Smithfield Foods, Inc. (NYSE:SFD) reported a disappointing first quarter results on Friday. The pork processor’s first quarter earnings declined 36% to 27 cents per share from 40 cents a share in the same period last year. Analysts polled by Bloomberg were expecting 47 cents per share in Q1 earnings.

Smithfields food

Smithfield sales hurt in Japan, Russia and China

Smithfield Foods, Inc. (NYSE:SFD) said that its earnings were hurt by plunging pork exports. Falling yen has lowered the demand in Japan. Stricter regulations in Russia and China have banned the import of pork that have been raised using medicated feed additive ractopamine. The feed additive is very popular in the United States, but is banned in many other countries. Smithfield Foods, Inc. (NYSE:SFD) CEO C. Larry Pope said that increasing hog-raising costs in Mexico and Eastern Europe further weighed on earnings.

The Virginia-based company is in the process of selling itself to China’s Shuanghui International Holdings Ltd. for $4.7 billion or $34 a share. The deal will cost the Chinese firm $7.1 billion including debt assumption of about $2.2 billion. A high-level Committee on Foreign Investment has approved the deal. It will be the largest acquisition of a U.S. firm by a Chinese company. Smithfield Foods, Inc. (NYSE:SFD) shareholders will vote on the deal on September 24.

For the quarter ending July 28, the company earned $39.5 million, down from $61.7 million in the same period last year. Though Smithfield Foods, Inc. (NYSE:SFD)’s earnings missed consensus estimates, sales for the quarter jumped 9.8%. First quarter revenues came at $3.39 billion, beating the consensus estimate of $3.19 billion. Gross margins shrank from 10.7% to 9% amid rising input costs. Pork sales jumped 9.6% during the quarter, while hog production business posted a 20% increase in revenues.

Starboard hasn’t given up on Smithfield

Activist hedge fund Starboard Value LP has openly criticized the deal with Shuanghui International Holdings Ltd. The hedge fund owns 5.7% stake in Smithfield Foods, Inc. (NYSE:SFD) Starboard said that the pork processor is worth much more than what Shuanghui is paying for the deal. The hedge fund wants to break up Smithfield Foods Inc. (NYSE:SFD). Starboard said that, if broken up, Smithfield Foods, Inc. (NYSE:SFD) could easily fetch between $44 and $55 per share.

Last week, Starboard chief Jeffrey Smith said in a letter to shareholders that he is working with a group of possible buyers to make an alternative all-cash offer, superior to the one offered by Shuanghui International Holdings Ltd.

Bank of America Merrill Lynch analysts Ryan Oksenhendler and Bryan Spillane said that the deal implies 7x EBITDA on a normalized basis. After the Chinese company made an official offer on May 29, Smithfield Foods, Inc. (NYSE:SFD) hasn’t been trading only on fundamentals. So, the BAML analysts moved to a No Rating on the stock after the offer.

Smithfield Foods, Inc. (NYSE:SFD) shares were up 0.65% to $34.14 at 10:04 AM EDT.