Smithfield Foods, Inc. announced plans to consolidate and streamline the corporate structure and manufacturing operations of its pork group. 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.
"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.
The plan includes the following actions at various operating units:
- Smithfield Foods will reduce the number of independent operating companies in the pork group to three from seven. Four existing independent operating companies will be combined under the various business units of The Smithfield Packing Company, Inc., John Morrell & Co. and Farmland Foods, Inc. John Morrell and Farmland Foods will merge their respective fresh pork sales forces. This consolidation will enable the company to serve customers with two highly competitive sales groups, Smithfield Packing Company in the East and Farmland Foods in the Midwest and West.
- Patrick Cudahy, Inc., a producer of bacon, dry sausages, hams and other specialty packaged meats, will become part of the John Morrell Group.
- Carando Foods, a unit of Farmland Foods producing Italian deli and specialty meats, also will be combined with the John Morrell Group. The addition of Carando and Patrick Cudahy to the John Morrell Group, which includes Armour-Eckrich Meats, LLC and Curly's Foods, Inc., will leverage the efficiencies of the packaged meats companies' manufacturing and marketing platforms.
- Farmland Foods will strengthen its foodservice business with the assimilation of North Side Foods Corp., a large supplier to the quick service restaurant industry.
- Cumberland Gap Provision Co., a unit of the John Morrell Group and producer of hams, sausages and other specialty packaged meats, will integrate with Smithfield Packing Company.
- The international sales organizations that are responsible for exports of several independent operating companies will be consolidated into one group to form Smithfield Foods International Group, providing one face to overseas markets and reducing selling, general and administrative expense. This consolidation already is underway and has yielded positive results.
- Smithfield Foods will close six plants and transfer production to more efficient facilities, increasing their utilization rates. These plants are expected to be closed by December 2009.
"We are very excited about this restructuring plan. The plan will better align the company by enhancing operating efficiencies and increasing utilization rates to reduce our overall manufacturing and overhead structures, which will make Smithfield Foods a more competitive company," said Pope. "Previously, the company's overall focus has been on growth based on opportunistic acquisitions of high-quality companies at distressed prices. Now we want to fully assimilate and integrate these enterprises, driving operating efficiencies and growing our high-margin packaged meats business."
Mr. Pope said that, beginning in the first quarter of fiscal 2010, investors will be able to track packaged meats performance, as the company will begin reporting separate metrics for that component of the business.
As a result of the restructuring plan, the company expects to achieve a net reduction of approximately 1,800 jobs in the pork group.
With sales of $12 billion, Smithfield Foods is the leading processor and marketer of fresh pork and packaged meats in the United States, as well as the largest producer of hogs. For more details on the restructuring, click here. You can also find more details about Smithfield Foods at their Web site: www.smithfieldfoods.com.
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