(Includes ratings actions from S&P and Moody's, updates
stock price.)
DOW JONES NEWSWIRES
Smithfield Foods Inc. (SFD) announced fiscal first-quarter
results were below its expectations as the meat processor sees
greener pastures ahead.
The company didn't give details in a filing with the Securities
and Exchange Commission beyond saying "record" results in its
packaged-food business were more than offset by
greater-than-expected losses in its hog-production business.
While Smithfield noted the company met its planned production
and feed-cost cuts, "the company did not experience seasonal
improvements in hog prices" as the recession and H1N1 flu outbreak
depressed demand, particularly in the export markets.
The company also said the quarter ended Sunday was the last
which will be "significantly" impacted by grain positions
Smithfield entered into last year. The company locked in some
prices just as commodities peaked.
Depressed hog prices and demand have been hurting Smithfield for
a while, and the company has responded with plant closures and
production cuts. The company's loss in the latest fiscal year was
its first since the 1970s.
Smithfield also said its first-quarter results would also
include write-downs because of idled production as it looked to
reduce herd size and commodity exposure.
Standard & Poor's Ratings Services reacted to the warning
with a one-notch downgrade of Smithfield to B-, putting it on the
cusp of highly speculative territory. Credit analyst Patrick
Jeffrey said the company isn't expected to meet S&P's earnings
target as he highlighted the Smithfield's debt pressures.
However, Moody's Investor Service reiterated its B2 ratings,
which is one step above where S&P has Smithfield on its
scale.
Smithfield's shares were recently up 0.7% at $12.79 amid a broad
market rally. The stock is down 49% the past year.
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353;
kerry.benn@dowjones.com