Smithfield Foods synergies drive Q1 results
April 29, 2016
by Erica Shaffer
Smithfield Foods showed some strong numbers in the first quarter.
SMITHFIELD, Va. – Lower raw material costs and strong results in packaged meats and fresh pork lifted first quarter earnings at Smithfield Foods Inc. by 25 percent.
For the first quarter ended April 3, Smithfield, a subsidiary of WH Group, reported net income of $121 million, compared with $97 million in the first quarter ended March 29, 2015.
“Our China and US operations reported substantial growth in the first quarter, attributable to increasing synergies between our China and US businesses, the continuous adjustment of product structures in China, as well as significant improvement in the US operations brought about by its “One Smithfield” program,” WH Group Chairman and CEO Wan Long said in a statement. “The achievements reflect our excellent progress in pushing forward the synergies and in the enhancement of our China and US operations post-Smithfield acquisition, as well as in creating new value.”
Overall, sales for the quarter totaled $3.31 billion, a decrease of 9 percent from $3.62 billion reported in the year-ago quarter. The company attributed the decline in sales to lower average selling prices of domestic fresh pork products and lower domestic live hog market prices.
On a segment basis, Fresh Pork sales declined 16 percent to $1.12 billion due to a 13 percent decrease in average selling prices and a 4 percent decrease in volume. Operating profit increased to $99.9 billion primarily as a result of lower raw material costs.
Packaged Meats operating profit was $207.1 million compared with $172.5 million in the first quarter of 2015. Sales in the segment climbed 2 percent to $1.75 billion on a 2 percent rise in volume.
“Our most exciting growth prospect is the ongoing development of our packaged meats business,” the company said in a filing with the Securities and Exchange Commission. “Although we have experienced meaningful and consistent improvement in packaged meats margins, we believe significant growth potential remains.
“We will continue to strengthen our consumer-focused marketing programs and promote innovation to improve our product mix toward branded, value-added products,” the company noted. “We expect these actions to result in continued broad-based gains in packaged meats sales, volume, market share, distribution and margins.”
The company’s Hog Production business reported significant losses in the quarter. The segment reported an operating loss of $83.5 million compared with $6.4 million in the year-ago quarter. Sales decreased 23 percent.
In the International Segment, operating profit fell $1.7 million to $14.2 million primarily due to unfavorable foreign currency translation.
Sales in the segment retreated 4 percent on foreign exchange rates which negatively impacted sales by $29.9 million, or 9 percent. On a constant currency basis, operating profit was relatively flat, the company said.
“…In the first quarter of 2016, WH Group officially launched Smithfield-branded products manufactured at the American-style packaged meat products factory in Zhengzhou,” Long said. “This not only facilitates the product structure upgrade of our China operations, but deepens the synergies between the China and US businesses. We are fully confident of the company’s future development. We will actively expand and reinforce our global market leadership, and enhance our operating efficiency and profitability, creating more returns for our shareholders.”