- Smithfield Foods lost $72 million during its second quarter after spending $350 million on costs associated with the pandemic, the company said in a statement. Smithfield said even when it factored in the benefits of risk management activities before the pandemic, Q2 results were $102 million compared to $221 million a year ago.
- The total $350 million in costs tied to the pandemic included $195 million in people-related costs, such as expanding employee benefits, $125 million in facility-related costs, like adding personal protective equipment, and $30 million in donations.
- "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's president and CEO.
Smithfield said the first half of 2020 was "a tale of two tapes" for the company. It delivered record results in the first quarter of the year. But as the coronavirus outbreak spread across the meat industry, sickening thousands of workers and shuttering plants, the largest U.S. pork producer's finances were heavily impacted.
More than 40,000 meatpacking employees have tested positive for the coronavirus and at least 189 have died across the industry, according to the Food and Environment Reporting Network. Early on, Smithfield factories were hit especially hard by outbreaks.
A Centers for Disease Control and Prevention study looking at a Smithfield plant outbreak in Sioux Falls, South Dakota, found 929 employees, or 25.6% of all workers, tested positive and two died, the Argus Leader reported. The first employee to test positive was on March 24, the study found, and the company temporarily shuttered the plant and warned of potential shortages from the closure in April. The study found the highest transmission rates happened among workers operating fewer than six feet away from each other.
The $350 million was spent partly by Smithfield to compensate employees, expand worker benefits and hire private healthcare providers. The company also installed protective measures in plants, including adding mass thermal scanning systems and physical barriers, while also slowing lines, incurring downtime and changing production to meet shifting demand.
Smithfield is not alone. Other meat companies also are facing higher costs that are weighing on earnings during the pandemic. Tyson Foods recently said it has spent $340 million on facility sanitation, employee bonuses and safety measures during its third quarter of fiscal 2020, which negatively impacted its results. Tyson will likely be spending even more as it implements weekly coronavirus testing for its workers and adds nearly 200 nurses and administrative support personnel.
But even as plants have implemented more precautions, the coronavirus has continued to spread. As criticism has escalated, Smithfield's CEO said workers can't be socially distanced in all areas of its facilities, responding to U.S. senators who pressed meatpackers on slaughterhouse outbreaks, Reuters reported.
"For better or worse, our plants are what they are," Sullivan told the wire service. "Four walls, engineered design, efficient use of space, etc. Spread out? Okay. Where?"
When plants started to close to stop the spread, President Donald Trump issued an executive order in April to keep facilities open amid supply chain concerns. Critics said the order could endanger workers, and since then, plants have mostly stayed open and returned to normal production. Still, the criticism has lingered, especially as line speeds increase to make up for lost time.
As Smithfield, which is owned by China-based WH Group, continues to defend its coronavirus protections, it could end up spending more money to protect its business and employees. But overall, Smithfield said it is more optimistic on its outlook for the rest of the year, especially during the fourth quarter.