Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — Credit Suisse 3rd Annual Consumer Conference (December 2012)
33 slides from Smithfield Foods's conference presentation, Dec 11, 2012
Slide 1: Smithfield – Credit Suisse Annual Consumer Conference
Smithfield Credit Suisse 3" Annual Consumer Conference December 11, 2012
Slide 2: 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 our outlook for the future, as well as other statements of beliefs, future plans and strategies or antici
Slide 3: Non-GAAP Measure Reconciliations
3 Non-GAAP Measure Reconciliations
Slide 4: Leading Positions In Food Industry
Leading Positions In Food Industry
Slide 5: Leading Positions In Pork Industry
Leading Positions In Pork Industry 14% Triumph 6% 4% 3% 3% Others 70% Hog Production Seaboard Maschhoffs Prestage 28% Others 27% Tyson 17% JBS 11% Cargill 9% Hormel 8% Pork Processing Sources: National Pork Board Spring 2009; U.S. Pork Powerhouses 2011 5
Slide 6: Pork Sales and Volume by Channel
Retail 34% Foodservice 14% Export 19% Deli 3% Processor/In dustrial 30% Volume #1 U.S. Packaged Pork Company Retail 44% Foodservice 22% Export 16% Deli 6% Processor/In dustrial 12% Sales Note: FY 12 Pork segment third party sales and volume 6
Slide 7: Market leader with top three position in ten key product categories
7 Market leader with top three position in ten key product categories 45% 36% 22% 20% 17% 16% 14% 13% 9% 8% Specialty Ham Cuts Smoked Hams Marinated Pork Bacon BBQ Meats Dinner Sausage Dry Sausage Portable Lunches Meatballs Service Deli Smithfield Market Share #1 #1 #2 #1 #3 #2 #2 #2 #2 #2 Source: I
Slide 8: Delivering Higher Quality & More Consistent Earnings
Delivering Higher Quality & More Consistent Earnings
Slide 9: Packaged Meats Driving Sales and Operating Profit
Hog Production 20% International 9% Packaged Meats 38% Fresh Pork 33% Pork 71% Sales Packaged Meats Driving Sales and Operating Profit Note: Fiscal 2012 segment sales before inter-segment eliminations 9 Hog Production 20% International 5% Packaged Meats 48% Fresh Pork 27% Pork 75% Operating Profit P
Slide 10: Retail Brand Strength
10 Retail Brand Strength 75% 75% 25% 25% Smithfield Industry Branded Private Label Smithfield continues to maintain a strong brand presence, in line with the industry Source: Information Resources, Inc. (IRI) 52 weeks ending 11/04/12, Nielsen Perishables Group 52 weeks ending 10/27/12, and internal
Slide 11: Executing Strategy For Growth
Executing Strategy For Growth • Consistent increases in consumer marketing spending • Restructured Pork Group is platform for growth • Driving consumer relevant product innovation • Leveraging consolidated brand portfolio Focus on 12 core brands Building strong innovation pipeline Investing in adver
Slide 12: Delivering Core Brand Growth In Packaged Meats
12 Delivering Core Brand Growth In Packaged Meats +9% +9% +8% +4% +3% Armour John Morrell Kretschmar Farmland Cook's FY 13 Q2 YOY % pound change Source: Internal shipment data for retail packaged meats
Slide 13: Increasing Share
Increasing Share 6.7% -0.6% 5.6% -0.9% 15.4% 1.2% 3.8% 4.0% 19.7% 15.9% 10.9% 4.0% Dry Sausage Hot Dogs Bacon Portable Lunches Category Smithfield total Smithfield lead brand (% pound change) 13 Source: Information Resources, Inc. (IRI) 13 weeks ending 11/04/12
Slide 14: Expanding Distribution
Expanding Distribution 14 +0.2 +0.6 +1.9 +5.7 +1.2 +16.4 +14.7 +4.4 +4.4 +0.7 Deli Meats Packaged Lunchmeat Dinner Sausage Dry Sausage Portable Lunches Smithfield total Smithfield lead brand (ACV point change) Note: ACV=All commodity volume; Source: Information Resources, Inc. (IRI) 13 weeks ending
Slide 15: Volume Gains Across All Key Trade Channels
15 Volume Gains Across All Key Trade Channels +1.9% +4.0% +5.3% +2.1% Retail Foodservice Deli Total Driven by gains in Armour, Farmland, John Morrell and Kretschmar brands Secured contracts with several new national foodservice accounts Introduction of Eckrich Bacon Lovers Deli Meats contributed to
Slide 16: Building a Strong Innovation Pipeline
Building a Strong Innovation Pipeline
Slide 17: Innovation Platforms
Innovation Platforms Packaging Packaging differentiation highlighting quality and convenience Packaging technology establishing new features and benefits Health and Wellness Meeting consumer demand for better-for-you foods Lower in sodium, lean protein, natural ingredients Convenience
Slide 18: Packaging Platform
• Leveraging packaging technology (cook-in-bag, re-sealable packaging, etc.) to deliver enhanced quality and convenience Platform • Consumers are seeking products that allow for ease of storage, preparation, and clean up as part of their time-constrained lifestyles Consumer Insight Re-sealable Re-se
Slide 19: Health and Wellness Platform
• Meeting the growing consumer need for better-for-you products that support a healthier lifestyle Platform • More and more, consumers are demanding products that are lower in sodium, leaner, and made with natural ingredients Consumer Insight Innovations Health and Wellness Platform All Natural Anti
Slide 20: Convenience Platform
• Providing convenient solutions to consumers who lack time but demand delicious, high-quality foods Platform • Consumers are seeking ready-to-heat and ready-to-eat food solutions to fit their time-starved lifestyles Consumer Insight Innovations Convenience Platform Versatility Convenient solutions
Slide 21: Taste Platform
•Delighting consumers with on-trend new taste experiences, leveraging mega trends like bacon, bold flavors, and ethnic flavors Platform •Consumers are gravitating to new taste experiences and twists on old favorites Consumer Insight Innovations Taste Platform Bold Flavors Bold and spicy taste combin
Slide 22: Pork Consumer Solutions
• Making it easier for home cooks to prepare and enjoy the flavor and versatility of fresh pork Platform • Consumers are growing tired of the same old protein dishes, but need help making pork as easy and familiar to prepare as beef and poultry Consumer Insight Innovations Pork Consumer Solutions Co
Slide 23: Returning Cash to Shareholders While Maintaining Conservative Balance Sheet
Returning Cash to Shareholders While Maintaining Conservative Balance Sheet
Slide 24: Aggressive Share Repurchase Track Record
24 Aggressive Share Repurchase Track Record $34 $145 $76 $67 $174 $79 9.2 million shares for $189 million 19.1 million shares for $386 million FY 12 FY 13 Sh ar e r e p u rc h as e s (i n milli o n s) Q1 Q2 Q3 Q4 In past eighteen months, Smithfield has repurchased 28.2 million shares, or more than 1
Slide 25: Maintaining Conservative Balance Sheet
Maintaining Conservative Balance Sheet $4.0 $2.2 <$2.0 Net debt (in billions) Net Debt FY 09 Q1 FY 13 Q2 Target 7.3x 2.5x <3.0x Net debt to TTM adjusted EBITDA Net Debt to Adjusted EBITDA FY 09 Q1 FY 13 Q2 Target 56% 41% <40% Net Debt to Total Capitalization Net Debt to Capitalization FY 09 Q1 FY 13
Slide 26: Continued Positive Outlook
Continued Positive Outlook
Slide 27: Continued Positive Outlook
Continued Positive Outlook Segment Normalized Operating Profit Range FY 12 Volume FY 12 Results FY 13 H1 Results FY 13 Forecast Fresh Pork $3-7 per head 28 million hogs $8 per head $6 per head Normalized Packaged Meats $0.12-0.17 per pound 2.7 billion pounds $0.15 per pound $0.18 per pound High end
Slide 28: Consistently Solid & Predictable Margins
$ 0 .0 5 $ 0 .0 6 $ 0 .1 2 $ 0 .1 7 $ 0 .1 7 $ 0 .1 9 $ 0 .1 7 $ 0 .1 4 $ 0 .1 1 $ 0 .1 2 $ 0 .1 6 $ 0 .1 2 $ 0 .1 7 $ 0 .1 1 $ 0 .1 5 $ 0 .1 6 $ 0 .2 1 $ 0 .1 5 2.7% 3.0% 6.9% 9.9% 8.8% 10.5% 10.4% 7.6% 5.3% 5.4% 7.8% 5.4% 7.5% 5.1% 6.9% 7.3% 9.8% 6.7% FY 09 Q1 FY 09 Q2 FY 09 Q3 FY 09 Q4 FY 10 Q1 F
Slide 29: Pork Exports Remain Strong
250 300 350 400 450 500 Ja n Fe b Ma r Ap r Ma y Ju n Ju l Au g Se p Oc t No v De c milli o n p o u n d s Total U.S. Pork & Pork Variety Meat Exports 2010 2011 2012 Source: Foreign Agricultural Trade of the United States (FATUS) Pork Exports Remain Strong 29 Mexico 28% Japan 24% China/H K 21% Russia
Slide 30: Economics Supportive of U.S. Pork Exports
$0.69 $0.73 $0.79 $0.87 $1.06 $1.09 $1.14 $1.26 $0.58 Braz il Mexic o EU Chil e Chin a Kore a Au st ra lia Japa n Live Hog Price ($ per pound) U.S. Live Hog Price ($ per pound) 30 Economics Supportive of U.S. Pork Exports Note: Live hog cost estimate week ending 11/24/12; EU is average of Denmark, F
Slide 31: Commodity Risk Actively Mitigated
31 Commodity Risk Actively Mitigated Note: ISM live hog prices for May-12 to Nov-12; Live hog futures for Dec-12 to Apr-13; Pre-interest industry raising cost based on futures curves for grains on 11/28/12 $50 $55 $60 $65 $70 $75 May- 12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13
Slide 32: International Segment Strong
International Segment Strong Positive hog production fundamentals in Europe fueling solid profitability from international hog operations Modest, positive contributions from international meat processing business Recent approval to export pork from Romania to EU will have beneficial impacts on
Slide 33: Smithfield – Credit Suisse Annual Consumer Conference
Smithfield Credit Suisse 3" Annual Consumer Conference December 11, 2012
Smithfield Foods — Credit Suisse 3rd Annual Consumer Conference (December 2012) on 6ix