Smithfield Foods yesterday (17 February) insisted the company would continue to meet its banking covenants and maintained plans to revamp its pork operations were not caused by pressure from its lenders.

Earlier in the day, the US-based meat group said it would restructure its pork processing with a series of moves including the closure of six plants and the possible loss of almost 1,800 jobs.

In recent months, Smithfield has enjoyed rising profits from its pork business. For the second quarter to 26 October, Smithfield saw earnings from its pork business rise from US$62.9m to $93.4m, thanks to a jump in export sales.

However, Smithfield has faced questions over its financial position and, speaking at an analyst conference in Florida, president and CEO Larry Pope and CFO Bo Manly were quick to reassure investors.

Manly said Smithfield had improved its liquidity and had secured a series of new banking covenants with its lenders, while Pope said the pork shake-up had been introduced to improve margins and focus the business on more profitable categories.

“We’re not doing this [the pork restructuring] as a result of pressure from any of our banks,” Pope told the Consumer Analyst Group of New York (CAGNY) conference.

Pope said the revamp would see Smithfield focus on higher-margin, packaged meat categories. “We are walking away from cheap business. We would rather be a smaller, more profitable company than a larger, less profitable company,” Pope explained.

The global downturn had hit demand for protein worldwide, Pope said, with pork production falling in most key exporting and importing countries.

However, Pope insisted market conditions appear to be “moving in the right direction” due to falling input costs, lower protein supplies leading to improved prices and higher pork exports.

“The next year should be better than the current year despite the recession,” Pope insisted. “We have gone through the storm and we have come out the other side.”

Shares in Smithfield closed down 7.3% yesterday, trading at $8.87.