On June 9th, Joseph W. Luter, III, chairman and chief executive officer of Smithfield Foods announced sharply improved earnings during its fiscal year 2004. For fiscal 2004, the company reported net income of $227.1 million, or $2.03 per diluted share, versus $26.3 million, or $.24 per diluted share, in the prior year. Earnings from continuing operations, excluding Schneider results, were $162.7 million, or $1.46 per diluted share, compared with $11.9 million, or $.11 per diluted share, in fiscal 2003. Included in earnings from continuing operations were $14 million of financing costs related to the Farmland bridge loan from the date of the Farmland acquisition in October until the bridge loan was repaid following the sale of Schneider in April. In addition, the company's beef operations incurred approximately $11 million in inventory write-down and operating inefficiency costs related to the market impact of the BSE case in December.

Sales were $9.3 billion versus $7.1 billion a year ago. Fiscal 2004 included 53 weeks, while the preceding year included 52 weeks.

Benefiting from a 27 percent increase in live hog prices year-over-year, the Hog Production Group recorded a substantial operating profit versus a large loss in fiscal 2003, a positive earnings swing of $234.1 million.

Pork segment earnings increased 17 percent in spite of significantly higher raw material costs. The gain was due in large part to the inclusion of six months of Farmland results, combined with strong consumer demand for pork. Excluding Farmland, hog processing levels were three percent above last year. Fresh pork margins for the year were down slightly due to the weak fresh pork market in the early part of the fiscal year. Processed meats volume grew 25 percent including Farmland; excluding Farmland, processed meats volume rose seven percent. Processed meats margins, although down slightly, were strong, considering the significant increase in raw material costs compared to the previous year.

The addition of Farmland's substantial processed meats business to Smithfield's grew the company's sliced retail, branded bacon market share to a solid number one in the United States, according to A.C. Nielsen. Breakfast sausage retail share rose to fourth from fifth and sliced luncheon meats rose to third place from fifth. Far outpacing the industry, foodservice volume rose nine percent and Smithfield Deli Group continued to penetrate new accounts and grew more than twice as fast as the market.

In spite of several months of depressed market conditions from the BSE incident, the beef segment posted record earnings, increasing seven percent. Earnings in the company's other segment grew due to strong results in its turkey operations, as well as improvements in Poland on sharply higher volumes, as the Krakus brand achieved significant volume growth in both the domestic and export channels.

“Looking forward to fiscal 2005 the business looks very good. Live hog prices look strong for the remainder of the calendar year, and pork demand is excellent. Beef margins for the near term are quite favorable and our processed meats business looks very good with several significant opportunities for new business in the near term,” Mr. Luter said. “Our international operations, while delivering mixed results this past year, are steadily improving and the international arena continues to offer some very interesting opportunities for the company in the coming years.“

“With that said, I am optimistic that fiscal 2005 could well be another record year,” he said.

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