Smithfield profit plunges after China blocks imports
(Reuters) - Smithfield Foods Inc SFD.N, subject of a $4.7 billion bid from China's Shuanghui International, posted a 63 percent drop in quarterly profit as costs rose and exports to China fell due to a ban on an additive it feeds to pigs to produce lean meat.
Smithfield has already started to wind down its use of the additive, ractopamine, and resumed shipments to China in March.
But it said double-digit declines in exports to China and Russia, which also banned the additive, had pushed production onto the domestic market in the fourth quarter, hitting its hog production and fresh pork businesses.
Smithfield, which does not provide a breakdown of revenue by country, also said exports to Japan fell due to a weaker yen.
The company did not provide an update on the takeover, which analysts and politicians have said could face land ownership issues in several states as well as scrutiny from a federal government panel that assesses national security risks.
The panel is not expected to block the sale, which if completed would result in a jump in Smithfield's exports to China, the world's biggest consumer of pork.
Smithfield said earlier this month that it would discontinue earnings conference calls because of the pending deal.
The company, whose products include Smithfield bacon and Eckrich sausages, said its net income fell to $29.7 million, or 21 cents per share, in the fourth quarter ended April 28, from $79.5 million, or 49 cents per share, a year earlier.
Last year's fourth-quarter profit included a $16 million benefit related to a litigation settlement.
Revenue rose 3 percent to $3.32 billion in the latest quarter but cost of sales rose 6 percent.
The operating profit margin in the international business fell to 2 percent from 6 percent a year earlier.
Analysts on average were expecting a profit of 43 cents per share on revenue of $3.27 billion, according to Thomson Reuters I/B/E/S.
Smithfield shares were little changed at $32.83 in morning trade on Friday on the New York Stock Exchange, below Shuanghui's offer price of $34 per share.
(Reporting by Aditi Shrivastava and Lisa Baertlein; Editing by Saumyadeb Chakrabarty)