UPDATE 3-Smithfield closing 6 plants, cutting 1,800 jobs

* Will run 3 instead of 7 independent operating companies

* Will close 6 processing plants, cut about 1,800 jobs

* Shares down 6.8 pct. (Recasts, adds, analyst comment, byline)

By Bob Burgdorfer

CHICAGO, Feb 17 (Reuters) - Smithfield Foods Inc (SFD.N) said on Tuesday it would close six processed meat plants and eliminate 1,800 jobs while retaining its current hog slaughter capacity as it restructures its pork group.

Smithfield, the largest U.S. hog and pork producer, makes more than 50 brands of pork and turkey products including John Morrell, Eckrich, and Armour. None of the brands will be discontinued, the company said.

The company's were down 6.8 percent on Tuesday to $8.92 on the New York Stock Exchange after reaching $8.77 earlier in the day.

While Smithfield said it expects to cut a net 1,800 jobs in the restructuring, some workers will be offered transfers to other units.

"I just think they are doing what they need to to get things shored up," said Rich Nelson, an analyst with the agricultural advisory company Allendale Inc.

"The (pork) processing side will make about half the profits it had in 2008 for (calendar) 2009 due to lower hog numbers combined with mixed to lower demand for pork," he said.

The global economic downturn is expected to limit sales of U.S. meat for much of the year, Nelson said.

SEVEN COMPANIES INTO THREE

Four of its existing independent companies will be combined under The Smithfield Packing Co Inc, John Morrell & Co and Farmland Foods Inc units, Smithfield said.

The restructuring is expected to save about $55 million in fiscal 2010, and $125 million by fiscal 2011, Smithfield said.

The company said it expects a pretax charge of about $85 million tied to noncash asset write-downs in its fiscal third quarter, ended Feb. 1.

It expects a one-time pretax charge of about $30 million as the restructuring is implemented over the next three quarters.

"We have long been an advocate of greater centralization in Smithfield's pork segment," Kenneth Zaslow, BMO Capital Markets equity analyst, wrote in a research note. "The cost savings are somewhat larger than our expectation and likely will structurally improve Smithfield's pork processing margins."

John Morrell and Farmland Foods will merge their fresh pork sales groups as part of the plan, Smithfield said.

The plants to be closed are in Smithfield, Virginia; Plant City, Florida; Elon, North Carolina; Great Bend, Kansas; New Riegel, Ohio; and Hastings, Nebraska.

CREDIT AMENDMENTS CALLED POSITIVE

Smithfield has also entered into amendments of its United States and European credit facilities.

The amendments provide, among other things, for a reduction of the applicable interest coverage ratio for specified periods through the third quarter of fiscal 2010, Chief Executive C. Larry Pope said in a statement.

"These amendments are very positive developments, for they provide the company with sufficient time and financial flexibility to bridge the current hog cycle and uncertain economic environment," said Pope.

"This action should remove any question about the financial strength of Smithfield Foods." (Reporting by Bob Burgdorfer; Additional reporting by Aarthi Sivaraman; Editing by Toni Reinhold)