Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — Barclays High Yield Bond & Syndicated Loan Conference 2015
34 slides from Smithfield Foods's conference presentation, Jun 12, 2015
Slide 1: Barclays High Yield Bond & Syndicated Loan Conference
BARCLAYS HIGH YIELD BOND & SYNDICATED LOAN CONFERENCE June 12, 2015
Slide 2: Forward-Looking Statements
2 FORWARD-LOOKING STATEMENTS This presentation contains "forward-looking" statements within the meaning of the federal securities laws. The forward-looking statements include statements concerning our outlook for the future, as well as other statements of beliefs, future plans and strategies or anti
Slide 3: Non-GAAP Measure Reconciliations
3 NON-GAAP MEASURE RECONCILIATIONS TTM ($ mm's) FY 2013 CY 2013 CY 2014 Q1 2015 Net Income 183.8$ 120.7$ 556.1$ 547.9$ Add: Interest 168.7 180.5 159.4 153.3 Add: Income tax 46.1 35.6 217.0 209.2 Add: Depreciation and amortization 239.9 244.4 230.8 232.0 EBITDA 638.5$ 581.2$ 1,163.3$ 1,142.4$ Adjustm
Slide 4: Ken Sullivan, Executive Vice President and Chief Financial Officer
Ken Sullivan Executive Vice President and Chief Financial Officer 4
Slide 5: Company Overview
Smithfield Good food. Responsibly? COMPANY OVERVIEW
Slide 6: Smithfield Is Wholly Owned Independent Subsidiary of WH Group
6 SMITHFIELD IS WHOLLY OWNED INDEPENDENT SUBSIDIARY OF WH GROUP WH GROUP: UNDISPUTED MARKET LEADER WITH GLOBAL FOOTPRINT Shuanghui Development and Smithfield Joint Venture
Slide 7: Packaged Meats Segment Is Key Business Model Driver
7 Packaged Meats 40% Fresh Pork 32% Hog Production 19% International 9% PACKAGED MEATS SEGMENT IS KEY BUSINESS MODEL DRIVER Note: 2014 sales before inter-segment eliminations
Slide 8: #1 US Packaged Pork Company
8 #1 US PACKAGED PORK COMPANY 18% 10% 6% 6% 4% OTHERS 56% Source: Frost & Sullivan
Slide 9: #1 Supplier to Retail, Foodservice and Export Trade Channels
9 Note: 2014 packaged meats third party sales and volume based on internal shipment data #1 SUPPLIER TO RETAIL, FOODSERVICE AND EXPORT TRADE CHANNELS Retail 50% Foodservice 33% Deli 10% Processor/ Industrial 4% Export 3% Sales Retail 55% Foodservice 30% Deli 8% Processor/ Industrial 4% Export 3% Vol
Slide 10: #1 U.S. Packaged Pork Company – Retail
10 #1 U.S. PACKAGED PORK COMPANY – RETAIL 42% 23% 19% 18% 15% 15% 13% 12% 9% 6% 6% H am M ar in at ed Po rk B ac o n Co o ke d D inne r Sausa ge B B Q Ho t D o gs Po rt ab le Lun che s D ry Saus ag e Del i Mea ts Sli ced Lun chm e at B rea kf as t Sa u sag e Market Share (%) & Rank Source: Informati
Slide 11: #1 U.S. Packaged Pork Company – Foodservice
11 #1 U.S. PACKAGED PORK COMPANY – FOODSERVICE 33% 31% 29% 28% 23% 22% Bacon Fresh Pork Ham BBQ Breakfast Sausage Hot Dogs Market Share (%) & Rank Source: Westport Consulting Group 2014 #1 #1 #1 #1 #1 #1
Slide 12: #1 Pork Processor
12 #1 PORK PROCESSOR 27% 17% 11% 8% 8% 5% 5% OTHERS 19% Source: Daily Livestock Report, 2014
Slide 13: #1 Supplier to Export
13 #1 SUPPLIER TO EXPORT Note: 2014 export markets by volume; Other category consist of the following countries: Angola, Aruba, Australia, Bahamas, Bermuda, Caribbean, Chile, Columbia, Costa Rica, Croatia, Cuba, Dominican Republic, Ecuador, El Salvador, Guam, Guatemala, Haiti, Honduras, EU, Indonesi
Slide 14: #1 Hog Producer
14 #1 HOG PRODUCER 15% 7% 4% 4% 3% 3% OTHERS 66% Source: Daily Livestock Report, 2014
Slide 15: Creditor Focused Financial Management
CREDITOR FOCUSED FINANCIAL MANAGEMENT 15
Slide 16: Milestones Since Merger with WH Group in September 2013
16 MILESTONES SINCE MERGER WITH WH GROUP IN SEPTEMBER 2013 SEP 2013 Achieved net debt to capital target of < 40% AUG 2014 Returned liquidity to over $1 billion SEP 2014 Accomplished net debt to EBITDA target of < 3x JAN 2015 Reduced debt to pre-merger level of $2.5 billion FEB 2015 Executed bond ten
Slide 17: Reduced Debt by $1 Billion Since WH Group Merger
17 41% 40% 34% 34% Apr-13 Dec-13 Dec-14 Mar-15 Net Debt to Capital $2,160 $2,834 $2,293 $2,372 Apr-13 Dec-13 Dec-14 Mar-15 Net Debt ($ mm) REDUCED DEBT BY $1 BILLION SINCE WH GROUP MERGER $1,528 $1,152 $1,691 $1,178 Apr-13 Dec-13 Dec-14 Mar-15 Liquidity ($ mm) 2.8x 4.2x 2.0x 2.1x Apr-13 Dec-13 Dec-1
Slide 18: Continued Proactive and Careful Liquidity Management
18 CONTINUED PROACTIVE AND CAREFUL LIQUIDITY MANAGEMENT • Upsized facility by $50 million • Extended maturity to December 2017 • Reduced drawn pricing by 10 bps to ABCP + 1.05% and undrawn pricing by 5 bps to .40% A/R Securitization: Completed December 2014 Bond Tender: Completed February 2015 Inven
Slide 19: Significantly Improved Debt Maturity Profile
19 SIGNIFICANTLY IMPROVED DEBT MATURITY PROFILE 2016 2017 2018 2019 2020 2021 2022 $1,025 Inventory Revolver $1,025 Inventory Revolver No Loans Drawn Pre-Tender Bond Balances Post-Tender Bond Balances $275 A/R Facility $325 A/R Facility $40 Drawn 2017 Bonds reduced from $481 to $426 $200 Term Loan $
Slide 20: Positive Credit Ratings Trajectory
20 POSITIVE CREDIT RATINGS TRAJECTORY Trajectory reflects strength of improved credit metrics and capital structure MOODY’S STANDARD & POOR’S Pre-merger Announcement Merger Announcement Merger Current Ba3 Stable BB Stable B1 Stable BB- Stable Ba3 Stable Under Review Uncertain Outlook On Watch Negati
Slide 21: Growth Strategy
Smithfield Good food. Responsibly? GROWTH STRATEGY
Slide 22: Significant Growth Potential of Packaged Meats Business
22 $185 $460 $0.06 $0.16 FY07 CY14 Packaged Meats profitability has improved, but significant growth potential remains Operating Profit ($ mm) Operating Profit ($/lb) SIGNIFICANT GROWTH POTENTIAL OF PACKAGED MEATS BUSINESS $3.55 $4.30 $4.49 $5.55 Tyson/Hillshire Oscar Mayer Hormel Sizeable opportuni
Slide 23: Packaged Meats Division Has Realized Significant and Consistent Improvement in Margins
23 $ 5 $ 6 $ 1 9 $ 1 7 $ 1 8 $ 1 9 $ 1 9 $ 1 5 $ 1 1 $ 1 2 $ 1 6 $ 1 2 $ 1 7 $ 1 1 $ 1 5 $ 1 6 $ 2 1 $ 1 5 $ 1 5 $ 1 6 $ 1 6 $ 1 9 $ 1 5 $ 1 8 $ 1 4 $ 2 4 Initial Goal $10 $10 to $15 $12 to $17 $15 to $20 FY09 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY10 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY11 Q1 FY11 Q2 FY11 Q3 FY11 Q4
Slide 24: One Smithfield 2009
24 Farmland Foods, Inc. Packaged Meats Fresh Pork Sales & Marketing Administrative Functions Smithfield Packing Company Packaged Meats Fresh Pork Sales & Marketing Administrative Functions John Morrell Food Group Packaged Meats Sales & Marketing Administrative Functions Murphy-Brown LLC Hog Producti
Slide 25: One Smithfield 2013
25 Smithfield- Farmland Packaged Meats Fresh Pork Sales & Marketing Administrative Functions John Morrell Food Group Packaged Meats Sales & Marketing Administrative Functions Murphy-Brown LLC Hog Production Administrative Functions International Meat Processing Hog Production Administrative Function
Slide 26: One Smithfield Today
26 Larry Pope President and CEO PACKAGED MEATS DIVISION Joe Sebring President SALES & MARKETING John Pauley Executive Vice President of Retail Sales FRESH PORK DIVISION Scott Saunders President HOG PRODUCTION DIVISION Gregg Schmidt President INTERNATIONAL DIVISION Darek Nowakowski President ADMINIST
Slide 27: Benefits of One Smithfield Approach
27 ONE SMITHFIELD BENEFITS OF “ONE SMITHFIELD” APPROACH Benefits of “One Smithfield” Approach Unifies all IOCs, brands, marketing and 48,000+ employees under one corporate umbrella Leverages Smithfield’s size and scope in pork industry Allows for more efficient and effective approach to the market B
Slide 28: Innovation Platforms
28 INNOVATION PLATFORMS INNOVATION AND THOUGHT LEADERSHIP WILL IGNITE FUTURE GROWTH Licensing Snacking Brand Extension Line Extension Health INNOVATION MISSION Create an ongoing flow of innovation, that becomes part of DNA. Establish innovation leadership that drives best-in-class long- term value.
Slide 29: Brands Primed for National Leadership
29 BRANDS PRIMED FOR NATIONAL LEADERSHIP Flagship Brand • Mainstream premium • Ham, Bacon and Fresh Pork Growth Engine • Value • Smoked Sausage and Deli Already the National Leader • Premium Hot Dogs
Slide 30: Growth Strategy Is Working – Explosive Growth in Bacon
30 GROWTH STRATEGY IS WORKING EXPLOSIVE GROWTH IN BACON 27.2 32.8 39.4 40.9 56.2 2010 2011 2012 2013 2014 mm lb s Smithfield bacon volume is +29 mm lbs since 2010 +37% YOY Source: Third party sales volume based on internal shipment data
Slide 31: Growth Strategy Is Working – Smithfield Taking Share: Smoked Sausage
31 GROWTH STRATEGY IS WORKING – SMITHFIELD TAKING SHARE SMOKED SAUSAGE 10.6% 11.7% 11.3% 12.4% 13.2% 14.6% 2010 2011 2012 2013 2014 2015 YTD Mar ke t sh ar e 28.1% 25.5% 24.9% 24.3% 22.7% 20.2% 2010 2011 2012 2013 2014 2015 YTD Mar ke t sh ar e Source: Information Resources, Inc. (IRI) 52 week volum
Slide 32: Growth Strategy Is Working – Smithfield Taking Share: Hot Dogs
32 GROWTH STRATEGY IS WORKING – SMITHFIELD TAKING SHARE HOT DOGS 39.8% 38.5% 38.1% 40.4% 41.2% Jan Feb Mar Apr May Mar ke t sh ar e 34.0% 35.1% 35.2% 33.5% 31.9% Jan Feb Mar Apr May Mar ke t sh ar e Source: Information Resources, Inc. (IRI) premium beef hot dogs 12 week volume share Top Competitor
Slide 33: Smithfield Is Fastest Growing Top CPG Company
33 SMITHFIELD IS FASTEST GROWING TOP 50 CPG COMPANY DOLLAR SALES +16% -10% -5% 0% 5% 10% 15% 20% L A N D O L AK ES I N C S TA R B U C K S C OF FE E C O M EA D J OH N SO N … S AR G EN TO FOO D C O JOH N SON VILL E SAU SAG E… D OL E FOOD C O IN C W H IT EWAV E FO O DS C O TH E H A IN C ELE ST IAL G RP
Slide 34: Smithfield – Good food. Responsibly.
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