Smithfield, VA - Smithfield Foods, Inc. reported record earnings for the 1998 fiscal year, ended May 3, and for the fiscal fourth quarter. This marked the second consecutive year of record earnings.
Excluding a nonrecurring charge, net income for fiscal 1998 increased to $66 million, or $1.66 per diluted share, from $44.9 million, or $1.17 per diluted share, in fiscal 1997. Including the nonrecurring charge of $12.6 million ($.32 per diluted share), net income for fiscal 1998 was $53.4 million, or $1.34 per diluted share. Net income per share figures have been adjusted to reflect a 2-for-1 split of the Company's common stock effective on September 26, 1997.
The nonrecurring charge, which was taken in the fiscal first quarter, reflects civil penalties imposed against the Company by the US District Court in a civil action brought by the US Environmental Protection Agency. The judgment has been appealed.
For the fiscal 1998 fourth quarter, the Company reported net income of $20.7 million, or $.52 per diluted share, compared with net income of $19.4 million, or $.50 per diluted share, for the same period in fiscal 1997.
Although unit volume increased 9.8% in fiscal 1998, dollar sales for the year were flat at $3.87 billion due to sharply lower hog prices. Fourth- quarter sales dipped to $874 million from $928 million in fiscal 1997 for the same reason.
Joseph W. Luter, III, chairman and CEO said that the Group's record results reflected sharply improved profitability in fresh pork and processed meats, both of which benefited from improved margins due to lower hog prices as well as a Company-wide concerted effort to increase sales of higher-margin value-added fresh pork and processed meats. A substantial improvement in operating efficiencies and productivity at the Company's Bladen County, North Carolina plant also contributed to the Group's record fiscal 1998 performance.
“We are very satisfied with our Smithfield Lean Generation Pork program which saw unit volume double in fiscal 1998,” Luter said. International unit volume rose nearly 26% during the year despite the turmoil in some Asian markets due to economic problems in the region.
“The strength in the Company's Meat Processing Group far overshadowed a sharp drop in profitability at the Company's Hog Production Group, which was adversely affected by the same lower hog prices which benefited the Meat Processing Group. The Hog Production Group incurred a small net loss of $.02 per diluted share in fiscal 1998 compared to net income in fiscal 1997 of $.34 per diluted share. In the fourth quarter of fiscal 1998, the Hog Production Group incurred a net loss of $.21 per diluted share compared to net income of $.06 per diluted share in the same quarter of the prior fiscal year.
In addition, fiscal 1998 full-year and fourth quarter results were adversely affected by a six-week production workers' strike at Lykes Meat Group which ended on May 26.
“To top off fiscal 1998, we were delighted that Fortune magazine ranked Smithfield Foods first among the Fortune 500 companies in total return to investors and in average annual rate of growth in earnings per share over the last decade,” Luter stated.
“We expect the Company's earnings momentum generated in our record fiscal 1998 year to continue through fiscal 1999 and result in another record year,” Luter said. “Although ours is a cyclical business, our prospects for growth this year are very good. Our vertical integration strategy continues to give our Eastern operations a competitive edge in pork quality and consistency, and the outlook for our flagship brand, Smithfield Lean Generation Pork, is excellent. Finally, we expect to complete strategically important acquisitions in both the US and in international markets in fiscal 1999. Our long-term strategies are working, and our expectations for the future are high.”
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
Phone: 631-757-4010
Fax: 631-757-4060
E-mail: sflanagan@sprintmail.com
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