Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — Rabobank International F&A Investor Conference (November 2013)
38 slides from Smithfield Foods's conference presentation, Nov 6, 2013
Slide 1: Rabobank International F&A Investor Conference
RABOBANK INTERNATIONAL F&A INVESTOR CONFERENCE C. Larry Pope President and Chief Executive Officer Smithfield Foods, Inc. November 6, 2013
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: Who Is Smithfield?
WHO IS SMITHFIELD? 3
Slide 4: Smithfield at a Glance
4 SMITHFIELD AT A GLANCE TTM FY14 Q1 Sales=$13.5 billion TTM FY14 Q1 Operating Profit=$485 million PACKAGED MEATS $6.3 billion $437 million Sales Operating Profit HOG PRODUCTION $3.3 billion $(76) million Sales Operating (Loss) INTERNATIONAL $1.5 billion $94 million Sales Operating Profit PORK $11.3
Slide 5: Pork Segment Is Key Business Model Driver
5 PORK SEGMENT IS KEY BUSINESS MODEL DRIVER Hog Production 20% International 10% Packaged Meats 39% Fresh Pork 31% Pork 70% Note: TTM FY14 Q1 sales before inter- segment eliminations
Slide 6: Smithfield's Operations Extend to Countries and US States
6 SMITHFIELD’S OPERATIONS EXTEND TO 12 COUNTRIES AND 24 US STATES NORTH AMERICA EUROPE Wholly owned operations Campofrío Food Group Joint Venture
Slide 7: #1 Hog Producer
7 #1 HOG PRODUCER 15% 6% 4% 3% 3% 3% OTHERS 66% Source: U.S. Pork Powerhouses 2012
Slide 8: #1 Pork Processor
8 #1 PORK PROCESSOR 26% 17% 11% 8% 8% 4% 4% OTHERS 22% Source: National Pork Board Spring 2013
Slide 9: Strategic Brand Portfolio
9 STRATEGIC BRAND PORTFOLIO • Strategic brand portfolio designed for profitable growth – Smithfield is leading supplier to retail and foodservice channels – Brands that win with consumers – Hold leading market positions – Play to the demographic segments and regional preferences that are inherent in
Slide 10: Who Is Shuanghui?
WHO IS SHUANGHUI? 10
Slide 11: Who Is Shuanghui?
11 WHO IS SHUANGHUI? Henan Shuanghui Development Shuanghui International Holdings Limited Hong Kong-based holding company serving as a global platform for food and food-related businesses Owns a majority shareholding in Henan Shuanghui Development, China’s largest meat processing business Shareholde
Slide 12: Shuanghui Key Data Summary
12 $6.5 bn SALES 310,000 hogs HOG PRODUCTION VOLUME 31% CAGR (1984-2012) SALES GROWTH 11.4 mm hogs PORK PROCESSING VOLUME $3.5 bn TOTAL ASSETS 3.4 bn lbs PACKAGED MEATS VOLUME KEY DATA SUMMARY Note: All figures for CY12
Slide 13: #2 Pork Processor in China
13 Shuanghui 11.4 mm hd 2% Yurun 13.8 mm hd 2% Jinluo 6.7 mm hd 1% Zhongpin 5.3 mm hd 1% Gaojin 1.6 mm hd 0.2% OTHERS 612 mm hd 94% #2 PORK PROCESSOR IN CHINA China processes about 650 million hogs per year.
Slide 14: #1 Packaged Meats Company in China
14 Shuanghui 3.4 bn lbs 9% Jinluo 1.3 bn lbs 3% Yurun 243 mm lbs 1% Zhongpin 243 mm lbs 1% COFCO 110 mm lbs 0.3% OTHERS 34.4 bn lbs 87% #1 PACKAGED MEATS COMPANY IN CHINA China produces approximately 40 billion pounds of packaged meats annually.
Slide 15: Transaction Timeline
TRANSACTION TIMELINE 15
Slide 16: Transaction Overview
16 TRANSACTION OVERVIEW • On May 28, 2013, Smithfield entered into a definitive merger agreement with Shuanghui International to create a leading global pork enterprise • On September 26, 2013, Shuanghui International and Smithfield completed their strategic combination in the largest Sino-US transa
Slide 17: Regulatory Clearances and Approvals
17 REGULATORY CLEARANCES AND APPROVALS US Antitrust The Committee on Foreign Investment in the United States (CFIUS) Non-US Regulatory Approvals in Mexico, Poland, Russia and Ukraine Approval by Smithfield's shareholders Regulatory Clearances and Approvals
Slide 18: Smithfield and Shuanghui Journey
18 SMITHFIELD AND SHUANGHUI JOURNEY EARLY 2000s Shuanghui becomes a Smithfield customer. 2006 Shuanghui and Smithfield initiate high-level preliminary discussions about potential business transactions, none of which result in a deal. 2013 D EC EMB ER 201 2 Smithfield and Shuanghui contingent meet in
Slide 19: Transaction Timeline: March 2013
After the close of trading, Continental Grain Company, then a major shareholder of Smithfield, makes public a letter to the Smithfield Board that, among other things, suggests that Smithfield should be split into three separate parts. MA R CH 7, 201 3 Smithfield announces its third quarter earnings,
Slide 20: Transaction Timeline: March-April 2013
MA R CH 24, 201 3 Shuanghui offers to acquire all outstanding shares of Smithfield for $33.00 per share in cash. APRI L 1 –3, 201 3 Smithfield holds one-on- one meetings with investors to discuss its strategic position and the Continental Grain letter. APRI L 4, 201 3 Smithfield communicates to Shua
Slide 21: Transaction Timeline: May 2013
The Smithfield Board unanimously adopts and approves the merger agreement and resolves to recommend that Smithfield shareholders vote to approve the merger agreement. M A Y 3, 201 3 Company A increases its offer to $33.50 per share in cash. M A Y 8, 201 3 Company B, a non-U.S. public company, submit
Slide 22: Transaction Timeline: May-June 2013
M A Y 29, 201 3 Prior to the opening of trading, Shuanghui and Smithfield issue a joint press release announcing the transaction. JUNE JU N E 1, 201 3 Company A fails to deliver an alternative acquisition proposal to Smithfield. JU N E 3, 201 3 Continental Grain Company announces that it has exited
Slide 23: Transaction Timeline: July-September 2013
JU LY 10, 201 3 CEO Larry Pope testifies before U.S. Senate Committee on Agriculture, Nutrition and Forestry to review the benefits of the Shuanghui-Smithfield transaction for U.S. farmers and agriculture, while reaffirming the commitment to upholding the highest food safety standards. JULY JU LY 12
Slide 24: Transaction Timeline: Shareholder Approval and Closing
SEPTE M BE R 24, 201 3 Smithfield shareholders approve strategic combination with Shuanghui International. SEPTE M BE R 26, 201 3 Shuanghui International and Smithfield Foods complete strategic combination, creating a leading global pork enterprise. 24
Slide 25: Partnership All About Growth
PARTNERSHIP ALL ABOUT GROWTH 25
Slide 26: Growing Exports Is Key Strategic Objective
26 GROWING EXPORTS IS KEY STRATEGIC OBJECTIVE • Partnership is all about growth and improving the agricultural environment in both US and China • Combination facilitates Smithfield’s continued growth in the US and throughout the world, including China, the world’s largest protein consuming country •
Slide 27: Strategic Initiatives
27 STRATEGIC INITIATIVES #1 Build global trading operation to facilitate exports of US pork to Asia and other global markets #2 Explore opportunities to work together to develop premium products for Chinese market #3 Exchange best practices across global platform
Slide 28: China Is a Large and Growing Market
28 CHINA IS A LARGE AND GROWING MARKET, AND IS ALREADY THE WORLD’S SINGLE LARGEST PROTEIN CONSUMING COUNTRY China 30% EU 15% US 14% Other 41% % Global Protein Consumption Source: 2013 USDA Foreign Agricultural Service (FAS)
Slide 29: China Has 1.35 Billion People Moving Into Middle Class
29 CHINA HAS 1.35 BILLION PEOPLE, MANY OF WHOM ARE MOVING RAPIDLY INTO THE MIDDLE CLASS AND DESIRE MORE AND BETTER-QUALITY PROTEIN IN THEIR DIETS Source: USDA Foreign Agricultural Service (FAS) 83% 61% 40% 15% 32% 44% 2% 7% 16% 2005 2010 2015E Low Income Middle Income High Income
Slide 30: As Chinese Incomes Rise, They Consume Less Carbs and More Protein
30 AS CHINESE CONSUMERS’ INCOMES RISE, THEY CONSUME LESS CARBS AND MORE PROTEIN 12% 12% 12% 14% 63% 59% 55% 52% 25% 29% 32% 34% Lower Quartile Lower Middle Upper Middle Upper Quartile % of energy intake from proteins % of energy intake from carbohydrates % of energy intake from fat Source: Capacci S
Slide 31: Pork Is the Leading Protein in the Chinese Diet
31 PORK IS BY FAR THE LEADING PROTEIN IN THE CHINESE DIET, REPRESENTING OVER 70 PERCENT OF ALL PROTEIN CONSUMED Pork 73% Chicken 19% Beef 8% % of Chinese Meat Consumption Source: 2013 USDA Foreign Agricultural Service (FAS)
Slide 32: China's Share of World Pork Consumption
32 CHINA IS RESPONSIBLE FOR 50 PERCENT OF THE WORLD’S PORK CONSUMPTION AND THEIR DEMAND IS STILL GROWING 47% 47% 47% 47% 47% 47% 48% 48% 45% 48% 49% 50% 49% 50% 51% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 China % of World Pork Consumption Source: USDA Foreign Agric
Slide 33: Chinese Per Capita Pork Consumption Growth
33 OVER THE LAST 15 YEARS, CHINESE PER CAPITA CONSUMPTION HAS GROWN BY NEARLY 25 PERCENT 70 69 70 71 72 73 77 78 72 78 81 85 82 85 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Chinese Per Capita Pork Consumption (lbs) Source: USDA Foreign Agricultural Service (FAS) and US Ce
Slide 34: US Industry Exports Have Grown
34 US INDUSTRY EXPORTS HAVE GROWN FROM 7 PERCENT TO 22 PERCENT OF TOTAL INDUSTRY OUTPUT IN THE LAST 15 YEARS 7% 7% 8% 8% 9% 11% 13% 14% 14% 20% 18% 19% 23% 23% 22% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % US Production Exported Source: USDA Foreign Agricultural Se
Slide 35: Export Sales Share of Smithfield Fresh Pork
35 EXPORT SALES COMPRISE ABOUT 26% OF SMITHFIELD’S FRESH PORK VOLUMES AND 30% OF REVENUES Note: Other=Processor/Industrial; FY 13 third party volume and sales based on internal shipment data Retail 37% Export 30% Foodservice 10% Rendering 12% Other 11% Sales $ Export 26% Retail 25% Foodservice 6% Re
Slide 36: Smithfield FY13 Export Markets by Volume
36 SMITHFIELD FY13 EXPORT MARKETS BY VOLUME Mexico 29% Japan 23% China/HK 23% Russia 6% Korea 5% Canada 4% Philippines 4% Other 6% Note: Other category consist of the following countries: Angola, Aruba, Australia, Bahamas, Bermuda, Caribbean, Chile, Columbia, Cost Rica, Croatia, Cuba, Dominican Repu
Slide 37: Bottom Line
37 BOTTOM LINE • Partnership is all about growth and improving the agricultural environment in both the US and China • Growing exports is key strategic objective • America is the low-cost, highest quality producer of hogs and pork products in the world • Shuanghui acquisition of Smithfield should dr
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