Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — J.P. Morgan Global High Yield & Leveraged Finance Conference 2012
32 slides from Smithfield Foods's conference presentation, Feb 27, 2012
Slide 1: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. Morgan Global High Yield & Leveraged Finance Conference February 27, 2012
Slide 2: Robert W. Manly, EVP and Chief Financial Officer
Robert W. Manly Executive Vice President and Chief Financial Officer Smithfield Foods, Inc.
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: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations 4
Slide 5: Smithfield: A Global Food Company
Smithfield: A Global Food Company
Slide 6: Smithfield At A Glance
Smithfield At A Glance 6 Fiscal 2011 Sales=$12.2 billion Fiscal 2011 Operating Profit=$1.1 billion Pork Sales=$10.3 billion Operating Profit= $753 million Fresh Pork Sales=$4.6 billion Operating Profit= $407 million Packaged Meats Sales=$5.7 billion Operating Profit= $347 million Hog Production Sale
Slide 7: Sales by Segment
7 Hog Production 19% International 9% Packaged Meats 40% Fresh Pork 32% Total Pork 72% Sales by Segment Pork segment accounted for nearly three- quarters of segment sales in fiscal 2011 Note: Segment sales before inter-segment eliminations
Slide 8: Leading Positions In Pork Industry
Leading Positions In Pork Industry 8 28% Others 27% Tyson 17% JBS 11% Cargill 9% Hormel 8% Pork Processing Sources: National Pork Board Spring 2009; U.S. Pork Powerhouses 2011 14% Triumph 6% 4% 3% 3% Others 70% Hog Production Seaboard Maschhoffs Prestage #1 #1
Slide 9: #1 U.S. Packaged Pork Company
#1 U.S. Packaged Pork Company 9 Retail 45% Foodservice 23% Export 13% Deli 7% Processor/In dustrial 12% Sales Retail 39% Foodservice 16% Export 16% Deli 3% Processor/In dustrial 26% Volume Note: FY 11 Pork segment sales and volume before inter-segment eliminations #1 Supplier to Retail Foodservice E
Slide 10: Consumer-Winning Brands
Private Label/Oth er 25% Core Brands 65% Non-Core Brands 10% Branded 75% Consumer-Winning Brands 10 Note: Based on FY 12 YTD through December Pork segment packaged meats retail volume, including deli and direct store delivery More than three- quarters of Smithfield’s packaged meats sales are branded
Slide 11: Achieving Strategic Growth
Achieving Strategic Growth
Slide 12: Earnings Growth Driven By Pork Segment
Earnings Growth Driven By Pork Segment 12 $219 $449 $483 $573 $753 $759 $- $200 $400 $600 $800 FY 07 FY 08 FY 09 FY 10 FY 11 TTM FY 12 Q2 P ork s e gm e n t adj u st e d o p e ra ti n g p rofit (i n milli o n s) Fresh pork Packaged meats Total Pork Segment Note: Results represent management’s estima
Slide 13: Packaged Meats
Packaged Meats 13 Note: Results represent management’s estimated allocation of total Pork Segment results; FY 09 and FY 10 results adjusted for restructuring and impairment charges; Refer to Non-GAAP measure reconciliations; Sales before inter-segment eliminations Fiscal 2011 Fiscal 2012 Sales $5.7
Slide 14: Achieving Strategic Branded Growth
20% 14% 7% -3% -2% 12% 16% 9% 9% 2% 31% 23% 17% 10% 4% Boneless Ham Steaks BBQ Marinated Pork Bacon Hotdogs YOY Volume Growth Category Smithfield Total Smithfield Lead Brand Achieving Strategic Branded Growth 14 Source: Information Resources, Inc. (IRI) 12 weeks ending 01/01/12 and Freshlook Marketi
Slide 15: Product Innovation
Armour Lunchkit with Apples New Armour Active Packs offers lunchkits with better-for-you ingredients for consumers with active lifestyles Armour Lower Sodium Pepperoni Innovative full-flavor product packs 50 percent less sodium than regular pepperoni Smithfield PouchPack Bacon Innovative package des
Slide 16: Brand Activation
Billboards Consumer Promotions Digital FSIs Print Radio Retail POS Social Media Television Commercials Website Brand Activation 16 Smithfield has increased its consumer marketing spending by 20% this year
Slide 17: Fundamentals Remain Solid
Fundamentals Remain Solid
Slide 18: Fresh Pork
Fresh Pork $1 $5 $3 $3 $15 $14 0.9% 3.4% 2.0% 1.9% 8.9% 7.8% FY 07 FY 08 FY 09 FY 10 FY 11 TTM FY 12 Q2 Adjusted Operating profit ($ per head) Adjusted Operating profit (% of sales) Fiscal 2011 Fiscal 2012 Sales $4.6 billion Balanced domestic supply & demand Strong exports Volume 27.3 million hogs O
Slide 19: Economics Supportive of U.S. Pork Exports
China-HK 37% Japan 23% Mexico 19% Russia 5% Korea 5% Other 11% Smithfield FY 12 H1 Export Markets by Volume Exports Volume +37% YOY Dollars +54% YOY Note: Live hog cost estimate week ending 01/21/12; EU is average of Denmark, France, Germany, Hungary, Netherlands, Poland, Romania and Spain; FY 1
Slide 20: Hog Production
$16 $(26) $(28) $13 $16 12.4% $(1) -1.1% -20.2% -22.5% 7.9% 8.9% FY 07 FY 08 FY 09 FY 10 FY 11 TTM FY 12 Q2 Adjusted Operating profit ($ per head) Adjusted Operating profit (% of sales) Fiscal 2011 Fiscal 2012 Sales $2.7 billion Continued low global protein inventories Raising costs in mid $60s Volu
Slide 21: Hog Production Profitability
Industry hog production profitability averages normalized range of $10-15 per head for next twelve months 21 Note: Industry profitability based on futures curves for live hogs and grains on 02/16/12; cost is pre-interest Hog Production Profitability $55 $60 $65 $70 $75 Ma r- 1 2 Ap r- 1 2 M ay -1 2
Slide 22: International
International 22 $46 $3 $5 $128 $116 $65 FY 07 FY 08 FY 09 FY 10 FY 11 TTM FY 12 Q2 Operating profit ($ in millions) Fiscal 2011 Fiscal 2012 Sales $1.3 billion Continued high raw material costs & soft demand Sequential improvement from Q1 Operating Profit $115.9 million Normalized Operating Profit R
Slide 23: Financial Management
Financial Management
Slide 24: Strengthened Balance Sheet
Strengthened Balance Sheet 24 $4.0 $2.0 Net debt (in billions) Net Debt FY 09 Q1 FY 12 Q2 7.3x 1.7x Net debt to TTM adjusted EBITDA Net Debt to EBITDA FY 09 Q1 FY 12 Q2 56% 37% Net Debt to Total Capitalization Net Debt to Capitalization FY 09 Q1 FY 12 Q2 $0.6 $1.1 Liquidity (in billions) Liquidity F
Slide 25: Reduced Cost Profile
$68.6 $65.5 $60.3 $51.0 $48.1 $44.2 FY 11 Q1 FY 11 Q2 FY 11 Q3 FY 11 Q4 FY 12 Q1 FY 12 Q2 Quarterly Interest Expense ($ in millions) Reduced Cost Profile 25 Smithfield has eliminated $100 million in annual finance and interest expense Note: Excludes amounts outstanding under credit facilities
Slide 26: Extended & Smoothed Debt Maturities
$1 billion less long term debt; $100 million less interest New $1.2 billion, ABL facility – greater liquidity, lower rates/fees, efficient collateral utilization Extended & Smoothed Debt Maturities 26 $637 $49 $903 $853 $3 $19 $500 $6 $25 $563 $615 $28 $190 $500 FY 12 FY 13 FY 14 FY 15 FY 16 FY
Slide 27: Upgraded by Ratings Agencies
Upgraded by Ratings Agencies 27 Fitch Upgraded to B+ Moody’s Upgraded to B1 stable Standard & Poor’s Upgraded to B+ Moody’s Upgraded to Ba3 Standard & Poor’s Upgraded to BB- Fitch Upgraded to BB- January 2011 February 2011 March 2011 August 2011 October 2011 January 2012
Slide 28: Exceeding Financial Policy Targets
Exceeding Financial Policy Targets 28 FY 12 Q2 Target Net debt $2.0 billion <$2.0 billion Liquidity $1.1 billion $500 million – $1 billion Net debt to TTM adjusted EBITDA 1.7x <3x Net debt to total capitalization 37% <40% Note: Net debt is equal to notes payable and long-term debt and capital lease
Slide 29: Uses of Excess Cash
Uses of Excess Cash Cash Reinvest in packaged meats business Share repurchases Extraordinary pension contribution Debt reduction Acquire branded packaged meats companies 29
Slide 30: Investment Thesis
Investment Thesis
Slide 31: Investment Thesis
Investment Thesis 31 • Positive outlook for fiscal 2012 •Building momentum in packaged meats; growing sales and volume with consistent margins • Global demand for pork remains robust •Sustaining solid fundamental in hog production segment • International business improving • Competitive cost structu
Slide 32: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. Morgan Global High Yield & Leveraged Finance Conference
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