SOURCE: Swift & Company

April 11, 2005 17:50 ET

Swift & Company Reports Third-Quarter Results

Strong Performance of U.S. Pork and Australian Beef Segments Balances Continued Softness in U.S. Beef Segment

GREELEY, CO -- (MARKET WIRE) -- April 11, 2005 -- Bolstered by the continued strong performance of both its U.S. pork and Australian beef segments, Swift & Company achieved a 6.2 percent increase in companywide sales in its fiscal year 2005 third quarter ended Feb. 27, 2005. The company's U.S. beef business, like that of its industry peers, reflects the continued closure of export markets as a result of concerns about BSE (Bovine Spongiform Encephalopathy) in the world beef market. Sales for Swift U.S. beef did increase, however, over year-ago levels.

Net sales for Swift & Company rose $132.7 million in the quarter to a total of $2.26 billion versus $2.13 billion in the same period one year ago. Higher selling prices in all three segments helped offset declines in sales volume across the board.

While BSE-related factors continued to set the tone for the performance of the U.S. beef industry, Swift continued its steps to strategically diversify its approach to the segment. During the third quarter, Swift realigned its first-processing capacity to free up the entire second shift of its Greeley beef plant for production of higher-margin, value-added products, a realignment made possible by the transfer of first-processing volume from Greeley to untapped production capacity at the company's beef plants in Grand Island, Neb., and Cactus, Tex. Early results from the Greeley value-added initiative suggest a positive impact on both growth and profitability.

"We are very pleased with the early returns from our value-added program in Greeley," said John N. Simons, president and CEO of Swift & Company. "While there are lingering challenges in the international beef market, the value-added product category offers the beef industry's most significant growth and profit potential."

Simons also noted that Swift's anticipation of changes in the U.S. market enabled it to strategically realign company-owned production facilities and utilize existing resources for the new value-added processing without expending funds to buy or build new facilities. This enabled Swift to operate its other fed cattle processing plants at higher production levels, maintaining production volumes while the second shift at Greeley focuses on higher-margin products.

This move became even more significant when the USDA's recent efforts to reopen the U.S./Canadian border to live Canadian cattle younger than 30 months of age, which had been scheduled to occur on March 7, 2005, was temporarily thwarted by a lawsuit filed by a cattlemen's organization, R-CALF, which is seeking to maintain unseasonably high cattle prices by preventing lower-priced Canadian cattle from entering the United States. Canadian cattle have averaged $265 per head less than comparable U.S.-fed cattle over the past year.

"We fully support USDA's efforts to reopen the border to live Canadian cattle under 30 months of age," said Simons. "This will help correct the inequitable market condition caused by underpriced Canadian cattle, which are flooding the United States and other foreign markets in the form of underpriced boxed beef. The scientific community has said with crystal clarity that if the beef is safe, the cattle are safe. Considering that U.S. consumers ate more than 1 billion pounds of Canadian beef in 2004, there is no scientific basis for keeping the border closed to cattle, which are the source of that beef. Boxed beef and the cattle it comes from should be treated the same."

Simons also noted that while a final resolution between the United States and Japan on beef export issues has not yet been achieved, he is encouraged by the assertive approach new Secretary of Agriculture Mike Johanns has taken to ensure that the issue remains a high priority in relations between the two countries.

Swift Pork

Swift Pork recorded a 15 percent increase in net sales during the 13 weeks ended Feb. 27, 2005, versus the same period one year ago -- $532.4 million versus $462.9 million. The increase of $69.6 million reflected a 20 percent increase in average selling prices partially offset by a 4 percent decline in volumes.

"The increase in selling prices is partly attributable to the growth in value-added Swift-branded products and the 'price umbrella' that the continued high price of beef at retail provides for pork and other proteins," Simons said.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the third quarter of FY05 was $31.2 million compared to $31.7 million for the same period one year ago. The decrease of $0.5 million, or 1.6 percent, reflected a 24 percent increase in raw material costs.

Swift Australia

Swift Australia once again enjoyed a strong quarter with an 11.3 percent increase in net sales -- to $401.7 million from $361.1 million last year. The increase primarily reflected a 12.8 percent increase in sales prices partially offset by a 2.1 percent decrease in volume. In addition, the Australian dollar to U.S. dollar exchange rate increased an average of 1.8 percent between the two periods.

Higher revenues for Swift Australia offset an 11.6 percent increase in livestock prices, resulting in $12.7 million in EBITDA for the third quarter of FY05 -- an increase of 10 percent over the $11.6 million EBITDA total for the third quarter of FY04.

"Swift Australia continues to capitalize on the void left by the absence of North American beef in the Asian marketplace," said Simons.

Swift Australia's third quarter is abbreviated because of the Australian beef industry's traditional annual 30-day holiday leave, during which all Australian beef production facilities are taken off-line.

Swift Beef

Net sales of Swift Beef were $1.34 billion for the third quarter of FY05, up 2 percent from $1.32 billion one year ago. Selling prices were 6.6 percent higher on lower volumes, reflecting higher prices for finished boxed beef products, which allowed retailers to feature relatively lower-priced proteins, such as pork and poultry.

EBITDA for Swift Beef improved to a loss of $39.6 million for the third quarter of FY05 from a loss of $70.4 million for the comparable period of FY04. Excluding the $43 million one-time, BSE-related charge, EBITDA for the third quarter of FY04 was a loss of $27.4 million. The decrease of $12.2 million is attributable to continued deterioration of industry conditions combined with slightly higher livestock costs.

Consolidated Results

Despite continued weakness in Swift Beef, Swift & Company reported EBITDA of $4.4 million -- an improvement of $31.7 million over the loss of $27.4 million recorded in the third quarter of FY04 -- which includes the $43 million one-time BSE charge.

Swift & Company ended the quarter with $63 million of cash on hand and $259.3 million of cash availability under its revolving credit facility as of Feb. 27, 2005.

Transactions

Swift Australia (Australia Meat Holdings Pty Limited), a wholly owned subsidiary of Swift Holdings, entered into a definitive agreement on Feb. 19, 2005, to sell its Australian meat patty manufacturing and food-related products distribution business, known as FJ Walker Foods, to OSI International Foods (Australia) Pty Ltd. and McKey Distribution Pty Ltd., in two related transactions. The value of the combined transaction, which was completed on April 4, 2005, was approximately AUD $108.5 million in cash and assumed liabilities. This business was not considered a core part of Swift Australia.

Conference Call

Swift & Company will hold a conference call for investors and media to report financial results for the third quarter of FY05 at 9:00 a.m. MDT (11:00 a.m. EDT) on Tuesday, April 12, 2005. Callers should dial (888) 578-6632 and enter the confirmation code 4013573. International callers should dial (719) 955-1565 and enter the same pass code.

A replay of the call will be available from 2:00 pm MDT on April 12, 2005, through 11:59 p.m. MDT on April 16, 2005. Callers should dial 1-888-203-1112 and enter pass code 4013573. International callers should dial 1-719-457-0820 and enter the same code number.

About Swift & Company

Swift & Company is one of the world's leading beef and pork companies -- processing, preparing, packaging, marketing and delivering fresh, further processed and value-added beef and pork products to customers in the United States and international markets. For more information, please visit www.swiftbrands.com or call Danny Herron, CFO, Swift & Company, at 1-970-506-7575.

Information Concerning Forward-Looking Statements

This press release contains certain statements, projections and forecasts regarding Swift & Company's future business plans, financial results, products and performance that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of such words as "may," "will," "should," "expects," "plans," "anticipates" and "believes." There are a number of risks and uncertainties that could cause the actual results to differ materially. Some of these risks and uncertainties include product liability claims and recalls, livestock disease, fluctuating raw material costs and selling prices, changes in consumer preferences, compliance with environmental regulations and labor relations, operating in a competitive environment, and other general economic conditions and other risks described in the company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission and available on the SEC's website. Statements in this press release are based on the information available to the company as of the date of the release. The company undertakes no obligation to update the information contained in the press release.

Swift & Company's Form 10-Q, filed with the Securities and Exchange Commission on April 11, 2005, is filed under the parent's name of S&C Holdco 3, Inc., and may be seen at: http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001199114&owner=include

Contact Information

  • Investor Contact:
    Danny Herron
    CFO
    Swift & Company
    (970) 506-7575

    Media Contact:
    Jim Herlihy
    VP Communications
    (970) 506-8052