Smithfield Spent $350 Million on Virus in Q2, Causing Net Loss

The meat producer broke down how that $350 million was spent, adding that it expects performance to rebound in the fall.

This April 8, 2020 photo shows the Smithfield pork processing plant in Sioux Falls, SD.
This April 8, 2020 photo shows the Smithfield pork processing plant in Sioux Falls, SD.
Associated Press

Smithfield Foods, one of the United States' largest meat products producers, issued a press release Tuesday that detailed the financial impact the company took from various safety measures to combat COVID-19 during the April-June quarter.

The Smithfield, VA-based company said it spent $350 million on pandemic safety measures during the second quarter, causing its adjusting operating profit to swing to a loss.

The company actually broke down how that $350 million was spent:

  • $195 million went toward directly protecting its employees
    • Fully compensating 22,000 employees to stay home at various points of the pandemic
    • Expanding employee benefits and removing all health plan barriers
    • Adding "responsibility" pay premiums
    • Hiring private healthcare providers to supply free, on-site, on-demand COVID-19 testing to all employees
  • Facility-related costs totaled $125 millions
    • Adding PPE and hand sanitation stations, installing mass thermal scanning systems and physical barriers, among other protective measures
    • Adopting stringent and detailed processes, protocols and protective measures that follow or exceed federal guidelines for meat and poultry processing workers and employers
    • Slowing production lines and decreasing efficiency, incurring downtime and changing production to meet shifting demand and downgrading and rendering product
  • Community-related costs totaled $30 million from donating 40 million servings of protein to food banks nationwide.

In total, Smithfield said it had an adjusted operating loss of $72 million during Q2, compared to a $180 profit a year earlier. The company noted that with pre-pandemic risk management activities factored in, the company had a Q2 operating profit of $102 million, down 54 percent, or $221 million, from a year earlier.

The pork, beef and poultry producer went on to say that the first six months of 2020 was "a tale of two tapes" regarding pre-pandemic and pandemic months. Smithfield said that prior to the pandemic's onset in the US, the company had record Q1 results, with operating results soaring 190 percent year-over-year. But the company was hammered by COVID-19 in Q2, sending adjusted operating results to plunge 140 percent year-over-year.

"Going forward, we expect performance to rebound in the fall, as our COVID-19 related costs, some of which were one-time or short-term in nature, are declining," said Kenneth Sullivan, Smithfield president and CEO.

According to data collected by the non-profit Food and Environment Reporting Network, at least 189 meatpacking plant workers have died as of Aug. 12, while at least 40,517 meatpacking workers have tested positive for COVID-19. FERN said at least 471 meatpacking plants have had confirmed cases of the virus.

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