CHICAGO – Smithfield Foods Inc. (SFD), the world's largest pork processor, Wednesday posted higher quarterly earnings as the popularity of low-carbohydrate diets (search) spurred demand for meat.
The company said it plans to increase its bacon production capacity by 100 million pounds, or 20 percent, as part of its plan to sell more processed meats, which can be more profitable than unprocessed meats. The decision means Smithfield will become a net buyer in the pork belly market as it will need more bellies than it can supply itself.
"There is very strong food service demand and also very strong demand for convenience items at home," Todd Duvick, analyst at Banc of America Securities (search), said of the bacon boom.
Bacon has become more popular amid the growth of low-carb diets, because it can be eaten as a breakfast meat and added to salads and other foods during the day, analysts said.
"With the Atkins low-carb, high-protein diets, bacon has been the key beneficiary for that, because bacon is so versatile," William Chappell, analyst at SunTrust Robinson Humphrey, said.
The Smithfield, Va., company posted a profit for its fiscal fourth quarter, ended May 2, of $122.7 million, or $1.09 per share, up from $5.1 million, or 5 cents per share, a year earlier. Earnings for the 2004 quarter include an after-tax gain of $49 million from the April 5 sale of Canadian pork processing business Schneider Corp.
Profit from continuing operations was 63 cents a share. Wall Street analysts had expected 44 cents to 56 cents per share, with an average view of 50 cents, according to Reuters Estimates. Continuing operations exclude the operations of Schneider Corp.
Smithfield also said its beef operations turned profitable in the latest quarter after several months of losses following the discovery of a case of bovine spongiform encephalopathy -- mad cow disease -- in Washington in December 2003, and subsequent bans on imports of U.S. beef by many foreign countries.
Total Sales rose 44 percent to $2.52 billion, helped by the acquisition of the Farmland pork business last October.
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