August 25, 2005

Smithfield Packing to Consolidate Hog Processing;Will Convert Smithfield Facility to Value-added Pork Operation

New Office Building Planned

Smithfield, Va. (August 25, 2005)—Smithfield Packing Company announced today that it will shift hog processing operations from its Smithfield South facility (formerly Smithfield Packing) to its Smithfield North (formerly Gwaltney) and Tar Heel, North Carolina, facilities on or about October 28, allowing the company to convert the vacant plant space to value-added fresh pork and processed meats production in 2006. The initial conversion is expected to take about four months. All other operations in this facility will not be affected.

The changeover affects approximately 570 of the company's 4,000 employees in Southeast Virginia. The company hopes to rehire all affected employees at one of its four Virginia operations over the next nine months, based on expansion plans and current attrition. In addition to Smithfield North and South, employees could be rehired at Smithfield Ham and Products and at a hot dog manufacturing plant in Portsmouth.

"This difficult but necessary decision to discontinue hog processing at the Smithfield plant is driven largely by hog availability and competitive industry conditions," said Joseph W. Luter, IV, president of Smithfield Packing. "This lack of hog supply is the direct result of the moratorium on hog farms in North Carolina and the de facto moratorium in Virginia."

Smithfield Packing estimates the one-time cost of discontinuing hog processing operations will be $8-10 million. Last year the Smithfield East Coast complex (Smithfield Packing and Gwaltney facilities in Smithfield, Virginia, and the Tar Heel plant in North Carolina) processed 11.6 million hogs. The net result of discontinuing the Smithfield Packing processing operations will be a reduction in the annual hog processing rate by approximately 500,000 hogs.

"By consolidating hog processing from three to two facilities, we will significantly improve our operating efficiency and utilization of assets," said Jere T. Null, senior vice president of Smithfield Packing. "We have plans to produce value-added pork products in the vacated space, enabling us to meet our customers' continuing needs."

"We will continue to have substantial operations in Smithfield and remain committed to the local community," said Luter. "We will spend over $15 million to install pre-cooked microwave bacon lines, currently on order, which will add 50 jobs in early 2006. We will invest $10 million to modernize hog processing operations at our Smithfield North facility and another $5 million in a new office building to meet our current and future needs," he said.

In accordance with the decision to discontinue hog processing at the Smithfield South plant, the company will follow all required procedures as outlined in the Worker Adjustment and Retraining Notification Act (WARN), including providing a 60-day notification to employees or their bargaining representative. Under terms of the WARN Act, Smithfield Packing also will notify state dislocated worker units so that they can promptly offer dislocated worker assistance.

"We know this is difficult for the employees affected. We will be working diligently to return them back to work as soon as possible," Luter said. The company will work with the U.S. Department of Labor to sponsor a job fair; coordinate with the local unemployment office to assist employees with claims or job applications; and partner with local trade and educational institutions to provide job skill training and educational opportunities. Employees placed on layoff will be subject to recall based on the collective bargaining agreement with the Food Processors Local Union No. 1046.

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