Meat + Poultry - June 2005 - (Page 4)

Smithfield announces record-setting fourth quarter, annual net sales SMITHFIELD, Va. - Smithfield Foods, Inc. announced record fourth-quarter operating results and record net income for its fiscal year ended May 1. Net income for the fourth quarter was $85.4 million versus income from continuing operations this past fiscal year of $71.1 million. Sales in the fourth quarter were $2.9 billion, compared with $2.5 billion in the prior year. For fiscal 2005, the company reported an income from continuing operations of $296.2 million compared with $162.7 million for fiscal 2004. Fiscal 2005 sales were $11.4 billion compared with $9.3 billion a year ago. "We made substantial progress in our continuing priority of improving and growing the value-added pork segment," said Joseph Luter III, chairman and C.E.O. "We have invested to add considerable processed meats capacity. Our emphasis on deli and case-ready is also paying off." A key driver in the company's performance was a 29 percent increase in live hog prices year over year. "We have reached the peak and we are headed back down," said Larry Pope, Smithfield Foods president and C.O.O., in a conference call with financial analysts. Higher live hog prices translated into high raw material costs for the company's Pork segment and depressed margins. Fresh meat volume increased 14 percent with the full fiscal year contribution of Farmland Foods, the Kansas City, Mo.-based meat processor Smithfield acquired in fiscal 2004. On a product-by-product basis, caseready pork volume increased 34 percent, excluding Farmland Foods. In further processed meats, the company saw growth in its pre-cooked bacon, pre-cooked entrees and dry sausage products. Pork export demand was strong throughout the year, with volume growing 30 percent. Demand was so strong the company has had to put some product destined for international markets into cold storage until shipping capacity Sysco's appetite for meat firms continues HOUSTON - Sysco Corp. is in acquisition mode again, as it announced the purchase of two meat companies in the past month. Sysco's Buckhead Beef distribution subsidiary has signed an agreement to acquire Royalty Foods, Inc., a specialty meat distributor based in Orlando, Fla. Terms of the transaction were not disclosed. Founded in 1983 by Robert Meeks and Benjamin Guzzone, Royalty Foods employs 170 and operates from a 65,000-square-foot steak cutting and distribution facility. The company is a Certified Angus Beef distributor and supplies center-of-theplate, frozen and dry foods to foodservice operations throughout the Southeastern United States. During the 2004 calendar year, Royalty Foods' sales were approximately $75 million. Sysco Corp. also acquired Facciola Meat Co., Fremont, Calif., this past month. The company is a meat distributor, employing 131 at its 108,000-square-foot warehouse and processing facility. Facciola Meat Co. serves foodservice operations in Northern California, Hawaii and Nevada. For calendar year 2004, the company generated approximately $82 million in sales. Since 1999, Sysco has been in the process of acquiring small, regional meat processing companies. In other company news, Sysco also recently announced the retirement of Thomas Lankford, its president and C.O.O., effective July 2, the end of the company's fiscal year. Richard Schnieders, Sysco's chairman and C.E.O. will assume the additional role of president. 4 I MEAT&POULTRY I June 2005 I becomes available. Smithfield's Beef segment reported a modest loss for fiscal 2005, as volume declined 10 percent and unsatisfactory industry conditions continued throughout the year. Like other beef packers, the ongoing closure of the Canadian border and Japan's ban on U.S. beef imports have continued to hinder performance in this segment. Smithfield Foods has been one of the most active players in the acquisitions side of the meat business, and Luter said he has an interest in Swift & Co., Greeley, Colo., a company rumored to be available. Luter said, "Swift will be sold, in my judgment, in the next year or two. We have not made a secret of the fact we would want a seat at the table when that process gets active." American Foods and Rosen's announce mega-merger ALEXANDRIA, Minn. - American Foods Group, Inc., Green Bay, Wis., has announced it will merge with the meat processing division of Rosen's Diversified, Inc., a Minnesota agricultural holding company. Terms of the transaction were not disclosed and officials say the deal is a straight merger of the two companies, which will be known as American Foods Group L.L.C., based in Alexandria, Minn. Combined revenues for the companies were about $1.5 billion this past year. American Foods has plants in Wisconsin, South Dakota and Ohio, and more than 1,800 employees. Rosen Meat Group has plants in Minnesota, South Dakota, Nebraska and Virginia, and a total of 1,700 employees. The new company will consist of all of American Foods Group, Inc.'s current operations, along with R.D.I.'s meat processing companies. R.D.I.'s agricultural chemical distribution and fertilizer business units are not part of the agreement.

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Meat + Poultry - June 2005