- The Washington Times - Monday, July 18, 2005

Yesterday’s resumption of Canadian beef imports is expected to fortify the supply to Smithfield Food Inc.’s meat processing plants, but analysts doubt it will give the company’s stock price much of a boost.

Shares of Smithfield Foods, the nation’s largest pork producer and fifth-largest beef producer, closed yesterday at $26.49, down 29 cents from Friday’s close.

Smithfield will likely see a small increase in profits related to Canadian imports, said analyst Bill Chappell of SunTrust Robinson Humphrey Capital Markets in Atlanta.

Neither he nor SunTrust has a business relationship with Smithfield.

Canadian cattle were trucked into the United States yesterday for the first time in two years after a U.S. appeals court reversed a ban imposed after a case of mad cow disease was reported there.

Canadian imports are expected to ease a shortage of slaughter-ready animals, a shortage that forced Smithfield to close its Gering, Neb., plant last month. The appeals court decision is not expected to change Smithfield’s decision to close the plant.

About 5 percent of the 35 million animals slaughtered each year in the United States comes from Canada.

“Smithfield sells into the Canadian market, so overall it will reduce the beef prices by increasing the supply available in the United States. It should be positive for Smithfield,” said Ivan Feinseth, director of research for Matrix USA in Boston.

Mr. Feinseth said the lifting of the ban is a positive for Smithfield, but he does not see it having a major impact on the company’s stock price. Smithfield shares have fallen 24 percent since reaching a 52-week high of $34.62 in February.

“Overall, that has been due to some fears of mad cow disease, and … the trend away from low-carb, meat-intensive diets to more moderate diets has hurt them,” Mr. Feinseth said of Smithfield’s stock price.

However, Matrix USA touts Smithfield as a strong buy because of the company’s relatively cheap stock price and positive business trends, Mr. Feinseth said. Neither he nor Matrix USA has a business relationship with Smithfield.

Pen Jones, analyst with Deutsche Bank, said Smithfield investors may see positive results over the next two or three quarters because of the ban’s lift.

“To the investor, assuming all else is equal, it will be a benefit to the company’s earnings profile,” Mr. Jones said.

Mr. Jones said investors are more concerned about the company’s pork processing division, which has not been performing as strongly as expected.

Mr. Jones does not own stock in the company; Deutsche Bank owns less than 1 percent of Smithfield Foods’ common shares.

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