Smithfield Foods Earnings Call INSIGHTS: Hog Production and Packaged Meats, International vs. Domestic Hog Side
Hog Production and Packaged Meats
Farha Aslam – Stephens Incorporated: Question on hog production and on packaged meats. Your confidence in packaged meats margins going forward, do you think that margins will be above the first quarter level for the rest of the year given that the first quarter tends to be the most difficult and in hog production, do you expect profits? You are saying marginally positive to marginally negative. Is that based on your current hedges or changes in the market that you’re expecting, so, two-part question in one?
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C. Larry Pope – President and CEO: Farha, let me answer the packaged meats and Bo’s our new (indiscernible) hog production because Bo took over responsibility for the live production business effective August 1st, so he gets walk into a storm with the raincoat on. On the packaged meat side, we had a terrific quarter and I don’t expect that we will replicate these $0.20 margins in the remaining three quarters of the year and I’ll remind you that we are originally started with the $0.10 a pound goal. George Richter raised that goal to $0.15 when it appeared to be a layoff for our organization and now we are producing numbers above that on a regular basis above $0.15. So, I think it’s going to be very good, but I don’t believe that we are going to continue to deliver $0.20 a pound for the rest of the year. With that, Bo, I’ll let you address the hog production.
Robert W. Manly, IV – EVP and CFO: Farha, I think in conjunction with the statements I made earlier, if we have no improvement in pricing of live animals, our hedges and the current future strip would indicate that we would have probably a modest loss, some in single-digit, certainly low single-digit. If we do get an improvement in prices, we look forward in hog production. We do think that there is going to some reaction in terms of the cutbacks that we’ve seen in both here in United States with (indiscernible) as well as across the country, but if we get a couple of dollars more in terms of hog pricing between now and the end of fiscal year, we should have some positive results. So, we’re right on that edge at this point in time. We think we’ve got a very small limited amount of potential exposure if we don’t get any change in hog prices, but if we do have a modest improvement it’ll be a profitable year for us.
International vs. Domestic Hog Side
Kenneth Zaslow – Bank of Montreal: I guess I have a two-part question as well, can you compare and contrast why you’re more optimistic on the international hog side than you are on the domestic hog side, it seems like you think that there is more upside on that because everybody thought that they would have paralleled a little bit better. Are you guys actually making cuts as well?
C. Larry Pope – President and CEO: Ken, let me tell you that we are – at this point, we are not making any cutbacks and any reductions in sows. We are in the midst of finalizing our restructuring of our hog farms and actually we’re going to have a few more hogs for the fall, but that was already part of the plan, not big numbers, but that builds out the kills in the east where we’ve been actually short in the plant, but the hog price in Europe is certainly higher than it is in the United States and they’ve had some cutbacks even earlier. So at this point it still looks solid on the live production side in Europe.