WASHINGTON (dpa-AFX) - Packaged pork and meat products maker Smithfield Foods Inc. (SFD) reported Thursday a decline in second quarter profit as higher selling prices and volumes in the Pork segment was offset by margin erosion due to increased raw material costs. Earnings per share topped Street projections. Looking ahead, the company sees strong demand in the second half, and backed full-year volume growth forecast.
Net income was $120.7 million or $0.74 per share for the second quarter, lower than prior year's $143.7 million or $0.86 per share. The latest quarterly results included a charge of $0.02 per share for the early extinguishment of debt. Adjusted earnings per share declined to $0.76 from $0.80 a year earlier.
On average, 17 analysts polled by Thomson Reuters expected the company to earn $0.71 per share for the quarter. Analysts' estimates typically exclude special items.
Sales for the three-month period grew 10 percent to $3.31 billion from $3 billion in the prior year, beating Wall Street analysts' consensus estimate of $3.21 billion. The sales growth reflected higher average unit selling prices and volumes in the Pork segment, the company noted.
Gross profit declined to $419.6 million from prior year's $432.7 million on higher costs of sales. Operating income was $224.7 million or 7 percent of total sales, lower than $278.1 million or 9 percent of total sales a year earlier.
Segment-wise, total Pork sales increased to $2.77 billion from last year's $2.48 billion. Packaged meats sales rose 7 percent and volume grew 1 percent, and it maintained consistent margins despite a significant increase in raw material costs.
In Fresh pork, operating margins declined slightly from the prior year as a 22 percent increase in live hog market prices more than offset a 14 percent improvement in the USDA pork cutout. The division generated strong double-digit export growth.
President and Chief Executive Officer Larry Pope said, 'Our fresh pork and hog production businesses continued to benefit from a balanced domestic supply and demand dynamic, as well as very strong exports. Pork exports continued their upward trajectory, fueled by strong gains in shipments to Asia.'
Looking ahead to the second half of fiscal 2012, the company projects that global demand for pork will remain robust, which should fuel strong fresh pork profitability. The company also expects to sustain solid fundamentals in its hog production business and projects better results in the international segment.
The company added that it remains focused on achieving targeted 3 percent volume growth by increasing customer-focused marketing and strengthening innovation pipeline, while exercising strong pricing discipline.
Pope concluded, 'We expect that fiscal 2012 will be another very strong year for Smithfield.'
Smithfield shares closed Wednesday's regular trading session at $24.93, down $0.04 or 0.16 percent.
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