Smithfield hits record with Q1 results
The pig production business reported net income was up 479%, standing at US$105.3m. Sales, operating profit and margin by segment were all in positive figures; sales were up +3% to US$3.4bn, while consolidated operating profit increased +234% to US$196.4m. Fresh pork profits performed extremely well (+171% to US$59m) and packaged meats were also in positive sales (+13% to US$121.2m).
C Larry Pope, president and chief executive officer, said: "2014 is off to a great start with record first-quarter earnings. Looking forward, continued strong fundamentals driven by reduced hog and pork supplies, organic growth opportunities, as well as synergies with WH Group should fuel significantly improved year-on-year results."
Export sales also continued to perform well (+17%), despite sanctions on the US due to the porcine epidemic diarrhoea virus (PEDv). Last year Smithfield was bought by Chinese pork producer WH Group, and utilised the Chinese market through a partnership with Shuanghui Development, its Chinese counterpart.
"Hog production volumes will be lower due to PEDv, pushing hog and pork prices higher. The combination of lower corn costs and higher hog prices will generate very strong hog production margins. At the same time, as part of WH Group’s global platform, we will continue to efficiently allocate resources by adjusting our Chinese exports to maximise value.
"We also continue to grow our business organically by strengthening our brand positioning and lowering costs through improved efficiencies and productivity across all business segments. As such, we expect normalised operating margins, on a full-year basis, in our fresh pork, packaged meats and international businesses despite higher input costs," he continued.
Pope concluded: "We are encouraged by the ongoing collaboration and partnership with Shuanghui Development, our sister company in China, in the areas of marketing, engineering and procurement, to name a few. We will continue to leverage our vertically integrated platform to supply high-quality, ractopamine-free pork to Shuanghui in China, while continuing to meet the needs of our domestic customers.
"In addition, we now have access to the largest cold chain logistics network in China, as well as a robust sales and distribution network, both owned by Shuanghui. We can utilise these networks to service Smithfield customers globally. This market access in China is second to none and represents an enormous growth opportunity for Smithfield."
