Smithfield Foods Reports Fourth-Quarter Loss

June 16, 2009
Hog production and ethanol policy are hurting business, company reports. H1N1 virus had little effect on results.

Smithfield Foods on June 16 announced a fourth-quarter net loss of $78.8 million or 55 cents per diluted share, compared with net income of $2.4 million or 2 cents per diluted share in the prior year. The quarter ended May 3. Sales for the fourth quarter were down slightly at $2.85 billion, compared with $2.87 billion in the year ago period.

Full-year results show a $190.3 million loss on sales of $12.5 billion. Sales were up $1.1 billion, or 10%, from the previous year, and benefited from an extra week. The previous years results include net income of $128.9 million.

"Fiscal 2009 was one of the most challenging years in over three decades for the company. We faced grain and oil markets that reached record highs and then fell precipitously. These input dynamics, combined with an oversupply of all proteins as well as a worldwide recession and credit constraints, put significant pressure on the business," stated C. Larry Pope, president and CEO, in the earnings statement.

Pope also commented on current ethanol policy and the harm he said it is doing to his business. "While the meat business looks very good, we are concerned about our hog production business as it deals with an oversupply of live hogs and the unintended consequences of the current ethanol policy," he said. "This mandate toward increased usage of corn-based ethanol is resulting in more than 30% of the U.S. corn crop being diverted from animal feed to ethanol production. Since this plan was announced, there has already been a sharp run-up in corn prices tied to world oil markets. While we fully support the development of alternative fuel sources, the usage of corn, the primary source of feed for all livestock, as fuel is simply not good economics," he said.

Smithfield Foods said concerns over the H1N1 virus had "only a short-term effect on U.S. fresh pork demand, which hurt our business last month," Pope stated. Certain international markets, specifically China, are impacting first-quarter 2010 exports as export restrictions continue, he said.

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