Highlights

-- Net income was $4.2 million, or $.03 per diluted share, for the secondquarter compared to $17.4 million, or $.13 per diluted share a year ago.Current results include a loss from continuing operations of $30.0 million, or$.21 per diluted share

-- Smithfield completed the sale of its beef processing and cattle feedingoperations for $580.0 million, recording a pre-tax gain on the sale of $95.2million

-- The company had over $900 million in available liquidity at quarter end

-- Smithfield's hog production operations and turkey investments sufferedlosses under the weight of record high feed costs as grain costs peaked

-- Pork segment operating profits of $93.4 million achieved record forsecond quarter

-- Pork exports rose 29 percent, driving higher fresh pork earnings

-- International operating profit increased 20 percent

-- The company has so far liquidated seven percent of its U.S. sow herdsince its announcement in February 2008

-- Capital expenditures were cut in half from prior year

Following are the company's sales and operating profit from continuingoperations by segment (in millions):

13 Weeks Ended 26 Weeks Ended October 26, October 28, October 26, October 28, 2008 2007 2008 2007 Sales Pork $2,590.1 $2,343.5 $5,169.3 $4,571.7 International 402.5 274.2 807.8 520.9 Hog Production 748.8 614.8 1,474.6 1,220.4 Other 46.8 35.9 91.0 73.5 3,788.2 3,268.4 7,542.7 6,386.5 Intersegment (641.1) (521.4) (1,253.8) (1,022.8) Total sales $3,147.1 $2,747.0 $6,288.9 $5,363.7 Operating Profit Pork $93.4 $62.9 $155.1 $89.4 International 11.0 9.2 16.9 24.1 Hog Production (58.0) 18.6 (96.8) 111.6 Other (12.1) 12.9 (18.8) 23.6 Corporate (33.3) (18.2) (52.9) (35.3) Total operating profit $1.0 $85.4 $3.5 $213.4 The company reported a loss from continuing operations for the secondquarter of fiscal 2009 of $30.0 million, or $.21 per diluted share, versusincome from continuing operations last year of $23.4 million, or $.17 perdiluted share. Sales were $3.1 billion versus $2.7 billion a year ago. Beefgroup results for this and prior periods are reflected as discontinuedoperations.

Net income from continuing and discontinued operations in the secondquarter was $4.2 million, or $.03 per diluted share. After-tax income fromdiscontinued operations was $34.2 million, or $.24 per diluted share, whichincludes the gain on the sale of the Smithfield Beef Group and a market valuewrite down of cattle inventories. In the second quarter of last year, netincome of $17.4 million, or $.13 per diluted share, includes an after-tax lossfrom discontinued operations of $6.0 million, or $.04 per diluted share.

Commentary

"Our pork business continued to perform exceptionally well, even thoughraw material costs were 15 percent higher than a year ago. These results wereoffset by unprecedented adverse conditions in the hog production industry,"said C. Larry Pope, president and chief executive officer. "Raising costs wereat record high levels as we were consuming high-priced grain purchased lastsummer. Meanwhile, hog prices were well below our raising costs," he said.

Mr. Pope said that fresh pork margins were at record high levels."Packaged meats margins were strong, tracking slightly below record levels oflast year. Groupe Smithfield and Animex results were below a year ago,reflecting high-cost raw materials and a shift in consumer preference towardlower-cost private label products. Turkey operations have not been able toincrease wholesale prices fast enough to offset record high feed prices," hesaid.

Second Quarter Operating Highlights

Pork

In spite of live hog costs much higher than a year ago, pork operatingearnings rose almost 50 percent above a year ago. Overall, fresh pork volumerose three percent and exports continued to be a strong factor in the market.Pork exports rose 29 percent in volume and 52 percent in dollar value.

Packaged meats margins were slightly below record margins of a year ago ashigh raw material costs could not be fully passed through in higher prices.While overall packaged meats volume decreased slightly, pre-cooked ribs, ledby the Curly's brand, rose 33 percent.

International

International profits rose slightly. Results in Romania and at Campofrioimproved versus last year. Groupe Smithfield's results include $3.2 million inafter-tax restructuring charges related to closing a major plant in France.Groupe Smithfield results were below a year ago due to continued high rawmaterial costs and lower margins from a change in mix in consumer demand frombranded products to private label. Results in Poland were below those of ayear ago, due primarily to lower margins in white meat operations.

Hog Production

Hog production losses continued due to record high feed costs. Corn costswere 65 percent higher than a year ago and soybean meal was 59 percent higher.Cash raising costs increased to $63 per hundredweight versus $49 perhundredweight last year. Live hog market prices were $53 per hundredweightcompared to $46 per hundredweight in the same quarter a year ago. Murphy-Brown, Smithfield's hog production subsidiary, has liquidated seven percent ofits U.S. sow herd since its February 2008 announcement in order to balancesupply and demand. Murphy-Brown expects to complete its 100,000 sow reductionprogram in the third quarter. This will result in fewer market hogs beingraised by the company in the future.

Other

Butterball LLC, the company's joint venture turkey operation, experienceda substantial loss versus a profit a year ago as higher grain prices increasedraising costs dramatically. Butterball announced production cutbacks duringthe quarter and major competitors announced or implemented cutbacks as well.

Sale of Smithfield Beef Group

As previously announced, the company completed the sale of Smithfield BeefGroup, its beef processing and cattle feeding operations, to JBS S.A. for$580.0 million in cash in the current quarter. The sale is subject to aworking capital adjustment. Additionally, Smithfield expects to receiveapproximately $150 million in proceeds from the sale of the retained cattleinventory, net of associated debt.

Campofrio-Groupe Smithfield Merger

The Campofrio-Groupe Smithfield merger is expected to close in December,which will convert our Western European ventures into more highly liquidinvestments. After the merger, the company will own approximately 37 percentof the combined publicly-traded company, with these shares having a currentmarket value over $350 million.

Improved Liquidity

"The sale of our beef processing and cattle feeding operations will allowSmithfield to focus on our core business. The sale has significantlystrengthened our liquidity position and the outlook for continued strongliquidity is very favorable," Mr. Pope said. "We are in our peak cashgenerating season due to high seasonal sales of inventoried holiday hams andpackaged meats. Lower grain prices will reduce working capital requirements.Capital expenditures have been reduced and are significantly belowdepreciation. As a result, we believe that our current liquidity is more thanadequate to address projected cash needs. In addition, we do not anticipatecovenant compliance issues with our credit facilities for the remainder of thefiscal year," he said.

At the end of the quarter the company had over $900 million in availableliquidity. The company expects to sell about one-half of the retained cattleinventory in the third quarter.

Outlook

"Pork exports have remained strong throughout the quarter and we expectexports to continue at a good rate, albeit at a slower pace than earlier thisyear. U.S. pork remains the best valued pork in the world," said Mr. Pope."The third quarter typically is our best season for packaged meats and holidayhams. Also, the efforts of our new leadership team in the pork group alreadyare producing greater efficiencies and lower manufacturing costs," he said.

"We will experience slightly lower feed costs as we move through the thirdand fourth quarter. However, they will continue to be at high levels, comparedwith prior years. Herd liquidation in North America and throughout the world,together with lower production of poultry and beef, should strengthen allprotein prices going forward," Mr. Pope said. "According to the futuresmarkets, hog production should turn profitable in the first quarter of fiscal2010," he said.

"While the next two quarters will be difficult due to record high graincosts, I am very optimistic about fiscal 2010 and beyond after these graininventories have been worked through. The operational changes we have made,and those we are planning, combined with lower supplies of all proteins,should be very good for this company. We are in a very basic business,supplying food to average hard-working Americans. In tough economic times,people tend to cook at home by shopping at their local grocer. This is ourcore business and, as such, we should be better positioned than many as thisrecession takes hold," said Mr. Pope.

With sales of $12 billion, Smithfield Foods is the leading processor andmarketer of fresh pork and packaged meats in the United States, as well as thelargest producer of hogs. For more information, visit www.smithfieldfoods.com.

This news release contains "forward-looking" statements within the meaningof the federal securities laws. The forward-looking statements includesstatements concerning the Company's outlook for the future, as well as otherstatements of beliefs, future plans and strategies or anticipated events, andsimilar expressions concerning matters that are not historical facts. TheCompany's forward-looking information and statements are subject to risks anduncertainties that could cause actual results to differ materially from thoseexpressed in, or implied by, the statements. These risks and uncertaintiesinclude the availability and prices of live hogs and cattle, raw materials,fuel and supplies, food safety, livestock disease, live hog production costs,product pricing, the competitive environment and related market conditions,hedging risk, operating efficiencies, changes in interest rate and foreigncurrency exchange rates, access to capital, the investment performance of theCompany's pension plan assets and the availability of legislative fundingrelief, the cost of compliance with environmental and health standards,adverse results from on-going litigation, actions of domestic and foreigngovernments, labor relations issues, credit exposure to large customers, theability to make effective acquisitions and successfully integrate newlyacquired businesses into existing operations and other risks and uncertaintiesdescribed in the Company's Annual Report on Form 10-K for fiscal 2008 and inits subsequent Quarterly Report on Form 10-Q. Readers are cautioned not toplace undue reliance on forward-looking statements because actual results maydiffer materially from those expressed in, or implied by, the statements. Anyforward-looking statement that the Company makes speaks only as of the date ofsuch statement, and the Company undertakes no obligation to update anyforward-looking statements, whether as a result of new information, futureevents or otherwise. Comparisons of results for current and any prior periodsare not intended to express any future trends or indications of futureperformance, unless expressed as such, and should only be viewed as historicaldata.

(Tables follow) SMITHFIELD FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) 13 Weeks Ended 26 Weeks Ended October 26, October 28, October 26, October 28, 2008 2007 2008 2007 Sales $3,147.1 $2,747.0 $6,288.9 $5,363.7 Cost of sales 2,912.7 2,459.9 5,857.6 4,795.8 Gross profit 234.4 287.1 431.3 567.9 Selling, general and administrative expenses 209.7 216.6 400.3 381.6 Equity in (income) loss of affiliates 21.9 (16.5) 24.0 (30.3) Minority interests 1.8 1.6 3.5 3.2 Operating profit 1.0 85.4 3.5 213.4 Interest expense 52.1 48.3 96.6 89.7 Income (loss) from continuing operations before income taxes (51.1) 37.1 (93.1) 123.7 Income taxes expense (benefit) (21.1) 13.7 (34.6) 43.7 Income (loss) from continuing operations (30.0) 23.4 (58.5) 80.0 Income (loss) from discontinued operations, net of tax 34.2 (6.0) 50.1 (8.0) Net income (loss) $4.2 $17.4 $(8.4) $72.0 Income (loss) per share, basic and diluted: Continuing operations $(.21) $.17 $(.42) $.60 Discontinued operations .24 (.04) .36 (.06) Net income (loss) $.03 $.13 $(.06) $.54 Weighted average shares outstanding: Basic 141.5 134.3 138.5 133.5 Diluted 141.5 134.5 138.5 133.7 SMITHFIELD FOODS, INC. AND SUBSIDIARIES SCHEDULE OF EQUITY IN (INCOME) / LOSS OF AFFILIATES (In millions) 13 Weeks Ended 26 Weeks Ended Segment October 26, October 28, October 26, October 28, 2008 2007 2008 2007 Butterball $14.0 $(11.7) $20.5 $(19.1) Other Groupe Smithfield 2.2 (6.1) 2.5 (10.6) International Campofrio (2.3) 0.5 1.1 0.3 International All other equity method investments 8.0 0.8 (0.1) (0.9) Various Equity in (income) loss of affiliates $21.9 $(16.5) $24.0 $(30.3) This schedule shows the results of the company's major investmentsincluded in equity in (income) loss of affiliates as presented in theconsolidated statements of income.

SOURCE Smithfield Foods, Inc.