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Smithfield Foods Reports Fourth Quarter And Full Year Results

Packaged Meats

Packaged meats operating margins were solid and in line with the prior year at 7%, or $.16 per pound. Volume grew 4% and was up year over year across all key trade channels for the fourth consecutive quarter. The company delivered volume growth in nine of its twelve core brands: Smithfield, Gwaltney, Kretschmar, Armour, Eckrich, Curly's, Farmland, Margherita and Healthy Ones. In addition, it gained market share in cooked dinner sausage, dry sausage, ham steaks and marinated pork, with notable double-digit growth in its Eckrich cooked dinner sausage, Armour dry sausage and Smithfield and Farmland marinated pork. The company also broadened distribution in the bacon, deli meats, dry sausage, hot dogs, packaged lunchmeat, portable lunches and marinated pork categories.

Hog Production

The company's risk management strategy continued to mitigate losses to produce results that were better than the industry average with an operating margin of (5)%, or $(11) per head. Year over year, live hog market prices decreased 6% to $59 per hundredweight, while raising costs rose 5% to $68 per hundredweight. Head sold increased 5%.

International

International operating margins declined to 2% largely from higher feed costs in the company's hog production operations. On a constant currency basis, sales increased 6% led by higher volumes in Poland and price increases in Romania. Recessionary pressures and high raw material costs continued to negatively impact Campofrío results.

Full Year Results

Pork

Fresh Pork

Fresh pork operating margins declined to 3%, or $6 per head. Larger domestic pork supplies resulting from lower exports pushed the USDA pork cutout down 7% year over year, while live hog prices fell only 6%. Retail sales volume increased double digits. Excluding the carcass volume last year, exports increased 4% year over year. The company processed 3% more hogs.

Packaged Meats

Packaged meats operating margins grew to 8%, or $.17 per pound, on 4% higher volume. Sales and volume grew across all trade channels and in eight of the company's twelve core brands: Smithfield, John Morrell, Kretschmar, Armour, Eckrich, Carando, Farmland and Margherita. Higher quality and more consistent earnings continued to result from market share and distribution gains across a number of key product categories.

Hog Production

Hog production operating margins were (4)% or $(7) per head. Losses were significantly diminished by the company's risk management strategy. Year over year, live hog market prices decreased 6% to $61 per hundredweight, while raising costs rose 6% to $68 per hundredweight. Head sold increased 1%.

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