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Smithfield Foods posts smaller-than-expected loss 18 Jun 2009

America's largest hog producer and pork processor, posted a smaller-than-expected fiscal fourth-quarter loss despite the H1N1 Flu outbreak that led to reduced pork consumption.
Smithfield Foods posts smaller-than-expected loss
Smithfield said although the swine flu dampened demand for pork in the US in May, the market is already back up to normal levels.
 
Chief Executive Larry Pope said on a conference call with investors that the company's loss in the quarter had far more to do with rising animal feed costs, which dug into profits in the company's hog production division.
  
"I can summarize the quarter and I can summarize the year very, very succinctly in saying that we have a hog production issue," Pope said. "It doesn't take a rocket scientist to figure out the issue is grain costs."
  
Overall, Smithfield Foods lost US$78.8 million, or 55 cents per share, in the three months ended May 3, in contrast to a profit of US$2.4 million, or 2 cents per share, a year ago.
 
The loss was smaller than the 60 cents per share loss analysts polled by Thomson Reuters had expected.
  
The hog production segment lost US$170.8 million alone in the quarter. The division raises hogs, which means the company buys lots of animal feed, which is made from corn and soybeans. Both grains, particularly corn, have become more expensive in the past year, mostly blamed on the country's ethanol policy.
  
Grain costs weren't the only culprit, however. The entire industry has been saddled with an oversupply of meat, which typically leads to lower selling prices for meat. Pork prices have generally fallen in recent months, hurt also by the recession.
  
To help boost prices, Pope said the company will cut its sow herd by another 3 percent. The cut is on top of a 10 percent chop the company made in 2008.
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