020611 Smithfield Profit Falls on Glut of Meat

Smithfield, VA - Smithfield Foods Inc. , the No. 1 U.S. pork producer, said its quarterly profit was cut by more than half as a glut of meat caused in part by Russia's month-long ban of U.S. poultry imports hurt prices.

The Russian ban, which ran from March 10 through April 15, diverted additional poultry into the U.S. marketplace, hurting prices for all meats. Smithfield, like other producers, saw lower live hog prices and weak fresh pork demand due to the excess of meat.

Russia, which bought about 1 million metric tons of U.S. poultry last year, instituted the ban amid concerns about salmonella and antibiotics in feed.

Smithfield Chief Executive Joseph Luter said last month that the company's results for the fourth quarter ended on April 28 would suffer from the ban and by Russia's slow resumption of poultry purchases after lifting it.

Smithfield, which last week was turned down in its bid to acquire the meat division of bankrupt agriculture cooperative Farmland Industries, said net income for the quarter fell to $24.9 million, or 22 cents a share, from $53.5 million, or 49 cents a share, a year earlier.

Analysts had forecast earnings of 19 cents to 25 cents a share, for an average of 21 cents, according to research firm Thomson First Call.

Sales rose to $1.96 billion from $1.51 billion, helped in part by newly acquired companies.

Smithfield shares closed at $17.90 Tuesday on the New York Stock Exchange. They have fallen about 19% since the beginning of the year, underperforming rival Tyson Food Inc. stock, which has risen about 22%.

Operating earnings in Smithfield's hog production group fell to $17.2 million from $66.4 million a year earlier, hurt by a 17% drop in live hog prices, the company said.

Despite the glut of meat, Smithfield said operating income in its meat processing group increased 20% in the quarter to $59.4 million from $49.5 million. That excludes a $5.1 million pretax gain from the sale of a Canadian plant in the year-earlier period.

The company's beef processing division, which was formed after the acquisitions of Packerland Holdings and Moyer Packing Co. last year, was marginally profitable on sales of $557.3 million.

While Farmland rejected Smithfield's offer to buy its meat division for an undisclosed price, the cooperative said it would still negotiate with the company.

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