Smithfield Foods, Inc. reported a loss from continuing operations for the first quarter of 2010 of $107.7 million or $.75 per diluted share.   Loss from continuing operations during the same time period, after adjusting for significant items, was $80.0 million or $.56 per diluted share.

The company reported sales of $2.7 billion versus sales of $3.1 billion during the same quarter last year.  This decline was principally attributed to lower volumes, currency fluctuations in its international operations, and lower fresh pork selling prices.

“This first quarter loss reflects the continuing adverse business environment in the hog production segment of the company’s operations. While raising costs have continued to decline and the pork processing segment continues to deliver strong profits, they were not sufficient to offset the negative impact of low hog prices on the hog production business.  The sharply lower hog prices reflect the impact of the A(H1N1) outbreak at the end of the prior quarter and softer export demand,” said C. Larry Pope, president and chief executive officer of Smithfield Foods, Inc.

“Smithfield is already benefitting from the Pork Group restructuring plan and we are on track to achieve annual cost savings of approximately $55 million, after applicable restructuring expenses, in fiscal 2010 and $125 million by fiscal 2011,” he continued. 

"On the financing front, a new $1 billion asset backed lending (ABL) credit facility, together with a new $200 million term load and our July and August notes offerings…have positioned us to retire all near term debt maturities, repay our revolving credit facilities and further reduce our exposure to financial covenant risks…These steps have strengthened our balance sheet and helped position us to better weather the current economic environment,” he continued.

Fresh pork volumes, average unit selling prices, and margins were weak throughout much of the quarter resulting in losses in fresh pork.  However, fresh pork returned to profitability late in the quarter and continues to be solidly profitable in the early weeks of the second quarter.

Smithfield’s packaged meats business delivered very strong profits in the first quarter as a result of pricing discipline and rationalization of unprofitable business that pushed margins higher.  Operating results were almost $74 million higher than last year’s results, mainly because of permanent improvements in operating efficiencies and plant utilization, as well as reduced raw material costs.

The company’s meat processing operations in Poland and Romania were profitable despite relatively high raw material costs.  Sales volumes in both countries improved a combined 10% over last year.

Losses in hog production continued in the first quarter despite reductions in raising costs.  Live hog prices in the US decreased 24% to $42 per hundredweight compared to $55 per hundredweight during the same quarter last year.  This was due to an oversupply of live hogs in the US.  Domestic raising costs decreased to $59 per hundredweight from $61 per hundredweight in the prior year and $63 per hundredweight in the fourth quarter of fiscal year 2009.

In response to overall industry conditions and in order to reduce its exposure to the live production side of the business, Smithfield reduced the size of its US sow by 10% or 100,000 sows.  The company announced a further reduction in June 2009, cutting its herd by 3% or 30,000 sows.  The company believes these reductions will result in approximately 2.2 million fewer market hogs annually by fiscal 2011.

Results from Smithfield’s investment in Butterball improved $5.9 million as production cutbacks and grain prices had a positive impact on the business.

“With current live hog market prices substantially below raising costs for the foreseeable future, we believe the industry has finally reached an inflection point where liquidation must occur.  In response to these industry dynamics, we have altered our hog production strategy by modestly reducing our exposure to commodity hog and grain markets through sow reductions and farm closings,” said Mr. Pope.

“Once the Pork Group restructuring plan is complete, we expect incremental improvement in packaged meats profits of approximately $80 million annually by fiscal 2011…We have become more competitive by improving operating efficiencies, lowering costs and increasing plant utilization.  Given the changes we have made in all aspects of our business, we are very optimistic and enthusiastic about the potential earnings power of this company,” he concluded.

With sales of $12 billion, Smithfield Foods is the leading processor and marketer of fresh pork and packaged meats in the United States, as well as the largest producer of hogs. For more information, visit www.smithfieldfoods.com.

This news release contains "forward-looking" statements within the meaning of the federal securities laws. The forward-looking statements includes statements concerning the Company's outlook for the future, as well as other statements of beliefs, future plans and strategies or anticipated events, and similar expressions concerning matters that are not historical facts. The Company's forward-looking information and statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. These risks and uncertainties include the availability and prices of live hogs, raw materials, fuel and supplies, food safety, livestock disease, live hog production costs, product pricing, the competitive environment and related market conditions, hedging risk, operating efficiencies, changes in interest rate and foreign currency exchange rates, changes in our credit ratings, access to capital, the investment performance of the Company's pension plan assets and the availability of legislative funding relief, the cost of compliance with environmental and health standards, adverse results from on-going litigation, actions of domestic and foreign governments, labor relations issues, credit exposure to large customers, the ability to make effective acquisitions and successfully integrate newly acquired businesses into existing operations, the Company's ability to effectively restructure portions of its operations and achieve cost savings from such restructurings and other risks and uncertainties described in the Company's Annual Report on Form 10-K for the fiscal year ended May 3, 2009. Readers are cautioned not to place undue reliance on forward-looking statements because actual results may differ materially from those expressed in, or implied by, the statements. Any forward-looking statement that the Company makes speaks only as of the date of such statement, and the Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.