Smithfield Foods, Inc. reported a net loss for the fourth quarter of fiscal year 2009 of $78.8 million, or $.55 per diluted share, versus net income of $2.4 million, or $.02 per diluted share, a year ago. For the full fiscal year, the net loss was $190.3 million, or $1.35 per diluted share, versus net income in fiscal 2008 of $128.9 million, or $.96 per diluted share.

Sales for the fourth quarter were $2.9 billion, nearly even with the fourth quarter of fiscal 2008. Sales for the full year were $12.5 billion versus $11.4 billion a year ago. Fiscal 2009 included 53 weeks compared to 52 weeks in the prior year. The company reported a loss from continuing operations for fiscal 2009 of $242.8 million, or $1.72 per diluted share, versus income from continuing operations of $139.2 million, or $1.04 per diluted share, for the same period last year.

"Fiscal 2009 was one of the most challenging years in over three decades for the company,” said C. Larry Pope, president and chief executive officer.  “But despite the challenges we confronted, we did not sit on the sidelines and wait for the economic conditions to improve; we have taken numerous actions to make us a more profitable company: namely, we repositioned the company's operations and made meaningful improvements to our liquidity and financial strength. As a result, I am especially pleased with our packaged meats business which delivered record profits even as fresh pork was weak in the face of an economic downturn. For the full year, the pork segment produced record profits, before the $88 million of restructuring costs, and is set to deliver very strong results going forward.”

“We believe that the A(H1N1) virus had only a short-term effect on U.S. fresh pork demand, which hurt our business last month. As the consumer received more accurate information about the virus, we saw domestic market conditions begin to move back to more normal levels, “ Mr. Pope added.

In the fourth quarter, packaged meats margins expanded substantially compared to last year as operational efficiencies and sales coordination began to take hold. Total pork volumes increased 2.5% from last year, but weaker fresh pork margins dampened the effect of significant gains in packaged meats.

International segment results were below those of a year ago. Last year's results included a gain of $9.4 million related to asset sales and other restructuring activity at Groupe Smithfield; this year saw no similar gain.

High input costs and weakened demand in Western Europe resulted in reduced profitability at Campofrio Food Group, which reported a quarterly loss of $1.4 million compared to a combined operating profit contribution of Groupe Smithfield and Campofrio of $23.0 million last year.

Hog production losses continued through the fourth quarter, as live hog market prices in the U.S. increased slightly to $43 per hundredweight compared to $42 per hundredweight last year. Domestic raising costs increased to $63 per hundredweight from $54 per hundredweight in the prior year. The cost increase is the result of the spike in U.S. corn prices last year and buying decisions that locked in corn purchases at prices exceeding $6 per bushel. Raising costs are expected to begin moderating in the first quarter of fiscal 2010.

Production cutbacks and lower grain prices are having a positive effect on our wholly-owned turkey operations as losses in our turkey operations have begun to moderate from previous quarters.

Fiscal Year Results

Record packaged meats results were partially offset in the segment by $88.2 million ($.40 per diluted share) of restructuring charges and weaker fresh pork margins.   Packaged meats margins were substantially higher than those a year ago. Packaged meats volume declined two percent year over year, as the company continued to focus on sales coordination and operating efficiencies.

Smithfield's total exports for fiscal 2009 increased 29% in pounds and 35% in dollars, with growth in all major importing countries. International operating profits declined versus last year. Campofrio/Groupe Smithfield earnings were well below a year ago as the worldwide recession negatively impacted demand in Western Europe.

Hog production suffered historic losses under the weight of sharply higher feed costs. Domestic raising costs increased to $62 per hundredweight versus $50 per hundredweight in the prior year as the cost of feed and feed ingredients increased $527 million, or 36% compared to the prior year. Corn, which is the major component in our livestock feed, increased 26% year over year.  However, we expect our raising costs to reflect lower corn prices in fiscal 2010.

However, liquidity remains strong, and the company has made balance sheet improvements.  At the end of the fiscal year, Smithfield had in excess of $1.1 billion of available liquidity. The company reduced overall indebtedness by over $890 million during the current fiscal year, including over $190 million in the fourth quarter alone. Debt to total capitalization has been reduced from 56% last year to 53%. The company lowered capital expenditures by 62% to $175 million versus $460 million a year ago. In fiscal 2009, the company generated more than $269 million in cash flow from operations, despite the heavy losses in hog production.

"As we move into fiscal 2010, our highest priority is on continuing the restructuring of the Pork Group, continuing to reduce debt, improving liquidity and strengthening the balance sheet," Mr. Pope stated. "I strongly believe that the hog production industry has reached an inflection point where, due to deep and extended losses, liquidation is now a recognized reality by all in the industry. To date, Smithfield has already reduced the size of its U.S. herd by two million market hogs annually, and we are initiating a further reduction of three percent of our U.S. sow herd, effective immediately. This reduction, combined with the additional cuts by our fellow producers should shrink supply to a point where the industry can return to profitability. This liquidation is long overdue," he said.

“While we are seeing improvements in our near-term raising costs, live hog markets remain well below historic levels and hog production remains unprofitable. Taking all of this into account, I remain very optimistic about the long-term future of this company, as we continue to further improve our fresh pork and packaged meats businesses through our current restructuring plan which is well underway. We are reshaping our business as the low-cost producer of high quality products to value conscious consumers, in all trade channels. I am very bullish about this end of the business. Our future is very bright," 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.

Disclaimer: 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 and cattle, raw materials, fuel and supplies, food safety, livestock disease, live hog production costs, product pricing, the competitive environment and related market conditions, the inability to refinance or otherwise amend our existing indebtedness on terms favorable to us or at all, hedging risk, operating efficiencies, changes in interest rate and foreign currency exchange rates, 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 fiscal 2008 and in its subsequent Quarterly Reports on Form 10-Q. 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.