated, "The business environment was very favorable in the Pork segment and sharply improved in the Hog Production segment in the first quarter."
"The hog production cycle has turned and our fresh pork and consumer packaged meats businesses are delivering solid and consistent earnings, owing to the success of the Pork Group restructuring last year and strong discipline in this segment. ... Overall favorable market dynamics benefited the company in all segments," Pope noted.
Going forward, Smithfield Foods said it expects to deliver solid margins in the Pork segment going forward, as the second quarter is generally a seasonally strong quarter for fresh pork. The segment is also expected to be benefited from tight protein supplies and continuing lower slaughter levels and freezer stocks.
Further, the company's Hog Production segment is projected to remain profitable, supported by lower hog supplies. The company also maintained its positive outlook for fiscal 2011.
Among peers, meat products producer Tyson Foods, Inc. (TSN) early last month reported an 89% surge in its third-quarter profit, boosted by better margins and an 11.6% sales growth as volume and average price increased.
SFD closed Tuesday's trading at $16.30, down $0.42, on a volume of 2.81 million shares.
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