Smithfield expected to post lower profits due to trade tensions

The country's largest pork producer, which has a strong presence in North Carolina, will likely deliver less revenue and profits to a giant Chinese parent, a study of filed accounts reveal.

Trade tensions will affect Smithfield Foods, which operates two of the largest hog slaughter plants in the country in North Carolina, according to accounts filed by its parent company, the Hong Kong-base WH Group.

Tariffs placed on US products, in response to ones announced by the Trump Administration, hit the bottom line revenues and profits of Smithfield Foods, and its parent company, in 2018.

The Virginia-headquartered Smithfield has also faced verdicts awarding plaintiffs well more than $500 million over allegations that hog farms were a public nuisance.

Those awards will be reduced under a Farm Act signed into law in August, but the company is still on the hook for more than $100 million.

Smithfield, bought by WH in 2013, operates the largest hog slaughter plant in the world, according to a CNBC report. The Tar Heel, North Carolina facility has the capacity to slaughter 35,000 hogs a day and has 4,400 employees.

In its 2018 half year report, WG reported $867 million in operating profit, the majority coming from the packaged goods sector.

However, while revenue increased in fresh pork and hog production segments, profits declined, particularly in the former, "due to an overabundant supply of meat in the market and trade tensions," according to an August press release.

"Revenue from hog production increased by 44.4 percent to US $397 million due to increased grain sales and more favorable hedging results, partially offset by lower market prices for hogs," according to the release. "Operating profit reduced from US $49 million from the same period last year to US $22 million."

Smithfield sends more than a quarter of its pork abroad, particularly to China, according to a March 2018 report in Rolling Stone, which noted the country received nearly 300,000 tons.

The article noted that it is approximately 50 percent cheaper to raise hogs in North Carolina due to cheaper pig-feed prices, larger farms and loose business and environmental regulations.

The NC Pork Council said the article was widely inaccurate, arguing that China gets about one-tenth of one percent of its pork from North Carolina, which the trade group said was highly regulated and one that requires "detailed and scientific plans for managing the manure as a fertilizer on growing crops."

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