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k0121 BC-Earns-SmithfieldFoods 1stLd-Writethru 06-05 0485

Smithfield 4Q tumbles 94 pct on costs, hog prices

Eds: UPDATES throughout; ADDS byline; CHANGES dateline.

By SONJA BARISIC

Associated Press Writer

NORFOLK, Va. (AP) — Smithfield Foods Corp., the nation’s largest hog producer and pork processor, said Thursday that fourth-quarter profits fell 94 percent, hurt by rising grain costs and falling hog prices.

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Profit for the quarter ended April 27 was $2.4 million, or 2 cents per share, compared with a profit of $37.1 million, or 33 cents per share a year ago.

Revenue was up 20 percent to $2.87 billion from $2.39 billion last year.

Analysts polled by Thomson Financial expected a profit of 7 cents per share on revenue of $3.55 billion.

The suprising results sent Smithfield shares falling 3.6 percent, or $1.09, to $29.04 in early trading.

Earnings excluding Smithfield’s beef operations fell to 1 cent per share from 46 cents. In March, Smithfield said it would sell its beef-processing operations to Brazilian meatpacking company JBS SA for $565 million.

Pork sales rose 29 percent to $2.45 billion, but the Smithfield, Va.-based company said weak hog production results offset strong results in its pork operations.

"The big story for the quarter is that the hog-production business was down sharply as a result of dramatically lower hog prices and sharply increased raising costs," C. Larry Pope, president and chief executive, told Wall Street analysts during a conference call.

Grain prices have soared in the past year, driven by world demand for wheat, corn, oats and soybeans to feed people and livestock. Pope also blamed the increases partly on the United States’ "corn to ethanol policy."

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Pope told analysts he expects grains used to feed hogs will continue to be very expensive well into the future.

Smithfield has raised prices to offset the rising costs.

In February, the company said it will reduce its U.S. breeding sow herd by 4 percent to 5 percent, or 40,000 to 50,000 sows. Pope said Thursday that Smithfield is well into the process.

For the year, Smithfield reported net income of $128.9 million, or 96 cents per diluted share, including an after-tax loss from discontinued operations of $10.3 million, or 8 cents per diluted share.

For fiscal 2007, net income was $166.8 million, or $1.49 per diluted share, including an after-tax loss of $45.1 million from discontinue operations, or a loss of 40 cents per diluted share.

In Iowa, Smithfield has a John Morrell production plant in Sioux City and a slaughtering plant in Denison.

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On the Net:

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Smithfield Foods: http://www.smithfieldfoods.com

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