Smithfield Foods posts higher sales, profit on strong packaged meats, pork demand
April 29 (Reuters) - U.S. pork processor Smithfield Foods (SFD.O), opens new tab on Tuesday posted higher first-quarter sales and profit, helped by strong demand for its packaged meats and pork businesses and cost-control efforts.
The Virginia-based company has been focusing on its high-margin packaged meats business. It sells pork, ham and sausages under brands including Smithfield, Eckrich and Nathan's Famous.
Packaged meat sales rose 1.2% in the quarter ended March 30 from a year earlier. It is a major revenue generating segment for Smithfield. Fresh pork sales increased 4.9%.
Smithfield, which went public in January, warned last month that cautious consumer spending and higher raw material costs were crimping profit in its packaged meats business.
The segment's operating profit declined 7% to $266 million, while profit in its pork business slumped 25.7% to $82 million in the reported quarter.
Smithfield has kept a tight lid on its expenses through workforce reduction and exiting certain farm operations to reduce its hog production business at a time of higher input costs.
Its quarterly adjusted operating margin was 8.6%, up from 5.1% in the first quarter of 2024.
Smithfield posted a 9.5% rise in total sales to $3.77 billion in the quarter. It earned 58 cents per share in adjusted profit from continuing operations, compared with 32 cents a year earlier.
The company reaffirmed its annual sales forecast in the low-to-mid-single-digit percentage range compared to last year, and packaged meats adjusted operating profit of between $1.05 billion and $1.15 billion.
Tyson Foods (TSN.N), opens new tab, a rival U.S. meatpacker that sells pork, chicken and beef, is set to report quarterly earnings on May 5.
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Wall Street's three main indices and the ICE BofA U.S. Treasury index are all slightly higher for the year to date, despite the post-'Liberation Day' volatility, while the dollar has steadily ground lower, losing around 10% of its value against a basket of major currencies and breaking long-standing correlations along the way. The dollar was perhaps primed for a fall. It's easy to forget, but only a few months ago the 'U.S. exceptionalism' narrative was alive and well, and the dollar scaling heights rarely seen in the past two decades. But that narrative has evaporated, as U.S. President Donald Trump's controversial economic policies and isolationist posture on the global stage have made investors reconsider their exposure to U.S. assets. But why is the dollar feeling the burn more than stocks or bonds? Non-U.S. investors often protect themselves against sharp currency fluctuations via the forward, futures or options markets. 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But now, investors are increasing their hedging," says Sophia Drossos, economist and strategist at the hedge fund Point72. And there is a lot of dollar exposure to hedge. At the end of March foreign investors held $33 trillion of U.S. securities, with $18.4 trillion in equities and $14.6 trillion in debt instruments. The dollar's malaise has upended its traditional relationships with stocks and bonds. Its generally negative correlation with stocks has reversed, as has the usually positive correlation with bonds. The divergence with Treasuries has gained more attention, with the dollar diving as yields have risen. But as Deutsche Bank's George Saravelos notes, the correlation breakdown with stocks is "very unusual". When Wall Street has fallen this year the dollar has fallen too, but at a much faster pace. And when Wall Street has risen the dollar has also bounced, but only slightly. This has led to the strongest positive correlation between the dollar and S&P 500 in years, though that's a bit deceptive, as the dollar is sharply down on the year while stocks are mildly stronger. Of course, what we could be seeing is simply a rebalancing. Saravelos estimates that global fixed income and equity managers' dollar exposure was at near record-high levels in the run-up to the recent trade war. This was a "cyclical" phenomenon over the last couple of years rather than a deep-rooted structural one based on fundamentals, meaning it could be reversed relatively quickly. But, regardless, the dollar's hedging headwind seems likely to persist. "Given the size of foreign holdings of both stocks and bonds, even a modest uptick in hedge ratios could prove a considerable FX flow," Morgan Stanley's FX strategy team wrote last month. "As long as uncertainty and volatility persist, we think that hedge ratios are likely to rise as investors ride out the storm." What could move markets tomorrow? Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias.
