Pork producer Smithfield Foods Inc. posted a quarterly profit, compared with a year-earlier loss, as prices rose for the hogs it raises and the pork it sells under such brands as Armour and Eckrich.
The company also forecast good results going forward Wednesday as it reaps the benefits of industry production cutbacks, which have boosted prices.
The earnings matched Wall Street expectations, though sales fell short of analysts' forecasts. Shares were up 2 percent at midday after rising as much as 5 percent earlier.
Smithfield raises most of the hogs that it processes into bacon, ham, pork chops and other cuts. Like its rivals, Smithfield reduced its herd this past year after sustaining losses the previous two years.
The smaller herds, coupled with strong pork exports, have increased sale prices and made hogs and pork profitable again.
The Smithfield, Va.-based company reported a profit of $76.3 million, or 46 cents per share, for the fiscal first quarter ended Aug. 1, compared with a year-earlier loss of $107.7 million, or 75 cents a share.
Revenue was $2.90 billion, up from $2.72 billion a year ago. Wall Street analysts on average had expected $3.07 billion, according to Thomson Reuters I/B/E/S.
Year-earlier results were hurt by low hog prices and a drop in pork sales due to fears then about the H1N1 flu, commonly known as swine flu.
Rich Nelson, analyst with Allendale Inc, said the first-quarter results "should set the general trend for profits over the next two to three quarters."
Pork margins could narrow in the first half of calendar 2011 because of expected higher hog prices then, he said.
Smithfield's pork unit, its largest, posted a 12 percent increase in profit to $113.3 million, while sales rose 7.2 percent to $2.41 billion. The hog unit earned $63.8 million on sales of $648.3 million versus a year-earlier loss of $180.2 million on sales of $476.4 million.
"The business environment was very favorable in the pork segment and sharply improved in the hog production segment in the first quarter," CEO C. Larry Pope said in a statement.
"The hog production segment should continue to be profitable, supported by lower hog supplies," he said.
During a conference call with analysts, Pope said it appears Smithfield will sell its 49 percent share in the Butterball turkey operation, with a decision expected this month.
In June, Smithfield offered to either buy out its joint-venture Butterball partner, Maxwell Farms Inc, for about $200 million, or sell its 49 percent stake to Maxwell.
The company said it repurchased more than $52 million in debt during the quarter.
Smithfield shares reached $17.15 at the New York Stock Exchange on Wednesday, the highest level since June, before slipping back $16.63, up 33 cents or 2 percent.
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