Smithfield to shutter several plants
In a move which company officials say is in no way related to the country’s economic downturn, Smithfield Foods recently announced that it would be instituting a restructuring plan which involves the closure of six pork processing plants.
Smithfield CEO Larry Pope says that the company has been discussing the move for nearly a year, all the while with the knowledge that they were operating several underutilized facilities, with some plants even duplicating operations.
Affected plants include the company’s packing facility in Smithfield, VA, which will be closed in December and affects 1,375 employees.
A Plant City, FL, facility producing packaged meats will close in September and leave 760 workers jobless. A plant in Elon, NC, will close in the summer and lay off 160 people. A John Morrell plant in Great Bend, KS, with 275 employees will close in July. Farmland Foods’ New Riegel, OH, plant will close in April, affecting 230 employees. Finally, an Armour- Ekrich Meats plant in Hastings, NE, will close in July and leave 370 unemployed.
“Layoffs and plant closing are difficult but necessary decisions,” said Pope. “We know that this will create adversity for the employees affected and we will work with union officials and others to determine how we can provide assistance to our employees and find future employment.”
Smithfield reported a net profit of $4.2 million in its second fiscal quarter, down from $17.4 million in the same quarter a year ago. Pork operating profit rose nearly 50 percent to a second quarter record of $93.4 million from $62.9 million a year earlier. Hog production operating profit, however, plummeted to a loss of $96.8 million from a profit of $111.6 million in the year-ago period. Smithfield says record feed costs are mostly to blame.
“This plan will create true synergies between our independent operating companies and produce more opportunities to improve the bottom line in the future,” Pope added. “Combined with the several plant closures we have made over the last three yyears, this restructur- ing sh should improve operat- ing ra rates dramatically, al- lowing us to shed low-margin busine business.”
Smithfield Smi says they hope the restructuring re plan will result in annual cost savings after aapplicable restructuring expenses of approximately $55 million in fiscal 2010 and $125 million by fiscal 2011. “After a careful and thorough analysis of our pork business, we have concluded that the consolidation of our independent operating companies into three strong, market-driven companies with highly-competitive and powerful regional brands will best serve the needs of our customers, employees and other key stakeholders,” said George H. Richter, CEO of the company’s pork group.
“This new business model will allow us to focus on maximizing operating, marketing, financial and logistical synergies that will enable us to better meet the needs of our retail, foodservice and international customers who do business with multiple Smithfield Foods companies.” Separately, Pope noted that Smithfield Foods has entered into amendments of its U.S. and European Union credit facilities. The company disclosed the two separate credit facility amendments on reports with the U.S. Securities and Exchange Commission on Feb. 6 and Feb. 13. He said that the amendments provide, among other things, for a reduction of the applicable interest coverage ratio for specified periods through the third quarter of fiscal 2010. “These amendments are very positive developments, for they provide the company with sufficient time and financial flexibility to bridge the current hog cycle and uncertain economic environment,” he said. “This action should remove any question about the financial strength of Smithfield Foods. We have eliminated a major distraction, allowing our management team to focus full time on the restructuring plan and running the business.” — WLJ