Smithfield Foods Profit Drops on Grain Costs

By EMILY FREDRIX

MILWAUKEE -- Pork producer Smithfield Foods (SFD Quote) on Thursday reported a 76% drop in its fiscal second-quarter earnings, as high feed costs linked to skyrocketing grain prices hurt its hog and Butterball turkey operations.

But the nation's largest pork producer said pork volumes were up in the quarter and it's poised to benefit as consumers look to save on costs and eat more of its meat. The company also said its liquidity is strong, and if it were to violate its debt covenants, it would be able to get waivers from its lenders.

Those statements meant much to investors on Thursday, just days after the nation's largest chicken producer, Pilgrim's Pride (PPC Quote), filed for Chapter 11 bankruptcy protection as it was hobbled by high feed costs and a high debt load.

Shares rose $1.38, or 22.5%, to $7.51 in morning trading. The company's stock is off more than 73% since January. It traded as high as $32.18 in the past 52 weeks.

The Smithfield, Va.-based company said profit fell to $4.2 million, or 3 cents per share, from year-ago profit of $17.4 million, or 13 cents per share. Latest-quarter results included a gain on the $580 million sale of its beef processing and cattle feeding operations.

Losses from continuing operations totaled 21 cents per share, compared with year-ago profit on the same basis of 17 cents.

Sales rose to $3.15 billion from $2.75 billion, helped by pork exports, but corn costs were 65% higher than a year ago and soybean meal costs surged 59%.