Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — BMO Capital Markets 2012 Farm to Market Conference
29 slides from Smithfield Foods's conference presentation, May 16, 2012
Slide 1: BMO Capital Markets 2012 Farm to Market Conference
Ne y) Maré se Bel | Soy « *~ ANDO Jolt) | BACON, (\°* gorre 4 am = Z <i Smityfia HONEY: & auc MAPLE <Zy a a 2 Smithfield BMO Capital Markets 2012 Farm to Market Conference May 16, 2012
Slide 2: Addressing Investors' Frequently Asked Questions
Addressing Investors’ Frequently Asked Questions C. Larry Pope President and Chief Executive Officer Robert W. Manly Executive Vice President and Chief Financial Officer
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation contains “forward-looking” statements within the meaning of the federal securities laws. The forward-looking statements include statements concerning the Company’s outlook for the future, as well as other statements of beliefs, future plans and strategies
Slide 4: What is Smithfield's strategy for growth?
What is Smithfield’s strategy for growth?
Slide 5: Executing Strategy For Growth
Executing Strategy For Growth • Consumer marketing spending +20% in fiscal 2012 • Restructured Pork Group is platform for growth • Driving consumer relevant product innovation • Leveraging consolidated brand portfolio Focus on 12 core brands Building strong innovation pipeline Investing in advertisi
Slide 6: Consumer-Winning Brands
Consumer-Winning Brands Note: Based on FY 12 Q3 YTD Pork segment packaged meats retail volume, including deli and direct store delivery Private Label/ Other 28% Core Brands 63% Non-Core Brands 9% Branded 72% Approximately three-quarters of Smithfield’s retail packaged meats sales are branded Twelve
Slide 7: Innovation & Brand Activation
Innovation & Brand Activation Driving Consumer Relevant Product Innovation Convenience Health & Nutrition Packaging Investing In Advertising To Drive Awareness Digital FSIs Print Radio Retail POS Social Media Television Innovation Brand Activation 7
Slide 8: Richard Petty Motorsports NASCAR Partnership
8 Richard Petty Motorsports NASCAR Partnership Multiyear, integrated partnership with Richard Petty Motorsports NASCAR team Primary sponsor of No. 43 Ford Fusion in fifteen NASCAR races in 2012, including Daytona 500 Underscores strategy to activate brands with consumer-focused marketing
Slide 9: Smithfield Innovation Center
9 Smithfield Innovation Center New 37,000 square foot R&D facility houses Innovation Center and Pilot Plant Three specialized state-of-the- art kitchens Dedicated product cutting room Multimedia technologies throughout USDA inspected pilot plant simulates full-scale manufacturing processes
Slide 10: Health & Nutrition Platform
Health & Nutrition Platform • Consumers demand great taste with less sodium for healthier lifestyle • Made with all-natural sodium replacer • Patented technology • Tastes and functions like salt Key Lower-Sodium Products • All Healthy Ones Retail and Deli Products • Armour Retail Lower-Sodium Pepper
Slide 11: Gaining Momentum & Leading Category Growth
11 Gaining Momentum & Leading Category Growth 22.2% 18.6% 6.1% 5.4% Sales Volume Marinated Pork Smithfield Core Brands Category (YOY % change) Source: Freshlook Marketing 52 weeks ending 03/25/12 Convenience
Slide 12: Bacon Innovation Driving Success
12 Bacon Innovation Driving Success What Consumers’ Want… …Smithfield PouchPack Delivers Consumers want fresh bacon = Only bacon package to offer two individually sealed, perforated pouches that provide fresh bacon now and later 75% of consumers have leftover uncooked bacon = Six slices in each pouc
Slide 13: What is happening in the fresh pork complex?
What is happening in the fresh pork complex?
Slide 14: Current Fresh Pork Dynamics
14 Current Fresh Pork Dynamics Negatives Positives Higher year over year slaughter levels in March and April But… Slaughter levels beginning to trend lower in May Higher retail pork prices and lower volumes But… Pork cutout should improve in near term as retailers feature more pork Lower domestic re
Slide 15: Higher Retail Prices & Lower Volumes
Higher Retail Prices & Lower Volumes 15 12% 8% 3% 1% 1% 0% -10% -6% -2% Beef Pork Chicken Price per pound Sales Volume Source: Freshlook Marketing YOY 52 weeks ending 03/25/12
Slide 16: Higher Gas Prices
Higher Gas Prices $- $1.00 $2.00 $3.00 $4.00 $5.00 Ap r- 9 2 Ap r- 9 4 Ap r- 9 6 Ap r- 9 8 Ap r- 0 0 Ap r- 0 2 Ap r- 0 4 Ap r- 0 6 Ap r- 0 8 Ap r- 1 0 Ap r- 1 2 U .S. g as o lin e p ric e s Record=$ 4.11 Current= $3.87 16 Source: United States Energy Information Administration (EIA)
Slide 17: Pork Exports Remain Strong
250 300 350 400 450 500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec milli o n p o u n d s Total U.S. Pork & Pork Variety Meat Exports 2010 2011 2012 Source: Foreign Agricultural Trade of the United States (FATUS) Pork Exports Remain Strong 17
Slide 18: Positive Global Fundamentals
USDA Forecast Smithfield Forecast 18 Positive Global Fundamentals 2012 World Production Forecast Smithfield outlook for hog and pork prices is more bullish than USDA due to more bearish view of global production increases Pork 3% Beef +0% Chicken +2% Total 2% Pork 1% Beef -0% Chicken +2% Total 1
Slide 19: U.S. & China Hog Prices
19 U.S. & China Hog Prices $104 $60 $20 $40 $60 $80 $100 $120 $140 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Li ve h og p ric e ( p e r h u n d re d w e ig h t) China U.S.
Slide 20: What are the company's priorities for uses of excess cash?
What are the company’s priorities for uses of excess cash?
Slide 21: Uses of Excess Cash
21 Uses of Excess Cash Ongoing Share Repurchase & Debt Reduction Remain Priorities Reinvest in packaged meats business Example – $85 million packaged meats expansion in Kinston, North Carolina Share repurchases Repurchased $189 million of stock in FY 12 Debt reduction Repaid $138 million of bonds in
Slide 22: Can Smithfield continue to consistently deliver solid earnings?
Can Smithfield continue to consistently deliver solid earnings?
Slide 23: Packaged Meats Fueling Stability
Packaged Meats Fueling Stability Note: Segment sales before inter-segment eliminations Hog Production 19% International 9% Packaged Meats 40% Fresh Pork 32% Pork 72% Sales Packaged meats accounted for 40% of sales in fiscal 2011 23
Slide 24: Consistently Solid & Predictable Margins
$ 0 .0 5 $ 0 .0 6 $ 0 .1 2 $ 0 .1 7 $ 0 .1 7 $ 0 .1 9 $ 0 .1 7 $ 0 .1 4 $ 0 .1 1 $ 0 .1 2 $ 0 .1 6 $ 0 .1 2 $ 0 .1 7 $ 0 .1 1 $ 0 .1 5 2.7% 3.0% 6.9% 9.9% 8.8% 10.5% 10.4% 7.6% 5.3% 5.4% 7.8% 5.4% 7.5% 5.1% 6.9% FY 09 Q1 FY 09 Q2 FY 09 Q3 FY 09 Q4 FY 10 Q1 FY 10 Q2 FY 10 Q3 FY 10 Q4 FY 11 Q1 FY 11 Q
Slide 25: Reduced Commodity Exposure
Reduced Commodity Exposure Lowered domestic corn market exposure by more than 40% since fiscal 2008 FY 08 – Beef Group divestiture FY 09 – U.S. sow herd reduction FY 11 – Sale of turkey interests and non-core hog farms More aggressive hedging to lock in margins and raising costs Hog Prod
Slide 26: Fundamentals Remain Supportive
Fundamentals Remain Supportive Total U.S. protein production continues to contract 2012 Production Forecast Volatile grain and protein prices, as well as limited capital availability have limited expansion in pork industry Export demand for pork remains strong Pork production in EU declini
Slide 27: International Segment Strong
International Segment Strong Positive hog production fundamentals in Europe fueling solid profitability from international hog operations Modest, positive contributions from international meat processing business Recent approval to export pork from Romania to EU will have beneficial impacts on
Slide 28: Segment Normalized Operating Profit Range
Segment Normalized Operating Profit Range FY 12 Forecast FY 13 Forecast Fresh Pork $3-7 per head Above normalized High end of normalized Packaged Meats $0.10-0.15 per pound High end of normalized High end of normalized w/ 2-3% volume growth Hog Production $10-15 per head Normalized Normalized Intern
Slide 29: BMO Capital Markets 2012 Farm to Market Conference
Ne y) Maré se Bel | Soy « *~ ANDO Jolt) | BACON, (\°* gorre 4 am = Z <i Smityfia HONEY: & auc MAPLE <Zy a a 2 Smithfield BMO Capital Markets 2012 Farm to Market Conference May 16, 2012
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