RICHMOND, Va. (AP) — Smithfield Foods Inc. said Thursday that its fourth-quarter profit fell 19 percent on lower margins on fresh pork, slow sales growth and higher selling costs.
The results missed Wall Street expectations, and Smithfield shares fell more than 3 percent in morning trading.
The Smithfield, Va.-based company, whose brands include Armour, Farmland and its namesake, said its net income fell to $79.5 million, or 49 cents per share, for the three months ended April 29, from $98.4 million, or 59 cents per share, a year ago.
Excluding certain items, the company earned 43 cents per share. Wall Street analysts surveyed by FactSet expected earnings of 53 cents per share.
Revenue increased 3 percent to $3.21 billion from $3.12 billion as it benefited from 13 percent higher pork exports and it expanded its distribution of its packaged meats. But the revenue figure was below analysts’ expectations of $3.25 billion. Fresh pork sales rose about 3 percent and packaged meat sales rose less than 1 percent.
However, Smithfield said its cost of sales rose about 8 percent and its gross profit fell 25 percent.
Smithfield also announced a two-year, $250 million share buyback plan.
In a conference call with investors, CEO C. Larry Pope said the company has gained market share in products such as deli meats, bacon, sausage, and hot dogs.
Pork producers like Smithfield are caught in a tug of war with consumers. The company needs to hike prices to offset rising commodity costs, namely the corn it uses for feed. But consumers are still extremely sensitive to price changes in the current economy.
By raising prices, Smithfield risks cutting into its sales should consumers cut back or buy cheaper meats, such as chicken.
“If you look forward, the fundamentals are moving our direction. Less chicken, less beef and lower grain should be pretty good for the pork business,” Pope said.
For the year, Smithfield reported net income of $361.3 million, or $2.21 per share, compared with $521 million, or $3.12 per share, a year ago. Revenue increased 7 percent to $13.1 billion.
Its shares fell 85 cents, or 4.4 percent, to $18.72 in morning trading. Its shares have flirted with their 52-week low of $17.79 set last September. They have fallen 25 percent since peaking at $25.12 per share in early December.
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Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.
