Smithfield Foods’ stock soared Thursday after the company reported a smaller quarterly loss than analysts expected. The stock rose $2.02 to $7.97. The company posted a loss of 15 cents per share in the three month period ending in January. Analysts were expecting a loss of 30 cents per share. Sales for the quarter were $3.3 billion compared to $3.1 billion a year ago.
For the most recent quarter, the company reported a loss including non-recurring charges and items, of $105.5 million. Sales for the company’s pork-processing unit rose 8.5 percent to $2.83 billion, the company said. However, profit for the quarter fell 42 percent to $129.4 million.
“We’re going to have a declining cost structure and an improving price structure, and that makes me have an awful lot of confidence about where next year is going to be,” said C. Larry Pope, Smithfield’s chief executive officer.
The company has cut their breeding herd by 10 percent over the last year and sold its beef unit to Brazil’s JBS SA to reduce costs. Smithfield also plans to close six plants by December. “I fully expect the fourth quarter to be another difficult quarter with continued substantial losses in hog production,” Pope said.
"Our results indicate that, despite the difficult environment and losses we have sustained in swine production, many parts of Smithfield are performing extremely well,” said Pope. “Our focus on improving packaged meats results is paying off. We earned record margins in this business in the quarter. Once our restructuring plan takes hold, these margins are expected to widen even further"
Record packaged meats results were offset in the pork segment by $84.8 million of restructuring charges and weaker fresh pork margins. Fresh pork volume was flat compared to last year.
"We expect that the recent decline in grain will begin to work its way through our cost structure, thereby providing us with better performance in our hog production operations,” continued Pope. "I am also pleased that we continued to make significant progress on improving our balance sheet, reducing debt and increasing liquidity."
“I am reasonably optimistic about fiscal 2010 in spite of the current recession,” said Pope. "Our packaged meats business is improving very nicely and I expect this to continue. In addition, the restructuring of our pork group should deliver significant benefits to the bottom line during the year,” he added. "All of this is encouraging and leads one to believe that fiscal 2010 should be a much better year for the company," he concluded.