Packaged meat profit up, fresh pork down in Smithfield Q1 results
Smithfield Foods Inc. reported fiscal 2013 first quarter results. Packaged meats operating profit was up 29%, to a first quarter record $130.6 million. The Fresh pork segment reported a $12 million loss.
Sales for the first quarter of fiscal 2013 were $3.1 billion, steady with the prior year. Net income was $61.7 million ($.40 per diluted share) in the first quarter, compared to net income of $82.1 million ($.49 per diluted share) last year.
"Our first quarter results underscore the ongoing strength of our packaged meats business, which delivered record margins and solid volume gains. These results also emphasize the fact that the key driver of our business model is our packaged meats business, which generated the majority of our earnings again this quarter," said C. Larry Pope, president and CEO.
"Total packaged meats volume increased 4% in the first quarter, with gains across all key trade channels including retail, foodservice and deli. Retail packaged meats volume growth was led by strong double-digit gains in bacon and dry sausage, as well as increases in many other product categories. Furthermore, we secured contracts with several new national foodservice accounts, which fueled 6% growth in the foodservice channel. The introduction of Eckrich Bacon Lovers Deli Meats last quarter contributed to a 6% volume gain in the deli channel. Notably, volume of our core brands rose 7%," he noted.
"This quarter, we achieved significant packaged meats sales and volume gains in our Armour, Carando, Eckrich, Farmland, John Morrell, Margherita and Smithfield brands. We also increased share in a number of strategic product categories including bacon, dry sausage, hot dogs and portable lunches and expanded distribution in the deli meats, dry sausage and portable lunches categories," Pope commented.
"We continue to invest in advertising with double-digit increases in consumer marketing spending to drive brand growth and remain committed to building a strong innovation pipeline. For example, we recently announced the launch of Farmland Oven Perfect, a new line of pork products that is marinated, dry-rub seasoned and ready to cook right in the bag. Oven Perfect was the result of extensive consumer research and is being supported with an integrated advertising campaign including television, print and online advertising and social media integration," he remarked.
Pope continued, "Another bright spot in the first quarter was our international segment, which posted strong earnings in spite of weaker currencies. Positive hog production fundamentals in Eastern Europe fueled solid profitability from our international hog operations. In addition, our Romanian meat processing business benefited from the approval to export to European Union member countries late last fiscal year."
"Naturally, we were disappointed with the poor performance of our fresh pork business, as the fresh pork complex remained under pressure due to higher supplies and weak domestic retail demand, although exports remained historically strong," he said.
"Despite higher raising costs in our hog production business that caused margins to decline, the segment remained profitable," Pope noted.
"I am pleased to report that we recently reached an agreement to settle substantially all of the Missouri nuisance litigation. In accordance with the agreement, all pending cases, with one minor exception, will be dismissed. This agreement effectively brings the Missouri nuisance litigation to a close," he stated.
Pope added, "Over the past year, our board of directors has approved four separate share repurchase authorizations totaling $600 million. We have aggressively executed against those authorizations, repurchasing 17.4 million shares for $350 million, leaving $250 million available for future repurchases. In little more than a year, we have bought back over 10% of the company. These share repurchases not only reflect our commitment to enhance shareholder value, but also our continued confidence in the fundamental strength of our business."
Source: Smithfield Foods Inc.