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CHICAGO, Feb 17 (Reuters) - Smithfield Foods Inc SFD.N, the largest U.S. hog and pork producer, said on Tuesday its hog unit will not be profitable in its fourth quarter ending in April, but better results are likely after that.
“We are not making money in that business. We do not expect to be making money in the fourth quarter,” Smithfield Chief Executive C. Larry Pope said of the hog unit during a webcast presentation at the Consumer Analyst Group of New York (CAGNY) conference in Boca Raton, Florida.
Earlier on Tuesday, Smithfield announced it will be closing six processed meat plants and cut 1,800 jobs this year as it restructures its pork operations to make them more efficient.
The restructuring is expected to save about $55 million in fiscal 2010, and $125 million by fiscal 2011, Smithfield said.
The restructuring will likely result in a pretax charge of about $85 million in its fiscal third quarter, ended Feb. 1, and a one-time pretax charge of about $30 million as the restructuring is implemented over the next three quarters.
High-priced corn and low hog prices have created losses for hog producers during the latter part of 2008 and early 2009. Smithfield’s hog unit lost $58 million in the fiscal second quarter ended in October, compared with a year-earlier profit of $18.6 million.
“It has been a miserable year to be raising hogs. We do think the future is getting better. If you look at our fiscal third quarter and into the fourth quarter you see the hog market coming up,” Pope said during CAGNY presentation.
However, current hog prices of about $45 per hundredweight are still below production costs, he said.
Because of the losses on hogs and high grain prices, Smithfield last year initiated a hog herd reduction plan and said on Tuesday that when completed, the herd will be down 10 percent.
The Smithfield, Virginia-based company, which also has international operations, is due to report third-quarter results on March 12. Wall Street analysts, on average, expect an operating loss of $23.69 million, or 22 cents a share, according to Reuters Estimates.
During the CAGNY presentation, Pope said pork production is declining in many other countries, which should help exports of U.S. pork.
“Our (pork) exports continue to be strong,” he said. “Last year we had giant volumes going to China. Even given that, our export numbers continue to exceed last year’s numbers.” (Reporting by Bob Burgdorfer; editing by Richard Chang)
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