Austin, MN - Hormel Foods Corp. said that higher pork contract prices deflated second quarter earnings.
“Procurement agreements with pork producers, designed to provide adequate supplies of raw materials for manufacturing moperations, reduced reported earnings because contract prices paid for a portion of the company's hog purchases exceeded prices available in the spot cash market,” Joel Johnson, chairman, president and chief executive, said in a statement.
U.S. meat prices have been weak in recent months amid abundant supplies, a situation that ordinarily would be good news for meat processors like Hormel. Hormel said its contracts will pay off in the long run once meat cash prices rebound.
Earlier today, Hormel reported second quarter diluted earnings of $0.34 a share on sales of $778.3 million. That compared with last year's second quarter earnings of $0.33 a share and sales of $798.5 million.
Analysts were expecting Hormel to earn $0.31 a share, according to estimates compiled by First Call.
“Lower selling prices in the marketplace, due to reduced prices for pork raw materials, contributed to the decline in dollar sales,” Hormel said.
Hormel also struggled with heavy supplies of turkey, which trimmed selling prices and margins.
“The entire turkey industry continues to operate under difficult business conditions, although the outlook appears to be improving,” Johnson said.
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