- The Washington Times - Wednesday, February 18, 2009

MILWAUKEE

Smithfield Foods Inc. said Tuesday it plans to cut 1,800 jobs and close six factories - including one in its Virginia hometown - as part of a restructuring that comes amid an overall slump in the meat industry.

Chief Executive C. Larry Pope said the nation’s largest pork producer was switching its focus from buying up its hard-pressed competitors to operating more efficiently. He said Smithfield would shift away from low-margin businesses and instead work on expanding its packaged meat business, where it can make more money.

The company plans to combine seven of its independent operating companies into three main units and close plants in six cities, including one in Smithfield, Va., by December. The moves will lead to annual cost savings, after expenses, of about $55 million in fiscal 2010 and $125 million by the following year.

The meat industry is slumping as companies like Smithfield recover from volatile energy and commodity costs that reached record highs over the summer. An oversupply of meat on the market has been keeping prices down, while tight credit markets have hurt the potential for exports, a key market for meat producers. Further, a drop in restaurant spending by consumers has lowered demand.

Pilgrim’s Pride Corp., the nation’s largest chicken producer, filed for Chapter 11 bankruptcy protection last year as it was hobbled by the volatile costs and high debt. Tyson Foods Inc., the world’s largest meat producer, which makes chicken, beef and pork, has seen its chicken unit slump. Dick Bond abruptly resigned as chief executive last month and was replaced on an interim basis by former CEO Leland Tollett.

BMO Capital Markets analyst Kenneth Zaslow said Smithfield’s restructuring was “long-awaited and exceedingly appropriate.” In a note to clients Tuesday he said the moves could put the company in a position to at least break even in its hog production in the first quarter of fiscal 2010. The company is due to release its third-quarter 2009 results next month.

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