DOW JONES NEWSWIRES
Smithfield Foods Inc. (SFD) swung to a bigger-than-expected profit in its fiscal second quarter after year-earlier results were hurt by losses at its hog production unit, with the world's largest pork processor's latest results helped by low supplies pushing up prices.
Rising grain prices remains a concern for meat and dairy producers, while a sluggish economy and cautious consumers are making it tricky to raise their own prices. However, Smithfield has locked in the price it pays for corn and soybean feed through at least March 2011 after soaring corn futures two years ago nearly crushed the company.
Meanwhile, Smithfield--whose brands include John Morrell and Farmland--has benefited from increased demand for pork and pork products, while global hog supplies remain tight and exports have been growing.
For the quarter ended Oct. 31, Smithfield reported a profit of $143.7 million, or 86 cents a share, compared with a prior-year loss of $26.4 million, or 17 cents a share. The latest quarter had a net 6 cents of gains.
Revenue increased 11% to $3 billion after falling 14% a year earlier.
Analysts polled by Thomson Reuters most recently forecast earnings of 56 cents a share on revenue of $3.21 billion.
Gross margin surged to 14.4% from 6.3% as production and other costs rose just 1.7%.
At Smithfield's packaged-meat segment, its largest by sales, earnings slumped 42% on higher costs, though revenue increased 12%.
The fresh pork business' earnings more than doubled as revenue improved 8.6% and margins strengthened amid higher prices and tight supplies. The hog-production business swung to a profit as revenue soared 51% as live-hog market prices soared amid lower supplies.
Shares closed Wednesday at $17.70 and were inactive premarket.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com