Hormel cuts pork production due to piglet virus

by Keith Nunes
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AUSTIN, Minn. – Hormel Foods Corp. is reducing slaughter operations at its Fremont, Neb., pork processing plant to four days a week due to the impact of Porcine Epidemic Diarrhea virus (PEDv).

“We anticipate pork raw material supplies to tighten significantly later in our third quarter impacting our Refrigerated Foods segment,” said Jeff Ettinger, chairman, president and CEO.

Ettinger made the announcement on May 21 while discussing the company’s financial results for its second quarter, which ended April 27. For the quarter, Hormel Foods recorded net income of $140,090,000, equal to 53 cents per share on the common stock, compared favorably to the previous year when net income was $125,520,000, or 47 cents per share.

Sales for the quarter were $2,244,866,000 compared with $2,152,686,000 during the previous year.

“Our outlook would be that when it comes to say the pork prices, that we do think this will be a several month process, but we don’t think there’s been a systemic change in the cost picture in the pork industry,” Ettinger said. “The beef price increases everybody kind of saw coming and certainly is a little bit more of a systemic challenge. I think in the long run they are expecting to build it (live hog supplies) back but that’s not going to happen overnight.”

Ettinger added that the company expected to see a live hog supply impact during the Hormel’s fiscal third and fourth quarters.

“But the price impact, in terms of what’s going on in the country in terms of pork supplies, was very pronounced during the second quarter and very sharp,” he said. “That’s always the hardest in our area, when we get a quick, steep increase in cost. Trim costs, selling costs, you name it – They’re rocketing up and those have been very difficult to price against.”

Looking ahead, Ettinger said “Elevated pork, beef, turkey, and avocado costs, driven by tighter raw material supplies, are presently compressing margins on many of our value-added products. We are maintaining our fiscal 2014 guidance range of $2.17 to $2.27 per share, but expect these cost pressures to push our full year earnings toward the lower end of this range.”
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