Smithfield Foods, flagging rising profits in packaged meats,
said it was "excited about growth prospects" despite its worst performance in hog
rearing since 2010, and the hurdle a stronger dollar poses to US exporters.
Shares in the hogs and pork group soared nearly 11% in New York.
Smithfield forecast "consistent growth" in its packaged meats
business, helped by a continued increase in market share of its brands, which include
the Armour and Eckrich sausage labels.
The division in the latest quarter, to January 27, delivered
a 7.2% rise to $125.9m in operating profits, lifted by sales expansion "across
all trade channels, including retail and foodservice, deli and export".
Larry Pope, the Smithfield chief executive, also highlighted
"ongoing positive fundamentals" backing the group's Eastern European business
"We are excited about the growth prospects for this company
as we continue to transform Smithfield into a more value-added, consumer
packaged meats company," Mr Pope said.
He forecast "solid" earnings for the current fiscal year,
which ends in late April, and "even stronger results" in the following year.
The comments come at a difficult time for hog producers -
squeezed by elevated grain costs and falling prices of lean hogs, dented by
growing pork production at a time of wavering demand.
Smithfield said that its own hog production division had run
at an operating loss of $64.5m, the worst result in nearly three years, at the
end of a period when overproduction also sent margins negative.
In the latest quarter, while rearing costs were 7% higher at
$68 per hundredweight, live hog prices were 2% lower at $60 per hundredweight,
creating losses of some $15 per head.
Investors have also voiced caution over the impact of a
stronger dollar on pork exporters, especially given the weakness of the yen,
increasing the cost to Japan of imports from the US which, for beef and pork
alone, topped $3bn a year in 2012.
"Japan is our most important meat trading partner," a report
from Paragon Economics and Steiner Consulting said.
"When looking at the export data that will be released next
week for January, pay close attention to the value of export to Japan and the impact
that has on the value of all US exports."
Smithfield said that its fresh pork exports rose 19% in the latest
quarter, year on year, despite the absence of Chinese trade.
"Export demand across a number of markets was greater than a
The group reported a rise of 3.2% to $81.5m in earnings for
the quarter, on revenues up 3.0% at $3.58bn.
Earnings were equivalent to $0.58 per share, ahead of market
forecasts of a $0.50-per-share result.
Smithfield shares closed up 10.7% at$24.68 in New York, their highest finish since December 2011.