CHICAGO – Top U.S. hog and pork producer Smithfield Foods Inc. (SFD) on Wednesday reported lower quarterly earnings on a charge to restructure its East Coast operations and losses in its international businesses.
The results missed the average of analysts' estimates by a penny and its shares fell 3.3 percent, even though the company said it expects a rebound in performance in the third quarter to year-earlier levels.
Net income in the second quarter fell to $51.6 million, or 46 cents per share, for the fiscal second quarter, ended Oct. 30, from $58.4 million, or 52 cents a share, a year earlier. Revenue rose to $2.90 billion from $2.72 billion.
Excluding a charge of $16.3 million, or 9 cents a share, to close plants in Smithfield and Salem, Va., earnings were 55 cents a share, 1 cent below the average estimate of analysts polled by Reuters Estimates.
The charge reduced earnings for its domestic pork division, its main businesses, to $27.7 million from $39.9 million a year earlier.
"We would expect the stock to tread water, but maintain our cautious stance given the continued significant reliance on hog production earnings, and our belief that hog prices may ease in coming months " Pablo Zuanic, analyst with JP Morgan, said in a research report.
Chairman and Chief Executive Joseph Luter said earnings on hogs may be down for the third quarter, but the pork processing side of the business should be better.
"If I had to guess, I would guess that the third quarter is going to be as good as the third quarter last year," Luter told Wall Street analysts on a conference call.
For the second quarter, pork export volume was down slightly, compared with a "particularly strong" quarter last year, when exports grew 30 percent. However, pork exports for the first half of this fiscal year are up 10 percent.
Its international unit posted a loss of $1.3 million for the quarter compared with a year-earlier profit of $5.4 million, hurt by higher raw material costs in France and Poland.
Company President Larry Pope said a recent change in management in France was going well. "I can't tell you we are past any problems, but it is turning around nicely," he said.
In addition to hog and pork production, Smithfield is the fifth largest beef producer and that segment had an operating loss of $4.3 million on revenue of $683.6 million, compared with a year-earlier operating loss of $8.6 million and revenue of $527.2 million. The increased revenue was due to sales of Smithfield-owned cattle.
Its shares traded at $28.99, down $1, on the New York Stock Exchange.