Smithfield Foods reported income from continuing operations for the second quarter of fiscal 2008 of $18.7 million, or $.14 per diluted share, versus income from continuing operations of $46.4 million, or $.41 per diluted share last year. Sales were $3.5 billion, compared to $2.8 billion a year ago.

Second quarter results include approximately $13 million of after tax charges related to the previously announced disease outbreak in the company’s Romanian operations and an after tax loss of $25 million related to the effects of foreign currency fluctuations. These charges and foreign currency losses totaled $.28 per diluted share.

“The decline in earnings this quarter was almost entirely in the hog production segment, as most of our other businesses performed well,” said C. Larry Pope, president and chief executive officer. “Unquestionably, the highlight of the quarter was the dramatic improvement in packaged meats margins due to an improved product mix and our continuing effort to drive out costs. Additionally, our international meat processing operations have become consistent, growing contributors to profitability.”

Pope said that he expects another strong holiday ham season.

“Looking forward, the futures markets indicate continued near-term losses in hog production, but an improving environment as we move into our fiscal fourth quarter and beginning of fiscal 2009,” he said. “Meanwhile, fresh pork margins remain healthy and I expect a continued strong performance from our packaged meats business.”

Second quarter results in the pork segment rose significantly, reflecting a significant expansion in packaged meats margins, a much-improved fresh pork environment late in the quarter and the contribution of Premium Standard Farms, acquired in May. Packaged meats profit margins more than doubled. Total volume of key packaged meats categories, including pre-cooked bacon and sausage, boneless and spiral sliced ham and dry sausage, grew 37 percent, primarily the result of the contribution of Armour-Eckrich, acquired in October 2006. These product categories now represent 33 percent of the company’s total domestic packaged meats business compared to 29 percent last year. Excluding the impact of Armour-Eckrich, packaged meats volume grew five percent.

Smithfield continued acceleration of its marketing programs, accomplishing national rollouts of several Paula Deen brand specialty products. Pre-cooked entrées Healthy Ones and Sizzle 'n Serve also reached national distribution.

Beef segment results were below those of a year ago. However, the company believes that it has maintained a strong competitive position even as industry economics remained a challenge. Beef processing posted a slight gain in spite of higher cattle prices. Cattle feeding operations recorded a modest profit although feed costs were well above last year.

Hog production profits declined significantly, the result of lower live hog market prices and considerably higher raising costs. Live hog market prices averaged $46 per hundredweight versus $50 per hundredweight a year ago. Raising costs rose to $49 per hundredweight from $41 per hundredweight last year on higher grain costs. In addition, the company experienced write-downs of $13 million in Romania due to the liquidation of livestock inventory and cleanup costs associated with the previously-announced outbreak of classical swine fever at three of the company’s farms. During the quarter results also were negatively impacted by $19 million in foreign currency translation losses.

In the Other segment, earnings rose at the company’s joint venture turkey operation, Butterball, LLC, acquired in October 2006. Increased feed costs at the company’s growing operations partially offset strong gains in turkey processing.

International meat processing operating earnings rose sharply, as Groupe Smithfield and Poland operations continued their strong contributions. Results of Groupe Smithfield, a 50 percent-owned joint venture formed through an acquisition in August 2006, almost doubled. The Animex meat processing operations in Poland demonstrated continued earnings improvement on higher volumes and margins in packaged meats. The profit increase more than offset the negative impact of $6 million in foreign currency translation losses.

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