Packaged pork and meat products maker Smithfield Foods, Inc. (SFD) reported Thursday a better-than-expected profit for the third quarter compared to a loss last year, reflecting continued strength in packaged meats margins and benefits of its restructuring program. Meanwhile, quarterly sales dropped from a year ago and also missed analysts' expectations. The company noted that the latest quarter consisted of one week less that the year-ago quarter.
In a statement, president and chief executive officer, Larry Pope said, "The third quarter demonstrated the ongoing strength of our packaged meats business, which continues to deliver very strong margins. We are extremely focused on this part of the business, it is paying dividends and the restructuring program is beginning to have an impact."
The company added that its biggest obstacle for the past two years has been the lack of profitability in the hog production segment. As of the third quarter, these losses, according to the company, have substantially diminished and the futures markets are trending favorably.
Third-Quarter Results
The Smithfield, Virginia-based world's biggest pork processor reported net income of $37.3 million or $0.22 per share for the third quarter, compared to a net loss of $105.7 million or $0.74 per share in prior-year quarter.
Income from continuing operations for the quarter was $37.3 million or $0.22 per share, compared to a loss of $108.1 million or $0.75 per share in the year-ago quarter.
On average, 12 analysts polled by Thomson Reuters expected earnings of $0.19 per share for the third quarter. Analysts' estimates typically exclude special items.
Total sales for the quarter dropped to $2.88 billion from $3.35 billion in the same quarter last year, and missed seven Wall street analysts' consensus estimate of $3.28 billion.
Segmental Details
Pork segment sales for the third quarter declined to $2.40 billion from $2.83 billion in the prior-year quarter. Operating profit for the segment increased to $152.8 million from $129.4 million in the previous year, reflecting continued strength in packaged meats margins and benefits of restructuring activities. Fresh pork volumes declined 7%, and export volume was flat with a year ago.
Sales for the International segment grew to $343.1 million from $333.2 million in the comparable quarter a year ago. Segment operating profit was $13.1 million, lower than $14.5 million in the same quarter last year. Poland delivered strong results and brand growth as sales volumes increased 24%, while Campofrio also reported stronger year-over-year operating results.
The hog production segment sales totaled $691.8 million, higher than the year-ago quarter's sales of $660.5 million, while the segment recorded an operating loss of $55.6 million, sharply narrower than $253.6 million in the prior-year quarter, driven by lower feed costs, positive currency fluctuations and a 12% increase in live hog costs. Live hog market prices averaged $44 per hundredweight, up from $40 per hundredweight, and domestic raising costs declined 16% to $51 per hundredweight from $61 per hundredweight in the prior-year quarter.
Other Metrics
Operating profit for the third quarter was $96.5 million, compared to a operating loss of $135.5 million in the prior-year quarter, as cost of sales dropped to $2.60 billion from $3.26 billion in the year-ago quarter.
Gross profit for the quarter was $284.2 million, sharply higher than $84.3 million in the prior-year quarter. Selling, general and administrative expenses decreased to $194.5 million for the third quarter from $202.2 million in the year-ago quarter.
The company noted that the Pork Group restructuring plan is complete and the benefits are meeting expectations. The company also has closed all six plants that were announced as part of the restructuring plan early last year, and is on track to achieve the targeted $55 million of profit improvement this year, after applicable restructuring expenses, and $125 million of annual benefits beginning in fiscal 2011.
Nine-Month Highlights
For the nine-month period, Smithfield reported a net loss of $96.8 million or $0.63 per share, narrower than $117.2 million or $0.84 per share in the prior-year period.
Loss from continuing operations for the period narrowed to $96.8 million or $0.63 per share from $169.7 million or $1.21 per share in the year-ago period.
Net sales for the year-to-date period dropped to $8.29 billion from $9.64 billion in the same period last year.
Looking Ahead...
"This organization continues to focus on driving profitable growth through our consumer packaged meats business. Consequently, we are very pleased with the ongoing performance of our packaged meats business over the last two years. It is this focus that will continue to propel the company forward," Pope added.
The company also noted that the pork segment restructuring activities are on track to achieve annual profit improvement of about $55 million in fiscal 2010 and $125 million by fiscal 2011.
The company anticipates fresh pork margins to improve as hog slaughter levels continue to decline and the Sioux City plant is closed in April. It also expects that fiscal 2010 should be the second best year ever for Smithfield fresh pork exports.
Peer Performance
Among Smithfield's peers, Springdale, Arkansas-based second largest pork producer Tyson Foods, Inc. (TSN) reported last month a profit for the first quarter compared to a loss last year, boosted by improved operating income across all of its segments, with chicken and beef segments performing exceptionally well. Net income was $160 million or $0.42 per share, compared to a net loss of $102 million or $0.27 per share last year. Quarterly sales edged up to $6.65 billion from $6.52 billion in the same quarter last year.
Another peer, Austin, Minnesota-based packaged food and meat products maker Hormel Foods Corp. (HRL) reported last month a 37% year-over-year increase in profit for the first quarter, helped by quarterly sales growth and price increases. Net earnings rose to $111.21 million or $0.82 per share from $81.38 million or $0.60 per share in the prior-year quarter. Quarterly net sales increased 2.3% to $1.73 billion from $1.69 billion in the same quarter last year.
Stock Quote
In Thursday's regular trading session, SFD is currently trading at $19.31, up $0.32 or 1.69% on a volume of 35,250 shares. In the past 52-week period, the stock has been trading in a range of $5.88 to $19.86.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.