Smithfield eyes Europe expansion after Campofrio sale

By Elsa Reed, in Shenzhen

- Last updated on GMT

Europe remains a key focus for the WH Group
Europe remains a key focus for the WH Group

Related tags Chief executive officer Beef Pork Poultry

Smithfield Foods executives have said their company plans to push sales of its own products strongly in Europe, now that its parent, the China-based WH Group, has announced the sale of shares in Spanish meat company Campofrio.

The deal, to Mexican multinational conglomerate Alfa, for US$354 million in cash, involved WH offloading 37% of Campofrio’s share capital.

WH Group chairman and chief executive officer Long Wan said the trade would boost his company’s financial fundamentals and capital structure, laying the foundation for future global expansion.

"Europe remains the WH Group’s strategic focus,"​ Wan explained, relying on its remaining resources to increase European sales. Smithfield subsidiaries in Poland and Romania are expected to play a significant role: Poland-based Animex, processes pork, poultry, and beef; Agri Plus, supplies pigs to Animex; and in Romania, Smithfield Prod operates the largest pork processing plant, sourcing pigs from Romania-based Smithfield Ferme.

Campofrio is a cured ham specialist targeting Spain and France especially, but selling elsewhere across Europe. A WH spokeswoman said the sale would encourage Smithfield to push its own ham products to European consumers.

Xiang Jianjun, a researcher with market research firm CIConsulting, agreed that the sale would enable the WH Group "to improve its financial status, optimise its debt structure and reduce its operational risk".​ Jianjun argued that WH’s 2014 debt equity-ratio was as high as 58.9%, significant compared to other meat companies, and the trade would help the company rebalance itself financially.

But the WH spokeswoman disputed this, telling GlobalMeatNews​: "The trade was worth US$354m, but the amount is not that big and hardly affects the group’s profit and loss statement."​ She argued that the sale was made because Campofrio’s financial contribution to the group had not met expectations. She added that Campofrio’s financial contribution to WH Group in 2014 was slightly over US$10m.

Smithfield president and CEO C Larry Pope said: "The transaction reflects Smithfield’s commitment to continually review our portfolio and generate cash to support our long-term priorities. It is aligned with our strategic imitative to strengthen our balance sheet and reduce our financing costs,"​ he added.

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