Smithfield Foods announced in August that its first quarter profits for fiscal 2008 were substantially higher than the previous year. Income from continuing operations was $62.0 million, or $.47 per diluted share, versus last year’s totals of $39.9 million, or $.36 per diluted share. Sales were $3.4 billion versus $2.8 billion a year ago.

“Given the challenges of higher grain costs and the continued adverse fresh pork environment, I am generally satisfied with our performance in the first quarter,” said C. Larry Pope, president and chief executive officer. “Our strategic focus on converting raw materials to more value-added convenience products is working.”

The company recently reported outbreaks of classical swine fever, or CSF, at three of its hog farms in Romania. Smithfield is working closely with Romanian authorities to contain the outbreaks and to destroy and dispose of animals on the three affected farms. The company previously disclosed that inventory write down and disposal costs associated with the first two outbreaks would have a $4-5 million pre-tax impact to second quarter results. Given the third reported outbreak, the write down and disposal costs are expected to exceed the previously reported level. However, the revised cost estimate has not yet been determined.

“This most recent setback in Romania is disappointing and will certainly impact our results in the country for some time going forward,” said Pope. “However, we remain committed to our Romanian strategy.”

Following are the company’s sales and operating profit for continuing operations by segment:

In the pork segment, packaged meats volume grew 28 percent, primarily the result of the contributions of Armour-Eckrich, acquired in October 2006. Excluding the impact of Armour-Eckrich, total packaged meats grew by two percent. The volume of pre-cooked bacon, sausage, and ribs, as well as smoked boneless hams, increased by more than 10 percent before including Armour-Eckrich. The company continued its focus on rationalizing lower margin products in favor of higher margin and more fully processed products. The result is increased volume in higher margin categories and reduced volume in lower margin categories. This strategy produced significantly improved margins in the pork segment over the same period a year ago.

Margins in fresh pork remained under significant pressure. Results for the quarter include the pork processing operations of Premium Standard Farms, acquired in May. Seasonally, fresh pork margins are weak in the first quarter, as was the case this year.

Beef processing margins rose, reflecting a more favorable operating environment, increased volume and higher exports. Beef processing results more than offset losses in cattle feeding operations, as beef segment earnings were several times those of last year.

The international segment recorded strong profitability versus a slight loss last year. Groupe Smithfield, the combination of the company’s previously-owned Jean Caby operations and the recently-acquired Sara Lee European meats business, continued its strong performance. In addition, the company’s Polish operations were solidly profitable, in part, due to an 18 percent increase in packaged meats volume.

Hog production operating profits improved in spite of higher raising costs and the adverse impact of circovirus. Raising costs in the United States averaged $49 per hundredweight versus $42 per hundredweight last year. Including the hog production operations of Premium Standard Farms, the company marketed 27 percent more head domestically versus a year ago. Without the acquired hog production, Smithfield marketed six percent fewer head. Circovirus has continued to negatively affect hog production results. However, the vaccine the company has been administering for some time is working. Improvements in livability are occurring and the quarter-to-quarter productivity should be favorable from this point forward.

Live hog market prices averaged $53.50 per hundredweight for the quarter, versus $51 per hundredweight in the same quarter last year. The hog production segment benefited from a $17 million quarter-to-quarter swing in foreign currency translation gains. In the first quarter of fiscal 2007, the company recorded a pre-tax impairment charge of $4.2 million related to the sale of its share in its Brazilian live hog production operation.

In the Other segment, Butterball, LLC, the company’s joint venture turkey operation, reported a very solid quarter in spite of significantly higher raising costs.

Disclaimer: This website may contain "forward-looking" information within the meaning of the federal securities laws. The forward-looking information may include statements concerning the company's outlook for the future, as well as other statements of beliefs, future plans and strategies or anticipated events, and similar expressions concerning matters that are not historical facts. The forward-looking information and statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. These risks and uncertainties include availability and prices of livestock, raw materials and supplies, livestock costs, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital, the cost of compliance with environmental and health standards, adverse results from ongoing litigation and actions of domestic and foreign governments.