Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — Goldman Sachs Fifteenth Annual Agricultural Biotech Forum (February 2011)
43 slides from Smithfield Foods's conference presentation, Feb 9, 2011
Slide 1: Goldman Sachs Fifteenth Annual Agricultural Biotech Forum
Goldman Sachs Fifteenth Annual Agricultural Biotech Forum
Slide 2: Smithfield Foods, Inc. presenters
Smithfield Foods, Inc.C. Larry PopePresident and Chief Executive OfficerRobert W. ManlyExecutive 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: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconcilia tions Non-GAAP measure reconciliation (in millions) TTMFY 11 Q2FY 10FY 09FY 08FY 07FY 06Operating profit-Consolidated592$ 63$ (224)$ 397$ 423$ 431$ Less: Operating (profit) loss-Other segment(7) (4) 47 (28) (41) (43) Add: Pork segment restructuring and impairment charges2
Slide 5: The New Era of Smithfield
The New Era of Smithfield
Slide 6: Leading Positions In Food Industry
Leading Positions In Food Industry #1U.S. Packaged Pork Company #1World Pork Processor #1World Hog Producer #1Supplier to Retail #1Supplier to Foodservice #2Supplier to Deli Sources: Information Resources, Inc. (IRI); FreshLook Marketing Group; Successful Farming Pork Powerhouses 2010
Slide 7: #1 U.S. Packaged Pork Company
#1 U.S. Packaged Pork Company Hams 31% Bacon21% Sausage19% Lunch Meats12% Hotdogs10% Other7% Smithfield brands are ranked #1 in numerous packaged meats categories FY 10 Packaged Meats Volume = 2.9 billion pounds
Slide 8: The New Era of Smithfield
The New Era of Smithfield Driving profitable top and bottom line growth Competitive cost structure in all operating segments Closely coordinated sales & marketing platform Consolidated portfolio of leading consumer brands Focus on quality and consistent earnings Conservative balance sheet with focus
Slide 9: Competitive Cost Structure
Competitive Cost Structure
Slide 10: Restructured Pork Group
Restructured Pork Group… Before Restructuring After Restructuring Independent Operating Companies (IOCs) 7 3 Fresh pork plants 9 8 Packaged meats plants 36 30 Capacity Utilization <80% >90% Restructured Pork Group = Platform for Growth
Slide 11: A Competitive Platform For Growth
…Is A Competitive Platform For Growth Before Restructuring After Restructuring Fresh pork sales organizations 3 2 Export sales organizations 3 1 Retail packaged meats sales organizations 10 3 Computer systems >20 1 Brands 50+ 12 Restructured Pork Group = Platform for Growth
Slide 12: Hog Production Cost Savings Initiative
Hog Production Cost Savings Initiative oPhilosophy –Least cost is only competitively sustainable position oPlan –Improve operating efficiencies, productivity, competitive cost structure and profitability oBenefits –Fully achieved by end of three-year period
Slide 13: Initiative provides less than 1.5 year payback
Initiative provides less than 1.5 year payback and more competitive cost structure $86 million CAPEX $44 million one time charges $90 million or $.02 per pound annual benefit
Slide 14: Sales & Marketing Platform
Sales & Marketing Platform
Slide 15: Coordinated sales & marketing platform for growth
Restructuring provides highly coordinated sales & marketing platform for growth Restructured Pork Group = Highly coordinated sales & marketing platform for growth Before Restructuring After Restructuring Decentralized Centralized Independent Coordinated Volume Margin Relationship Focused Fact Based
Slide 16: Leading Consumer Brands
Leading Consumer Brands
Slide 17: Core Portfolio of Leading Brands
Core Portfolio of Leading Brands 50 + brands Consolidating acquisitions into 12 powerful key brands
Slide 18: Quality and Consistent Earnings
Quality and Consistent Earnings
Slide 19: Pork segment profitability has more than doubled since fiscal 2007
Pork segment profitability has more than doubled since fiscal 2007 Note: FY 09 and FY 10 results adjusted for restructuring and impairment charges; Refer to Non-GAAP measure reconciliations Pork segment adjusted EBIT (in millions) Fresh pork Packaged meats Total Pork Segment FY 07 $34 $185 $219 FY 0
Slide 20: Packaged meats margins remain within normalized range
Despite record high raw material costs, packaged meats margins remain within the normalized range $ per hundredweight 14/16 Belly 72% Trim 20/23 Ham FY 07 $90 $54 $66 FY 08 $84 $51 $58 FY 09 $80 $57 $62 FY 10 $80 $53 $60 FY 11 Q1 $116 $85 $79 FY 11 Q2 $134 $82 $86
Slide 21: Consumer packaged meats drives earnings growth and stability
Consumer packaged meats drives earnings growth and stability Note: FY 09 and FY 10 results adjusted for packaged meats restructuring and impairment charges; Refer to Non-GAAP measure reconciliations Consumer packaged meats adjusted EBIT (in millions) Consumer packaged meats adjusted EBIT (% of sales
Slide 22: Fresh pork has remained consistently profitable
Fresh pork has remained consistently profitable Note: FY 09 and FY 10 results adjusted for fresh pork restructuring and impairment charges; Refer to Non-GAAP measu re reconciliations Fresh pork adjusted EBIT(in millions) Fresh pork adjusted EBIT($ per head) FY 07 $34 $1.39 FY 08 $141 $4.50 FY 09 $97
Slide 23: Hog Production Continued Profitability
Hog Production Continued Profitability Hog Production EBIT (in millions)
Slide 24: Conservative Balance Sheet with Focus on ROIC
Conservative Balance Sheet with Focus on ROIC
Slide 25: Project Objectives
Project 100 Objectives Project 100 Reduce debt by $1 billion Eliminate $100 million in interest exp ense Extend and smooth debt maturities Ensure ample liquidity Reduce idle cash
Slide 26: Reduce annual interest run rate by $100 million
Project 100 Objective: Reduce annual interest run rate by $100 million by end of fiscal 2012 Interest expense (in millions) FY 07 $134 FY 08 $185 FY 09 $222 FY 10 $266 FY 12 E Goal
Slide 27: Reduce total debt below $2 billion by end of fiscal 2012
Project 100 Objective: Reduce total debt levels below $2 billion by end of fiscal 2012 Note: Debt consists of notes payable and l ong-term debt and capital lease obligations, including current portion; FY 11 Q2 adjusted to reflect $318 million of 2011 bond repurchases from 11/01/10 to 12/02/10 Debt
Slide 28: Return on Invested Capital
Return on Invested Capital Note: ROIC computed as adjusted EBIT, less income taxes at an estimated 34% effective tax rate, divided by invested capital. Invested capital is equal to total capitalization and intercompany debt, less investments in subsidiaries and cash. ROIC for total company excludes
Slide 29: Market Dynamics
Market Dynamics
Slide 30: Fundamentals Remain Strong
Fundamentals Remain Strong oFresh pork margins remain robust oExport demand strong oPork cold storage levels relatively flat Company expects profitability in Hog Production segment in fiscal 2011 and beyond oRaising costs in the mid-$50’s per hundredweight in fiscal 2011, despite higher grain prices
Slide 31: U.S. Is Most Competitive Exporter
U.S. Is Most Competitive Exporter
Slide 32: U.S. Competitive Advantage
< font style="font-family:inherit;font-size:10pt;"> U.S. Competitive Advantage Note: Week ending 01/15/11 Estimated Live Hog Price ($ per pound)
Slide 33: Industry Hog Production should be profitable in fiscal 2012
Industry Hog Production should be profitable in fiscal 2012 $ per hundredweightISU Model Cost of Production (pre-interest) Note: Industry profitability based on futures curves for live hogs and grains on 01/25/11; cost is pre-interest
Slide 34: Sensitivity Analysis
Sensitivity Analysis $1 per bushel in corn = $10 per head $50 per ton in soybean meal = $3 per head $5 per cwt in live hog price = $13 per head
Slide 35: Conclusion
Conclusion
Slide 36: Conclusion
Conclusion oThis is a New Era for Smithfield Foods oSmithfield evolving to a Consumer Packaged Meat company oRestructured Pork Segment has highly competitive cost structure driving profitability oSales and marketing coordinated across all trade channels with focus on consolidated brand portfolio oHo
Slide 37: February 9, 2011
February 9, 2011
Slide 38: Appendix
Appendix
Slide 39: #1 World Pork Processor
#1 World Pork Processor Smithfield31% Tyson19%JBS11%Excel9%Hormel7%Other23%(% of U.S. hogs processed) TTMFY 11 Q2 Fresh Pork Packaged Meats Sales $4.4 billion $5.3 billion Volume 29 million hogs 2.8 billion pounds Operating Profit $181.2 million $385.0 million Normalized EBIT Range $3-7 per head 10
Slide 40: #1 World Hog Producer
#1 World Hog Producer (% of U.S. hogs produced) Other66%Smithfield18%Five producers*7%Seaboard4%Christensen3%Prestage*2% TTMFY 11 Q2 Sales Operating Loss Volume HogProduction $2.6 billion $(22.2) million 17.1 million hogs Note: TTM FY 11 Q2 sales (before inter-segment eliminations), operating loss a
Slide 41: #1 Market share in several European countries
#1 Market share in several European countries TTMFY 11 Q2 International Segment Sales $1.3billion Operating Profit $128.1 million Locations Europe & Mexico Note: TTM FY 11 Q2 sales (before inter-segment eliminations) and operating profit; results have been reclassified to reflect realignment of inte
Slide 42: Japan and Mexico are Smithfield's leading export markets
Japan and Mexico are Smithfield’s leading export markets Volume Mexico26% Japan25% China/HK18% Russia10% Canada5% Korea3% Other13% DollarsJapan43% Mexico16% Russia11% China/HK10% Canada8% Korea2% Other10% Note: FY 11 Q2 YTD Smithfield export markets; Other Category consists of sales to the following
Slide 43: Smithfield Foods, Inc.
Smithfield Foods, Inc.
Smithfield Foods — Goldman Sachs Fifteenth Annual Agricultural Biotech Forum (February 2011) on 6ix