Smithfield Foods says liquidity adequate to withstand downturn cycle

By Jennifer Lanning Drey

Portland, Ore., Feb. 17 - Smithfield Foods Inc. has more than adequate liquidity and the ability to meet its debt covenant requirements while managing through the downturn cycle, Robert "Bo" Manly, chief financial officer of Smithfield, said Tuesday during a presentation at the Consumer Analyst Group of New York Conference.

The company met the interest coverage covenant included in its secured revolving credit facility for the quarter ended Feb. 1, he said.

"We have been busy working on the balance sheet, and we're in a tough cycle but are making sure that we work with our banks, work with the balance sheet and deal with the needs that we have in front of us to ensure that we have all the flexibility we need to get us on the other side," C. Larry Pope, chief executive officer of the company, said during the presentation.

Smithfield has reduced total debt by more than $600 million in the last nine months and improved available liquidity to $950 million from less than $500 million in the same amount of time.

Smithfield also announced plans Tuesday to restructure its pork group for an estimated bottom-line improvement of $125 million by the beginning of fiscal 2011. The initiative is the single largest cost-savings effort ever put together by the company.

During his presentation, Pope dispelled rumors that the action was taken in response to pressure from the company's bank group.

Smithfield ended the second quarter with debt to total capitalization of 54%, compared to an eventual goal of debt to total capitalization of 50%, Manly said.

Based in Smithfield, Va., Smithfield Foods is a meat processing and packaging company.

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