DOW JONES NEWSWIRES 
 

Hormel Foods Corp.'s (HRL) fiscal second-quarter profit rose 3.6% on a gain from a dissolved joint venture, as production cuts helped offset falling volume.

The maker of processed meats also sees fiscal-year earnings at the high end of its forecast as the quarter's profit handily beat analysts' expectations.

The results came despite "a continuation of some of the same trends we saw in the first quarter, as consumers seek value in retail channels while foodservice sales remain soft," said Chairman and Chief Executive Jeffrey M. Ettinger. "Unlike the first quarter, however, we have seen improvement in sales of some of our convenience items."

The meat industry, like many others, is reeling from declining demand and oversupply, forcing producers, processors and supermarkets to cut production and prices.

For the quarter ended April 26, the maker of Spam and Dinty Moore stews posted earnings of $80.4 million, or 59 cents a share, up from $77.6 million, or 56 cents a share, a year earlier. The profit climb was due to investment and other income more than doubling to $8.6 million amid the venture-dissolution gain.

Net sales inched up 0.1% to $1.6 billion. Volume dropped 2%, or 3% excluding acquisitions.

Analysts surveyed by Thomson Reuters were expecting earnings of 50 cents a share on revenue of $1.68 billion.

Gross margin slipped to 16.4% from 16.6%.

Despite higher costs, analysts say production cuts will help keep meat prices down. Unlike other commodity sectors where supply levels are relatively easy to manage, animal life cycles prevent livestock producers from reacting quickly to changes in the market.

Jennie-O Turkey profit rose 42%, helped by lower feed costs due to reduced turkey production. The business has been a long-struggling one for Hormel, but its turnaround appears to be taking hold, noted Ettinger.

Earnings in the refrigerated foods segment - by far Hormel's biggest division - fell 7% due to the spread between hog costs and primal values as well as soft foodservice sales. Volume dropped 2% but revenue was flat on price increases.

Shares of Hormel, added to the Standard & Poor's 500 Index in March, closed Wednesday at $32.95 and were inactive premarket.

-By Mike Barris, Dow Jones Newswires; 201-938-5658; mike.barris@dowjones.com