Smithfield Foods, Inc. reported a loss from continuing operations of $26.4 million, or $.17 per diluted share, for the second quarter of fiscal 2010, versus last year’s second quarter reported loss of $32.5 million, or $.23 per diluted share.  The current quarterly results were affected by many factors, including a higher than normal effective tax rate, restructuring and plant impairment charges in the Pork segment, and a loss on the extinguishment of the European credit facility.

Sales this quarter were $2.7 billion versus $3.1 billion a year ago.  The decrease is a result of lower fresh pork selling prices, exchange rate changes in international operations and lower hog prices in the U.S. hog production business.

"Our packaged meats business continued to deliver record profits in the second quarter.  This is the part of the business we have focused on and it is repeatedly delivering superior results, “ said C. Larry Pope, president and chief executive officer.  “The restructuring plan is in full swing and achieving benefits that are ahead of schedule with estimated profit improvement of approximately $17 million in the second quarter of fiscal 2010.  We expect this plan will deliver the targeted $55 million of profit improvement this year, after applicable restructuring expenses, and the full $125 million of annual benefits going forward,” he said.

Operating margins in fresh pork were strong on a historical basis, though slightly lower than last year’s margins.  These results are benefitting from strong sales discipline and continued improving operating efficiencies.  Although this year’s fresh pork exports for the second quarter declined compared to last years’ results, overall export volumes remain strong in historical terms. 

Packaged meat profits more than tripled on volumes that were 4% lower than last year.  Results were strong because of pricing discipline, rationalization of low margin business, low raw material costs and the early benefits of the Pork Group restructuring plan.

Despite a 16% year over year reduction in raising costs, hog production losses continued in the second quarter.  Domestic raising costs decreased to $53 per hundredweight this quarter from $58 per hundredweight in last year’s second quarter.  Live hog market prices in the U.S. decreased 32% to $36 per hundredweight compared to $53 per hundredweight in the same quarter last year.  The company has reduced the size of its U.S. sow herd by 13%, which the company believes will result in over 2.2 million fewer hogs annually by fiscal 2011.

International hog production results were stronger than domestic results.  Operating profits in the company’s Polish, Romanian and Mexican hog operations improved by $35 million on a year over year basis.  Campofrio Food Group’s results improved in the second quarter and contributed income of $4.2 million in the quarter despite the recession in Western Europe.

In the second quarter, the company completed a public offering of 22.3 million shares of its common stock, with the goal of continuing to strengthen its balance sheet.  In August, the company also added $225 million to the senior secured notes offering it completed in July.  Following receipt of these proceeds, the company repaid the $319 million balance under its European credit facility, and also repaid $206 million of maturing bonds and $21 million of other debt. 

Results from the company’s investment in Butterball increased $22 million resulting from year over year improvements in feed costs and industry supply contraction, although they were partially offset by losses in the company’s turkey operations.

“After a considerate and extended period of sizable losses in the hog production industry, the U.S. sow herd appears to be contracting.  As previously announced, Smithfield has reduced its exposure to commodity hog and grain markets through sow reductions and farm closings beginning in February 2008.  Given current and near-term industry dynamics, we believe that further liquidation is needed to reach a balance in supply and demand, “ said Mr. Pope.

“Although we are disappointed with the results of the hog production segment, we remain incredibly pleased with the continued profitability of the packaged meats business.  While the hog production losses are temporary, we expect the packaged meats business to provide a stable earnings stream far into the future…Our restructuring plan is working and our cost structure is steadily improving…The combination of the many actions taken on the financial, operating and sales fronts make me extremely optimistic as this business returns to a more normal operating environment.  For these reasons, we have never been more positive about the earnings power of this company,” Mr. Pope 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 and the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 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.