Food Business News - March 13, 2012 - 18

Higher costs pressure Smithﬁeld Foods income
SMITHFIELD, VA. — Income for Smithﬁeld Foods, Inc. was down 61% during the third quarter on higher costs and charges related to its share of the Spanish processed-meats company Campofrio. For the quarter ended Jan. 29, the company had income of $79 million, equal to 49c per share on the common stock, which compared with income of $202.6 million, or $1.22 per share, during the same quarter of the previous year. Sales for the quarter were $3,478.3 million, up 9% from $3,186.2 million during the same quarter of the previous year. “I am very pleased to report another quarter of strong proﬁtability and in particular the progress we have made in improving the quality and consistency of our earnings,” said C. Larry Pope, president and chief executive ofﬁcer. “Notably, our year-to-date adjusted earnings closely tracked last year’s record results.” “I am very encouraged by the consistency of our packaged meats margins in periods of both high and low cost raw materials. We are beginning to realize the beneﬁts of our long-term strategy to intensify our consumer-focused marketing programs, and I applaud the efforts of our sales and marketing team who produced consistently solid margins in our packaged meats year. Sales for the segment were $1,303.2 million, up 19% from $1,093.1 million during the same quarter of the previous year. The Packaged Meats segment had an operating proﬁt of $117.4 million, down 6% from $124.5 million during the same quarter of the previous year. Sales for the segment were $1,689.5 million, up 6% from $1,591.6 million during the same quarter of the previous year. “Favorable market conditions continued to support strong fresh pork proﬁtability,” Mr. Pope said. “Supply and demand remained well in balance, as healthy global demand for pork, particularly from Asia, drove doubledigit increases in both export volume and dollars. Although the hog production business recorded a loss for the quarter due to seasonal declines in hog prices, solid fundamentals remained intact. As anticipated, international segment proﬁtability improved, producing record third-quarter results after excluding the Campofrio charge.” For the nine months ended Jan. 29 the company had income of $281.8 million, or $1.73 per share, down 33% from $422.6 million, or $2.55 per share, during the same period of the previous year. Sales for the nine months were $9,885.1 million, up 9% from $9,086.3 million during the same period of the previous year. FBN

Pope business while delivering share and distribution growth in several of our core brands and strategic product categories. Although packaged meats volumes declined slightly, we achieved strong sales and volume growth in the third quarter in our Armour, Curly’s, Farmland, Gwaltney, John Morrell, and Kretschmar brands.” During the quarter the Fresh Pork segment had an operating proﬁt of $78.5 million, down 40% from $130.3 million during the same quarter of the previous

F.A.O. Food Price Index rises in February
ROME — The Food and Agriculture Organization Food Price Index averaged 215 points in February, up 2.4 points, or about 1%, from the revised January ﬁgure. The food price index consists of the average of ﬁve commodity group price indices (meat, dairy, cereals, oils and fats, and sugar) weighted with an average export share of each of the groups for 2002-2004. The F.A.O. said of the February results, “The increase … was mostly driven by higher prices of sugar, oils and cereals while dairy prices fell slightly after a marked rise in January.” The F.A.O. cereal price index averaged 227 points in February, up 4.4 points, or 2%, from January and compared with 259 in February 2011. “International wheat prices rose most followed by maize, while rice quotations were generally lower,” the F.A.O. said. “Wheat markets were supported by tightening supplies and concerns over the impact of severe cold weather on this year’s crops in Europe and the CIS. Maize prices also rose in February, mainly driven by stronger import demand in Asia and supported by weaker dollar and lower freight rates as well as concerns about crop prospects in South America. However, rice prices remained under downward pressure on generally weak import demand and stiff competition among exporters.” The F.A.O. oils and fats index at 239 points was up 5 points, or 2%, from January. In February 2011, the index stood at 281 points. “Poor monthly production growth in palm oil, together with the prospect of a tight supply and demand balance for total vegetable oils in 2011/12 have driven up the index,” the F.A.O. said. “In particular, lower production forecasts for soy oil, which push down expected global soy oil export availabilities to a multi-year low, have supported prices.” The meat price index averaged 175 points in February, virtually unchanged from January but up from 171 points a year ago. The F.A.O. said pig meat prices gained 3.4% behind strong purchases by Hong Kong and recent disease outbreaks in Russia. The dairy price index averaged 205 points in February, down 1.5 points from January and compared with 230 points in February 2011. The decline reﬂected falling skim milk powder and casein quotes, which fell by nearly 2%, the F.A.O. said. At the same time, prices of butter, cheese and whole milk powder remained relatively steady. The sugar price index rose to 342 points in February, up 8 points, or 2.4%, from January. The index still was sharply lower than in February 2011, though, when it averaged 418 points. “Last month’s increase was largely driven by unfavorable weather conditions in Brazil, the world’s largest producer and exporter of sugar, and fears that these would delay harvest and lead to short-term tightness in the market,” the F.A.O. said. “However, large production harvests in India, the E.U., Thailand and the Russian Federation kept prices from increasing further.” FBN

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March 13, 2012

Food Business News - March 13, 2012

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