Smithfield Foods Inc, the largest U.S. pork and hog producer, reported a quarterly profit below analysts' estimates as the worst U.S. drought in more than half a century has sent costs for feed grain soaring.
Companies such as Smithfield Foods, Sanderson Farms Inc and Maple Leaf Foods, one of Canada's biggest meat processors and bakers, have been hurt by rising feed prices associated with the lack of rain in the U.S. Midwest.
Smithfield's fresh pork operating margin was down 1 percent for the first quarter that ended July 29, after being up 3 percent a year earlier. While margins in its hog production business also declined, they were up in the company's packaged meats unit.
Smithfield's fresh pork and packaged meats businesses together account for more than two-thirds of company sales. U.S. retail demand for pork has been weak, weighing on results.
The company, which owns the Farmland, Smithfield, Armour and John Morrell brands, has used share buybacks and debt restructuring to reduce the sting out of spiking feed costs.
It expects the rising costs to be offset by favorable grain hedges for fiscal 2013.
The company's first-quarter net income fell to $61.7 million, or 40 cents per share, from $82.1 million, or 49 cents per share, a year earlier.
Profit from the latest quarter was below the 44 cents analysts had estimated, according to Thomson Reuters I/B/E/S.
Revenue was $3.09 billion for the quarter, also missing analysts' average estimate of $3.15 billion.
Smithfield shares, which have lost about one-fifth of their value this year, were up 10 cents, or nearly a half percent, at $19.42 in Tuesday morning trading on the New York Stock Exchange.