Challenges in Fresh Pork, International Operations Weigh on Smithfield's Profit

Smithfield, Va.Challenging conditions abroad and in the fresh pork business have hurt the bottom line at Smithfield Foods, Inc.

In the first quarter of fiscal 2014, net income fell to $39.5 million (or 27 cents per diluted share) from $61.7 million (or 40 cents per share) a year ago.

Operating loss in the fresh pork business tripled to $36.5 million from $12 million. Although the first quarter is seasonally the most difficult period for the segment, declines in export markets including China, Japan and Russia, exacerbated the weak conditions, said Smithfield, the world's largest pork processor and hog producer.

Smithfield's international business also suffered, with operating income plunging to $1.9 million from $15.8 million.

"Higher raising costs in our hog production businesses in Eastern Europe and Mexico adversely impacted earnings in our international segment,' Larry Pope, president and chief executive officer, said in a statement.

Sales, however, rose 10 percent to $3.4 billion.

"The first quarter should mark the low point of the year for Smithfield," Pope said. "We will continue to execute on our long-term strategic growth plan, focused on improving our earnings stream and migrating Smithfield further towards a consumer packaged meats company."

The results were announced amid a review by the Committee on Foreign Investment in the United States into the pending $7.1 billion acquisition of Smithfield by Shuanghui International Holdings Limited.

Shareholders will vote on Sept. 24 whether to approve the acquisition for $34 per share under a merger that could result in a cash windfall for Smithfield executives and create a precedent for takeovers of American corporations by Chinese companies.