Smithfield Foods Inc. reported record results Aug. 11 for the second quarter of this year, compared to the second quarter of 2013. Sales for this year’s second quarter were $3.8 billion, up 14%. Net income was $142.9 million, compared to net income of $32.4 million last year.
Pork had a big hand in this performance for Smithfield, as fresh pork showed a 257% increase in operating profit to $29.7 million and hog production operating profit was up 322% to $129 million on record-high margins. Packaged meats also showed an operation profit of $97.5 million.
President and Chief Executive Officer, C. Larry Pope, credits the supportive fundamentals in the hog production segment for driving the strong second quarter results. Tights hog supplies due to porcine epidemic diarrhea virus and strong domestic and international demand pushed hog margins to record levels.
Pope also says restructured and streamlined fresh pork and packaged meats operations are showing benefits. Fresh pork operating margins improved to 2%, or $5 per head. Tight supplies combined with resilient domestic and export demand pushed the U.S. Department of Agriculture cutout 30% higher and offset a comparable increase in live hog prices. The company processed 8% fewer hogs, but heavier weights compensated for a significant portion of the volume decline. Foodservice sales volume and dollars increased.
Packaged meats operating margins were 6%, or $0.15 per pound. Volume grew 6% with notable increases in bacon, hams, hotdogs and dry sausage. Ham volume was significantly higher owing to the later timing of Easter. The company delivered normalized margins and volume growth in the face of an unprecedented rise in raw material costs.
Hog production operating margins were 15%, or $37 per head, an all-time record. Year over year, live hog market prices increased 30% to $88/cwt., as tight supplies due to PEDV supported exceptionally high prices. Raising costs declined 3% to $66/cwt. A 10% decline in head sold was partially offset by 3% heavier weights.