Smithfield lags estimates on weak U.S. demand for pork

Tue Sep 4, 2012 2:07pm BST

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(Reuters) - Smithfield Foods Inc SFD.N, the largest U.S. pork and hog producer, reported a quarterly profit below analysts estimates as higher supplies and weak retail demand in the United States hurt its fresh pork business.

Operating margin in the fresh pork segment fell to negative 1 percent in the first quarter from 3 percent a year earlier.

The company, which owns the Farmland, Smithfield, Armour and John Morrell brands, said margins have improved considerably since the end of the quarter.

Operating margin in the hog production business also contracted during the quarter ended July 29, as the worst U.S. drought in more than half a century spiked grain costs, pushing up the cost of raising hogs.

Companies such as Smithfield Foods, Sanderson Farms Inc (SAFM.O) and Maple Leaf Foods (MFI.TO), one of Canada's biggest meat processors and bakers, have been hurt by a rise in feed costs associated with the drought in the U.S. Midwest.

Smithfield expects the higher raising 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 a fifth of their value this year, fell 3 percent to $18.78 in premarket trading on Tuesday. They had closed at $19.32 on Friday on the New York Stock Exchange.

(Reporting By Lisa Baertlein in Los Angeles and Ranjita Ganesan in Bangalore; Editing by Saumyadeb Chakrabarty, Sreejiraj Eluvangal)