Smithfield to Cut 1800 Jobs
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(Dow Jones) -- Smithfield Foods Inc. announced Tuesday plans to close six plants and shed 1,800 staff, as the world's largest pork processor by revenue battles the liquidity squeeze that has already pushed rivals into bankruptcy and widespread restructuring.
Smithfield will close plants in Florida, Kansas, Nebraska, North Carolina, Ohio and Virginia. The company will also merge staff from some of its various brand names such as John Morrell & Co. and Farmland Foods in Kansas City, Mo.
Among the plant closings, the John Morrell plant in Great Bend, Kan., will close in July, affecting 275 workers. That plant processes fresh pork and smoked meats. Also in July, the company will close an Armour-Eckrich Meats plant in Hastings, Neb., that employs 370 people. In April, Farmland Foods will close a spiral-ham plant in Riegel, Ohio, that employs 230 people.
Smithfield also will close a plant in Elon, N.C., later this summer that employs 160 people. A Smithfield plant in Plant City, Fla., that has 760 works will close by September, the company said. By December, Smithfield will also close a plant in Smithfield, Va., that has 1,375 workers. Most of those workers will be offered a chance to move to other Smithfield plants in North Carolina.
Jerry Hostetter, spokesman for Smithfield Foods, said in an e-mailed reply that "none of the plants affected are slaughter plants." The plants produce further processed meats such as smoked spiral sliced hams, packaged meats and some fresh pork cuts.
In addition, the company will consolidate the sales groups of its Farmland Foods and John Morrell pork divisions.
Market analysts said the changes made by Smithfield are centered around reducing costs for the company, making it more efficient. About 1,800 jobs will be affected, the company said.
"Layoffs and plant closings are difficult but necessary decisions," said C. Larry Pope, president and chief executive officer. "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 to find future employment. Also, we will be transferring many employees to other plants."
Smithfield, like rivals Tyson Foods Inc. and bankrupt Pilgrim's Pride Inc., has already seen margins fall and liquidity drained from a weakening demand and supply balance that collided with soaring feed costs last year, exacerbated by wrong-way hedges when corn prices started to decline.
The company is closing six of its 40 processing plants and will cut 3.4 percent of its workforce in a move that will affect more than 3,000 employees, though some will be relocated as part of a restructuring of its vertically integrated operations that will eliminate four independent operating companies.
Smithfield's loss-making hedges are not expected to roll off until the end of its financial year in April, said analysts, and the restructuring will see it take an $85 million pretax charge in the quarter to Feb. 1, with another $30 million spread over the following three quarters. The moves are expected to save $55 million in fiscal 2010, with $125 million anticipated in the following 12 months.
The company did not comment on any further production cuts, but Pope is scheduled to address the Consumer Analysts' Group of New York conference later Tuesday.
Smithfield accounts for around a third of the U.S. processed pork market, and while prices have started to strengthen, it has been hit by consumers switching down from branded products to white-label offerings. While pork remains the world's most consumed meat by volume -- above poultry and beef --- exports are expected to slow from the mix of weakening economic growth and the strengthening U.S. dollar.
Smithfield shares closed Friday at $9.57 and weren't active in pre-market trade Tuesday.
DTN Ag Policy Editor Chris Clayton contributed to this report.
(CZ/SK)
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