- - news, features and articles for the meat processing industry


Packaged Meat Sees Smithfield's Sales Up

07 September 2013

US - Sales for Smithfield Foods were 10 per cent up in the first quarter of its 2014 financial year compared to the same period in the previous year.

The Fresh Pork division reported an operating loss but the other businesses were in profit.

"The key driver of our business continues to be packaged meats where we achieved solid margins, while growing volume, as well as market share and distribution across a number of our core brands and product categories in the first quarter," said C. Larry Pope, president and chief executive officer.

The company's Smithfield, Armour, Kretschmar, Curly's, Margherita and Carando brands all grew in the first quarter. Its Armour and Curly's brands performed especially well, up double-digits. Market share increased across the cooked dinner sausage, dry sausage and marinated pork categories. At the same time, the company expanded distribution of its Eckrich cooked dinner sausage, Gwaltney hot dogs, Smithfield bacon, Curly's BBQ, Armour dry sausage, Armour portable lunches and Smithfield and Farmland marinated pork.

Mr Pope continued: "The operating environment in fresh pork and our international business was difficult in the first quarter. Normal seasonal weakness in fresh pork was exacerbated by declines in key export markets, namely Japan, as well as China and Russia. Higher raising costs in our hog production businesses in Eastern Europe and Mexico adversely impacted earnings in our international segment."

Mr Pope further noted that while these results were disappointing, the company's integrated model helped lessen the adverse impact of weakness in other segments. "Our hog production earnings nearly tripled from last year on higher hog prices," he said.

Sales for the first quarter of fiscal 2013 were $3.4 billion, up 10 per cent. Net income was $39.5 million ($.27 per diluted share) in the first quarter, compared to net income of $61.7 million ($.40 per diluted share) last year.

Results by Business Segment


Fresh Pork

Historically, the first quarter is seasonally the weakest period for fresh pork. Fresh pork operating margins decreased to a loss of three per cent or $5 per head, resulting from higher hog costs that could not be fully passed through in prices and export market weakness. The company processed four per cent more hogs.

Packaged Meats

Packaged meats operating margins were solid at seven per cent or $.16 per pound but declined on higher raw material costs, particularly bellies. Volume grew two per cent. The company delivered volume growth in six of its 12 core brands: Smithfield, Armour, Kretschmar, Curly's, Margherita and Carando.

The company gained market share in several strategic product categories including cooked dinner sausage, dry sausage and marinated pork.

In addition, the company increased distribution of its Eckrich cooked dinner sausage, Gwaltney hot dogs, Smithfield bacon, Curly's BBQ, Armour dry sausage, Armour portable lunches and Smithfield and Farmland marinated pork.

Hog production

Hog Production operating margins were strong at eight per cent or $17 per head. Year-over-year, live hog market prices rose six per cent to $71 per hundredweight, while raising costs increased two per cent to $68 per hundredweight. The company sold six per cent more hogs.


International operating margins declined to one per cent, largely from higher feed costs in the company's hog production operations.


Mr Pope said: "The first quarter should mark the low point of the year for Smithfield. We will continue to execute on our long-term strategic growth plan, focused on improving our earnings stream and migrating Smithfield further towards a consumer packaged meats company."

The focal points of the company's growth strategy include increased consumer marketing, product innovation and capital investment to maximise Smithfield's existing business by improving its product mix toward differentiated, branded and value-added products, both domestically and in the export markets. "We are leveraging our integrated platform to augment this strategy," he commented.

Mr Pope concluded: "Despite the lacklustre first quarter, we remain very optimistic about the future of Smithfield."

Smithfield and Shuanghui Merger

As previously announced on 29 May 2013, Smithfield and Shuanghui International Holdings Limited  entered into a definitive merger agreement that values Smithfield at approximately US$7.1 billion, including the assumption of Smithfield's net debt. Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Shuanghui will acquire all of the outstanding shares of Smithfield for US$34.00 per share in cash.

The transaction, which is expected to close in the second half of 2013, remains subject to certain conditions, including approval by Smithfield's shareholders, review by the Committee on Foreign Investment in the United States (CFIUS) and other customary closing conditions.

In light of this announcement and until further notice, Smithfield has elected to discontinue conference calls to discuss its quarterly and annual results. The company will continue to issue quarterly earnings press releases.

TheMeatSite News Desk

Our Sponsors


Seasonal Picks

Meat Cuts and Muscle Foods - 2nd Edition