PEDv pressures Hillshire earnings
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CHICAGO – Hillshire Brands Co. said it was increasing meat prices due to rising commodity costs tied to the porcine epidemic diarrhea virus (PEDv), according to a Reuters report.
Sean Connolly, president and CEO of Hillshire, said the company was taking additional pricing actions moving into the second quarter. Reuters reported that Hillshire Brands is one of the first companies to report the virus is affecting profits.
"That's been a significant impact from PEDV on the sow market and sow pricing, on pork and sows," said Maria Henry, CFO for Hillshire Brands. "We are heavily affected with what's going on there. As you probably know, we had a spike early, and then the number of reported cases was coming down. Now the number of reported cases is going back up. That's wreaked a bit of havoc on that piece of the market, particularly around pork and sows.
"As we said, we intend to cover commodities through pricing over time. The question will be as we put pricing into the market, how much coverage are we able to get into this fiscal year, and exactly how the consumer reacts to higher price points, and what the effect of the higher pricing is on our volumes,' she added. "We've taken into account our expectation on all of that when we affirmed our guidance. We're just through the first quarter and pleased with what we did on the top line this quarter. We'll have to see how it plays out."
Net income of The Hillshire Brands Co. in the three months ended Sept. 28 was $29 million, equal to 24 cents per share on the common stock, down 40 percent from $49 million, or 40 cents per share, in the same quarter in 2012. Net sales were $984 million, up 1 percent from $974 million.
PEDv was identified in the United States for the first time in May through testing at the National Veterinary Service Laboratory. The disease causes diarrhea, vomiting and dehydration in hogs. Piglets are especially vulnerable to the disease, which kills up to 80 percent of the piglets that contract it. The virus poses no food-safety risk and is not a trade-restricting disease. But a recent study funded by the pork industry found that the virus can be spread by contaminated transport trailers.