On the Street - Smithfield Restructuring Pork Group
February 25/Food & Farm Week -- Smithfield Foods Inc. announced a plan to consolidate and streamline the corporate structure and manufacturing operations of its pork group to improve operating efficiencies and increase utilization. The company expects the restructuring plan will result in annual cost savings after applicable restructuring expenses of approximately $55 million in fiscal 2010 and $125 million by fiscal 2011.
Smithfield Foods said that the pork group's new business model will enhance the strength of its independent operating company approach, while rationalizing manufacturing operations and taking advantage of synergies in key overhead areas such as sales, marketing, purchasing and information technology.
"This plan will create true synergies between our independent operating companies and produce more opportunities to improve the bottom line in the future," said C. Larry Pope, president and chief executive officer. "Combined with the several plant closures we have made over the last three years, this restructuring should improve operating rates dramatically, allowing us to shed low-margin business," he said.
In connection with the plan, the company anticipates recording a pre-tax charge, principally related to non-cash asset write-downs, of approximately $85 million in its third fiscal quarter ended February 1. In addition, Smithfield Foods expects to record one-time pre-tax charges of approximately $30 million as the plan is implemented over the next three quarters. The company estimates that $53 million in capital expenditures will be required relative to plant consolidations in the remainder of fiscal 2009 and in fiscal 2010. Total capital expenditures are expected to remain below depreciation in this fiscal year and next.
From the February 16, 2009, Prepared Foods E-dition