Earnings nearly evaporated in Smithfield Foods' ( SFD) fourth quarter, due to a glut of pork and beef in the U.S. and rising raw materials prices.

Smithfield earned $1.1 million, or 1 cent a share, in the quarter, compared with $85.4 million, or 76 cents a share, a year ago. On a continuing operations basis, Smithfield earned 4 cents a share, including a 5-cent charge. Adjusted earnings of 9 cents a share were 2 cents better than the Thomson First Call consensus estimate.

Sales were $2.68 billion, down from $2.90 billion a year ago. Analysts were looking for sales of $2.80 billion in the most recent quarter. By segment, pork sales were $1.73 billion in the latest quarter, down from $1.9 billion a year ago, while beef sales fell to $591.4 million from $607.1 million.

In the hog market, Smithfield saw an average price of $42 per hundredweight, down from $51 a year ago.

"As previously announced, current-year fourth-quarter results were sharply lower than a relatively strong fourth quarter last year, primarily due to depressed pork margins and lower live hog prices as a result of an oversupply of proteins in the U.S. marketplace," the company said. "In addition, higher energy costs materially impacted margins in both the pork and beef segments. "

The company says expansion plans in the U.S. and Europe could hurt near-term earnings, but should position the company better for the future.

"Looking into next year, it will take some time to work through the excess protein in the marketplace. Pork margins continue to be under pressure," the company said. "On the bright side, live hog futures are holding up well into the summer, which bodes well for continued profitability in hog production. With an increased number of cattle available and seasonally strong demand, we should have a better beef processing quarter."

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