By Tom Polansek and Savyata Mishra
(Reuters) -Smithfield Foods, the biggest U.S. pork processor, reported increased quarterly revenue and profits on Tuesday as sales prices climbed.
The company, a majority-owned subsidiary of Hong Kong-based WH Group, raised the midpoint of its annual profit forecast range, sending its shares up 2.7% in early trading.
Smithfield said average sales prices for its packaged meat, including bacon, sausage and hot dogs, climbed 9.2%, while prices for its fresh pork products jumped 12% due to lower U.S. production and strong demand from consumers. Sales volumes were steady, according to the company.
The company, which owns some hogs and buys others to process, has seen higher hog prices, CEO Shane Smith told analysts on a conference call.
TOTAL SALES UP 12.4%
The U.S. hog herd was 1% smaller at the start of September, compared with a year earlier, according to U.S. government data.
“The increase in average sales price was primarily due to higher raw material costs,” Smithfield said in a regulatory filing.
Smithfield’s total sales increased 12.4% to $3.75 billion in the quarter ended September 28, compared with a year earlier. It earned quarterly profit of 58 cents per share on an adjusted basis from continuing operations, compared with 53 cents a year earlier.
The meatpacker raised its outlook for annual adjusted operating profit between $1.23 billion and $1.33 billion, compared with its prior forecast of $1.15 billion to $1.35 billion.
OPERATING PROFIT DOWN 5.7%
Smithfield has sought to rein in expenses amid rising raw material costs and cautious consumer spending. It closed a U.S. sausage plant and eliminated jobs this year.
Operating profit in its largest packaged meats segment fell 5.7% in the quarter, while profits in the fresh pork division dropped about 64%.
Reduced U.S. exports of certain byproducts to China limited gains in Smithfield’s average sales prices for fresh pork, according to the company.
Most products that Smithfield ships to China, the world’s biggest pork consumer, were subject to 57% tariff rates in the quarter, according to the company.
“Fresh pork has been navigating a challenging tariff environment,” Smith said.
Investors expect U.S. President Donald Trump to reach a deal with Chinese President Xi Jinping on Thursday to cool their trade conflict.
Smithfield previously said it does not export material amounts of meat to China, but ships offal products, such as pig stomachs, hearts and heads, which U.S. consumers generally do not buy.
(Reporting by Savyata Mishra in Bengaluru and Tom Polansek in Chicago; Editing by Shreya Biswas and David Holmes)
