Meat + Poultry - December 2005 - 10

Business Notes
Smithfield earnings fall, closes facility in Virginia
For the second quarter ended Oct.
30, Smithfield Foods, Smithfield, Va.,
posted net income of $51.6 million,
down 12 percent from $58.4 million in
the same period last year. Sales for the
quarter were $2,900,700,000, up 7 percent from $2,719,100,000 last year.
Current quarter results include pretax charges totaling $16.3 million, in
connection with the restructuring of
East Coast pork processing operations.
Last year's second quarter included
pre-tax charges of $8.3 million related
to operating losses and shutdown costs
of the Showcase Foods plant and the
settlement of a civil suit.
Additionally, the company has announced plans to close its Valleydale
Foods pork processing facility in Salem, Va. The outdated facility's production will be transferred to other plants
with no anticipated loss of volume. The
plant produces a variety of processed
meats, including bacon, bacon bits,
smoked sausages, boiled and diced
ham, and roast beef. Smithfield will retain the Valleydale brand.
The facility will close in two phases
with the first phase beginning in late
January. Boiled and diced ham and
bacon bits operations will most likely
continue until July. Ultimately, 344
workers will lose their jobs.
Excluding the plant restructuring
charges, Smithfield's pork segment earnings were $44 million, 10 percent above
a year ago. Improved margins in fresh
pork and processed meats, somewhat
offset by higher plant energy and transportation costs, led to increased earnings.
Processed meats volume grew 2 percent.
Important precooked product categories,
including bacon, sausage and ribs, grew
at double-digit rates. Fresh pork volume
declined 3 percent.
Value-added ham categories also
posted impressive volume and margin
gains. Additionally, case-ready pork
volume rose 43 percent.
The company's hog production operations delivered strong profitability as
a result of continued favorable industry
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December 2005

conditions and lower raising costs. Live
hog market prices averaged $49 per cwt
for the quarter versus $54 per cwt a year
ago. Raising costs in the hog segment
were $40 per cwt, compared with $42
per cwt last year.
During the second quarter of last
year, the company's hog production
earnings were reduced by $36 million
related to live hog hedging activity, partially offset by $12 million
of favorable forward grain purchasing arrangements. Results in the
current quarter were not impacted
significantly by commodity hedging

activities or forward purchasing.
Reflecting continuing depressed industry conditions and closed export
markets, the company's beef operations
experienced a modest loss. Increased
sales in the beef segment reflect the
sale of the cattle on feed that are owned
by Smithfield and
are not included in
the cattle feeding
joint venture.
In the company's international meat
operations, higher raw material costs
pressured margins in Poland and
France. Conversely, international hog
production operations, which are reported in the hog production segment,
continued to perform well.

Tyson's shutters plant, puts it on the market
Tyson Foods, Springdale, Ark., closed
its poultry processing plant in Bentonville this past November, approximately seven weeks later than initially
planned. Tyson Foods announced in
mid-July that it planned to close the
facility by Oct. 1 and expand its Russellville facility. The closing was delayed because additional production
was needed to fill a customer's order,
according to the company.

A Tyson spokesman said the age
and location of the plant behooved the
company to move production rather
than invest in the facility, which made
partially fried and raw breaded chicken tenders, filets, livers and gizzards
for foodservice customers.
The company bought the plant,
which was built in the 1960s, in 1972
from Krispy Kitchens. The plant is
now for sale.

Triumph to build second plant in Illinois
Triumph Foods, St. Joseph, Mo., a vertically integrated producer-owned pork
processing company, plans to open its
second processing facility in early 2009
in the Quad Cities area of Illinois. The
$150-million plant will employ 1,000
workers and process about 16,000
hogs per day. The company expects to
receive tax incentives for building the
plant in East Moline.
The community is already heavily
invested in the food processing industry as Hormel, Oscar Mayer, Tyson,
West Liberty Foods and Farmland have
plants in the area.
The first Triumph Foods' plant, in
St. Joseph, Mo., is scheduled to open
next month. It was to open before the
end of 2005 but was delayed by an
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explosion during construction that
killed one person this past October.
Jerry Lehenbauer, vice president of
hog procurement and genetic operations,
said the new plant will be similar to the
St. Joseph facility. "We'll tweak the design some. It will be essentially identical
to the plant we have here in St. Joseph."
Like the St. Joseph plant, which is
the industry's first large-scale new U.S.
pork plant in about 10 years, the Illinois plant will have hog slaughter and
fresh pork operations. Seaboard Foods,
a unit of Seaboard Corp., Shawnee
Mission, Kan., will market product
from the St. Joseph plant; however,
Triumph has not made marketing plans
for the East Moline plant, according to
Lehenbauer.

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Meat + Poultry - December 2005

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