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Smithfield Foods, Inc. announced net income for the third quarter of fiscal 2006 of $71.0 million, or $.63 per diluted share, versus net income last year of $97.5 million, or $.87 per diluted share. Sales of $2.9 billion were slightly less than last year, despite overall volume increases, on lower average selling prices in the pork segment.

Earnings in the quarter were the result of sharply higher pork processing margins that partially offset the substantial decline in operating profits in the hog production segment.

“This year’s third quarter demonstrated once again the value of our integrated model in pork,” said Joseph W. Luter, III, chairman and chief executive officer. “As hog production profits declined, pork processing margins rebounded, delivering a solid quarter.”

Smithfield’s pork segment produced strong earnings as a result of lower raw material cost and improved product mix. The company enjoyed a very good holiday ham season, with significantly higher volumes and margins in smoked hams. Although Smithfield’s total processed meats volume grew a modest two percent, important, higher-margin product categories including dry sausage, pre-cooked sausage, spiral hams and pre-cooked ribs, recorded double-digit growth. Further processed meats margins were well above those of the same quarter last year.

The company continued to concentrate on using raw materials internally and upgrading its value-added categories. To this end, Smithfield has increased pre-cooked bacon capacity by 40 percent this year, emerging as the major provider to the foodservice industry, which is undergoing a transition from raw to pre-cooked bacon. Pre-cooked bacon volume advanced nine percent, on top of a 34 percent gain in the third quarter of fiscal 2005 and is poised for further growth. In addition to expansion in the bacon category, the company’s state-of-the-art, ready-to-eat deli ham plant is scheduled to come on line this summer.

Smithfield’s beef operations reported a modest profit in the third quarter in spite of export markets that were closed most of the quarter, tight cattle supplies and high cattle costs. Hog production earnings declined 55 percent from the same quarter last year, as live hog market prices fell 21 percent. The company’s joint venture turkey operations experienced increased earning due to favorable pricing and feed costs.

Internationally, the company reported a slight profit in spite of high raw material costs in Poland and continuing difficult industry conditions in France. Luter emphasized the company’s commitment to growing its international market.

“Startup costs and growing pains in our Central European operations have had, and will continue to have, unfavorable near-term impacts,” he said. “However, we continue to be very optimistic about the long-term opportunities in Central Europe. As our operations in Poland and Romania mature and Romania accedes to the European Union, we intend to become a significant player in the European market.”

Looking ahead, Luter said that the company is “guardedly optimistic” about the upcoming fourth quarter.