Smithfield Profits Plunge 50%

NEW YORK - Aug 23/06 - SNS -- Smithfield Foods, Inc. reported net income of U.S. $24.6 million on sales of $2,772.9 million during the first quarter of the 2007 fiscal year, compared to a net of $49 million on sales of $2,929.5 million during the same three-month period last year.

Shortly after the end of the quarter, the company completed the sale of substantially all of the assets and business of Quik-to-Fix. In the quarter, Smithfield recognized a $10.4 million after-tax write down on the assets in anticipation of the sale and an after-tax loss from discontinued operations of $3.9 million.

Smithfield said its pork segment benefited from improved fresh pork market conditions in the last half of the quarter in spite of relatively high hog prices. Processed meats volumes were flat compared to the previous year, although the company experienced strong growth in spiral hams and other ham products, pre-cooked ribs, lunch meats and dry sausages. Fresh pork volumes were down in the quarter, by design. Results include a $6.5 million pre-tax mark-to-market gain on open commodity positions.

Operating profit in the beef segment was slightly below last year as improved results in beef processing on lower cattle costs and higher demand were more than offset by losses related to the company's cattle feeding investments. As a result of the lower cattle markets, the cattle feeding investment reported a loss of $8.4 million versus a profit of $5.6 million last year.

In the hog production segment, operating results declined on higher raising costs, lower volumes and an impairment charge in connection with the pending sale of the company's share of its Brazilian live hog production operation. Live hog prices of $51 per hundredweight (100 pounds) remained about the same as the first quarter of last year. In the United States, however, volume was down three percent from a year ago and raising costs increased to $41.50 per hundredweight from $40 last year. The impairment charge for the Brazilian investment was $4.2 million, pre-tax, or about $.02 per share.