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Company update: Fresh Pork Unit Weighs on Smithfield's Profit

Smithfield Foods the largest US pork and pig producer, reported a quarterly profit below analysts estimates as the worst US drought in more than half a century has sent costs for feed grain soaring.

Smithfield, the largest US pork producer by volume, said operating margins in its fresh-pork division were negative in the quarter, which is seasonally weak. But the company voiced optimism for coming quarters, saying fresh-pork margins have improved considerably in recent weeks and will benefit from strong export demand.

The company's first-quarter net income fell to $61.7 million, or 40 cents per share, from $82.1 million, or 49 cents per share, a year earlier. Profit from the latest quarter were also below the 44 cents analysts had estimated, according to Thomson Reuters. Revenue was $3.09 billion for the quarter, also missing analysts average estimate of $3.15 billion.

Smithfield's fresh pork and packaged meats businesses together account for more than two-thirds of company sales. US retail demand for pork has been weak, weighing on results.

The company which owns the Farmland, Smithfield, Armour and John Morrell brands, has used share buybacks and debt restructuring to reduce the sting out of spiking feed costs. It expects the rising costs to be offset by favorable grain hedges for fiscal 2013.

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