Hormel Foods Corporation · NYSE:HRL
Hormel Foods — 2017 Barclays Global Consumer Staples Conference
38 slides from Hormel Foods's conference presentation, Sep 6, 2017
Slide 1: Hormel Foods: Our Path Forward
Hormel Foods Our Path Forward
Slide 2: Jim Snee, President and CEO
Jim Snee President and CEO
Slide 3: Legal Disclosure
Legal Disclosure This presentation contains forward-looking information based on management’s current views and assumptions. Actual events may differ materially. Please refer to the cautionary statement regarding Forward- Looking Statements and Risk Factors on pages 32-38 in the Company’s Form 10-Q
Slide 4: 2017 Third Quarter Segment Results
THIRD QUARTER UPDATE 2017 Third Quarter Segment Results Adjusted Volume* Adjusted Revenue* Earnings Per Share Lbs, In billions In billions 2016 Q3 1.12 2016 Q3 $2.17 2016 Q3 $0.34 2017 Q3 1.11 2017 Q3 $2.20 2017 Q3 $0.36 - 1% + 1% - 6% Record Pre-Tax Earnings *Excluding Justin’s acquisition, Farmer
Slide 5: Margin Compression Due to Record Commodity Price Volatility
THIRD QUARTER UPDATE Margin Compression Due to Record Commodity Price Volatility Pork Belly Prices/CWT 50% Beef Trim Price/CWT $300 $250 $250 $200 $200 $150 $150 $100 $100 $50 $50 $0 $0 NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT Fiscal Fiscal Mo
Slide 6: Record Turkey Production Leads to Continued Low Turkey Prices
THIRD QUARTER UPDATE Record Turkey Production Leads to Continued Low Turkey Prices Turkey Poult Placement – YOY % Change Turkey Breast Cold Storage 120 Million Pounds 13% 100 80 9% 7% 7% 7% 60 6% 6% 4% 4% 40 3% 3% 2% 2% 2% 20 -1% 0 -2% -2% -3% JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC -5% 201
Slide 7: Brand Strength Despite Commodity Price Volatility
THIRD QUARTER UPDATE Brand Strength Despite Commodity Price Volatility Low Single-Digit High Single-Digit Double-Digit Innovation Growth* Growth* Growth* Peanut Butter Fresh Tray Pack Lunchmeat and Bacon Ribs *Source: Volume Growth, IRI MULO 13 weeks ended 7/30/2017
Slide 8: 2017 Third Quarter Segment Results
THIRD QUARTER UPDATE 2017 Third Quarter Segment Results ADJUSTED SEGMENT PROFIT NET SALES CHANGE • High input cost environment CHANGE* Refrigerated Foods + 5% + 15% • Strong Refrigerated Foods and Grocery Products segment Grocery Products + 3% + 10% performance Jennie-O Turkey Store (9%) (20%) • Con
Slide 9: Consistent Earnings Growth
Consistent THIRD QUARTER UPDATE Earnings Growth $1.80 $1.54 - $1.58 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 Internal data
Slide 10: Strong, Branded Presence Across the Food Space
POSITIONED TO COMPETE Strong, Branded Presence Across the Food Space Other 3% International 5% Retail 65% Foodservice 27% Net Sales Fiscal 2016 Data
Slide 11: Strong, Branded Presence Across the Grocery Store
Strong, Branded Presence POSITIONED TO COMPETE Across the Grocery Store *IRI Total U.S. MULO 52 weeks ended 4/9/2017
Slide 12: Exceeding Industry Growth In the Foodservice Channel
Exceeding Industry Growth POSITIONED TO COMPETE In the Foodservice Channel Segments Products Restaurants Convenience Hotels College & University Healthcare K-12 Schools * Technomic Inc. and Internal Data
Slide 13: Three Go-To-Market Strategies For International Growth
Three Go-To-Market Strategies POSITIONED TO COMPETE For International Growth
Slide 14: Industry-Leading Expertise
Industry-Leading POSITIONED TO COMPETE Expertise Value-Added Shelf Stable Direct Iconic Protein Products Sales Force Brands
Slide 15: Financially Disciplined Acquisitions
Financially Disciplined POSITIONED TO COMPETE Acquisitions Acquisition purchase price in millions
Slide 16: A Great Complement to Hormel Foodservice
A Great Complement to POSITIONED TO COMPETE Hormel Foodservice • Branded, value-added Italian meats & sausage company • $240 million in sales • $90 million tax cash flow benefit • Available production capacity • 3-4 cents EPS accretion in FY18
Slide 17: Expanding Our Global Presence
Expanding Our POSITIONED TO COMPETE Global presence • First entry into South America • Premium, authentic brand in Brazil • Experienced professional management team • $100 million in sales • 1 cent EPS accretion in FY18
Slide 18: Our Formula For Success
Our Formula A STRATEGY FOR LONG-TERM GROWTH For Success Building Innovation Acquisitions Balanced Brands Portfolio + + +
Slide 19: Our Path Forward
Hormel Foods A STRATEGY FOR LONG-TERM GROWTH Our Path Forward 1. Evolving to a broader food company 2. Expanding and accelerating foodservice 3. Becoming a more global food company 4. Reducing volatility and increasing balance 5. Divesting non-strategic assets 6. Modernizing our supply chain
Slide 20: Evolving to a Broader Food Company
Evolving to a Broader A STRATEGY FOR LONG-TERM GROWTH Food Company Meat Protein Company Broader Food Company Non-Meat Protein + Flavor Enhancers
Slide 21: Expanding and Accelerating Foodservice
Expanding and A STRATEGY FOR LONG-TERM GROWTH Accelerating Foodservice
Slide 22: Becoming a More Global Food Company
Becoming a More A STRATEGY FOR LONG-TERM GROWTH Global Food Company Recreating the U.S. Model Globally China Capacity Geographic Lbs Expansion 1. #1 or #2 brands 2. Product mix – shelf stable & perishable 3. Channel mix – foodservice & retail 4. No vertical integration
Slide 23: Reducing Volatility and Increasing Balance
Reducing Volatility and A STRATEGY FOR LONG-TERM GROWTH Increasing Balance Protein Packaged Foods Reducing Volatility By: 1. Continuing to shift our mix Retail Foodservice to value-added products Domestic International 2. Fewer commodity sales Beef, Nuts, Tomatoes 3. Expanding our portfolio of Pork
Slide 24: Portfolio Management: Divesting Non-Strategic Assets
Portfolio Management A STRATEGY FOR LONG-TERM GROWTH Divesting Non-Strategic Assets Internal data
Slide 25: Modernizing Our Supply Chain
Modernizing Our A STRATEGY FOR LONG-TERM GROWTH Supply Chain SIMPLIFY MODERNIZE OPTIMIZE RATIONALIZE Internal data
Slide 26: Strategic Actions Since 2017 Investor Day
Strategic Actions Since A STRATEGY FOR LONG-TERM GROWTH 2017 Investor Day Evolving to a broader food company Expanding and accelerating foodservice Becoming a more global food company Reducing volatility & increasing balance Divesting non-strategic assets Modernizing our supply chain
Slide 27: Jim Sheehan, Senior Vice President, Chief Financial Officer
Jim Sheehan Senior Vice President, Chief Financial Officer
Slide 28: Our Financial Strategy
FINANCIAL STRATEGY Our Financial Strategy • Strategic cost management • Improving our cash cycle • Optimizing our capital structure
Slide 29: Consistent Earnings Growth
Consistent FINANCIAL STRATEGY Earnings Growth $1.80 $1.54 - $1.58 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 Internal data
Slide 30: Delivering Long-Term Shareholders Returns
Delivering Long-Term FINANCIAL STRATEGY Shareholders Returns $600 Hormel $500 Foods $417 $400 S&P 500 Pkg $300 Food & Meats $273 $200 S&P 500 $100 $207 $0 $100 invested on 8/29/07 in stock or index – including reinvestment of dividends
Slide 31: Strategic Cost Management
FINANCIAL STRATEGY Strategic Cost Management General & Administrative Budget 0% CAGR Digital & E-commerce Strategic Strategic Less Mission Less Critical Mission Critical 2017 2018
Slide 32: Improving Our Cash Cycle
Improving FINANCIAL STRATEGY Our Cash Cycle Cash Conversion Cycle • Obtain industry-leading 50 accounts payable terms Days 48 Aggressive • Improvement Aggressively enforce agreed upon selling terms • Optimize inventory levels 2013 2016 2018 Internal Data
Slide 33: Optimizing the Balance Sheet For Growth
FINANCIAL STRATEGY Optimizing the Balance Sheet For Growth Internal data as of fiscal Q3 2017
Slide 34: Resulting in Consistently High ROIC
Resulting in Consistently FINANCIAL STRATEGY 40% High ROIC 35% Investment Principles 30% • Rigorous valuation process • Long-term weighted average 25% 20% cost of capital 15% • Post investment analysis 10% 5% 0% 1 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 -5% Factset data based o
Slide 35: Commitment to Returning Cash to Shareholders
Commitment to Returning FINANCIAL STRATEGY Cash to Shareholders Dividends $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Internal Data
Slide 36: Our Path Forward
Hormel Foods FINANCIAL STRATEGY Our Path Forward • Strategic cost management • Improving our cash cycle • Optimizing our capital structure • Maintain dividend growth • Invest to support high ROIC • Continue share repurchases
Slide 37: Hormel Foods: Our Path Forward
Hormel Foods Our Path Forward
Slide 38: GAAP Reconciliation: Adjusted Financial Measures
GAAP Reconciliation: ADJUSTED FINANCIAL MEASURES Adjusted net sales and volume excludes the impact from the Justin’s, LLC acquisition in May 2016, and the divestitures of the Diamond Crystal Brands business in May 2016, and the Farmer John business in January 2017. Results below reflect only the inc
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