Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — Lehman Brothers 1st Annual Back-To-School Consumer Conference (September 2007)
45 slides from Smithfield Foods's conference presentation, Sep 6, 2007
Slide 1: Lehman Brothers 1st Annual Back-To-School Consumer Conference
Exhibit 99.1 Lehman Brothers 1 st Annual Back-To-School Consumer Conference C. Larry Pope President and Chief Executive Officer Smithfield Foods, Inc. September 5, 2007
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 includes statements concerning the Company’s outlook for the future, as well as other statements of beliefs, future plans and strategie
Slide 3: #1 Market Position
# 1 Market Position #1 Turkey Processor #1 Spiral Hams Producer #1 Cattle Feeder #1 Smoked Pork Chops Producer #1 Bacon Producer #1 Poultry Hot Dogs Producer #1 Smoked Ham Producer #1 Deli Salami Producer With sales approaching $12 billion in fiscal 2007, Smithfield Foods is the world’s #1 hog produ
Slide 4: Core Strategies
Core Strategies • Capitalize on our vertically integrated protein model • Realign packaged and branded meats away from commodity oriented products to higher margin convenience oriented products to deliver higher profits • Utilize our raw materials internally
Slide 5: Core Strategies (continued)
• Arbitrage fresh meat to maximize profit by accessing both domestic and international markets • Develop attractive international markets Core Strategies
Slide 6: Recent Growth Initiatives
Recent Growth Initiatives • Improve packaged meats margins • Accretive acquisitions • European expansion
Slide 7: Packaged Meats Margins
Packaged Meats Margins
Slide 8: Bacon Market Leader: Smithfield Foods Brands by Region
Lb. Share – 10% Rank #4 Distribution – 83% West North East Lb. Share – 13% Rank #2 Distribution – 96% Bacon Source: Nielsen Co. Avg acv 52 W/E 4/21/07 Lb. Share – 24% Rank #1 Distribution – 100% Lb. Share – 23% Rank #1 Distribution – 99% South Central Bacon Market Leader Smithfield Foods Brands by R
Slide 9: Smoked Meats Market Leader: Smithfield Foods Brands by Region
Lb. Share – 32% Rank #1 Distribution – 96% West North East Lb. Share – 54% Rank #1 Distribution – 88% Smoked Meats Source: Fresh Look Marketing Avg distribution 52 W/E 4/29/07 Lb. Share – 55% Rank #1 Distribution – 92% Lb. Share – 55% Rank #1 Distribution – 96% South Central Smoked Meats Market Lead
Slide 10: Significant Scale and Market Share for Packaged Meats
• 3 billion-pound base of business upon which to leverage • Provides the opportunity to reposition brands up the value scale • 1% margin improvement equates to $50 million in pre- tax profits • Regional brand strategy takes advantage of regional preferences, both domestically and internationally, wh
Slide 11: Utilize Raw Materials Internally
83% 78% 20% Utilize Raw Materials Internally Base Business (2005) Add: Cook’s Add: Armour-Eckrich Bacon Hams 16% 7% 0% 20% 40% 60% 80% 100% 120% 99% Net Buyer 105% Note: Even with addition of Premium Standard Farms’ raw materials, Smithfield Foods is still a net buyer of hams.
Slide 12: Potential to Improve Processing Margins
$.01-.02/lb. $.03-.05/lb. $.01-.02/lb. $.01-.02/lb. $.03-.05/lb. Fresh Meat Traditional Products Convenience Products $0.00 $0.02 $0.04 $0.06 $0.08 $0.10 $0.12 $.05/lb. $.09-.12/lb. ¹ Traditional products – sausage, smoked hams, raw bacon and hot dogs ² Convenience products – pre-cooked bacon, pre-c
Slide 13: Packaged Meats Volume Growth
Packaged Meats Volume Growth 43% 34% 8% 13% Convenience Total Volume growth since FY 2004 530 MM lbs Total annual volume 1,100 MM lbs Annual volume as % of 3 billion lbs 37% 23% - 23% 14% Entrees 165% 157% 9% 19% Dry sausage 21% 16% 5% 4% Pre-cooked Sausage 13% - 13% 22% Pre-cooked Ribs 36% - 36% 24
Slide 14: Accretive Acquisitions
Accretive Acquisitions
Slide 15: Recent Acquisitions
¹ See EBITDA reconciliation on page 44 ² All amounts represent only the company’s share in these joint ventures ³ Equity and cash transaction; closed May 2007 Annualized Armour-Eckrich and Butterball based on 10 months of results under Smithfield Foods First quarter of Smithfield Foods FY08 plus las
Slide 16: Cook's + Armour-Eckrich
• Expanded core packaged meats business • Extended utilization of pork bellies and hams internally • Increased market position in branded packaged meats • Significantly reduced previously planned packaged meats capital expenditures Cook’s + Armour-Eckrich
Slide 17: Butterball
• Combined with Carolina Turkey’s to achieve #1 market share • A national brand with strong brand equity • Extended vertical integration strategy • Increased our position as a multi-species player Butterball
Slide 18: Groupe Smithfield S.L.
• Substantially increased packaged and branded meats market share in Western Europe • Dramatically upgraded branding and overall market position in Western Europe – Upgrade from first price to private label and branded • Created significant synergies with our existing European operations • Extended
Slide 19: Premium Standard Farms
• Secured a long-term, stable, high quality source of raw materials for our Midwest operations • Extended vertical integration strategy in the U.S. • Provided a process verified certification platform for high end, niche retail, packaged meats and export customers • Matched raw material supply to ex
Slide 20: European Expansion
European Expansion
Slide 21: European Strategies (Building for Tomorrow)
• Pursue broad, branded distribution in Western Europe • Invest in and develop attractive markets • Build vertically-integrated and low-cost production in Eastern Europe • Over time, build a solid, highly-efficient Pan European business European Strategies (Building for Tomorrow)
Slide 22: Slide 22
Slide 23: Groupe Smithfield S.L.
• Largest packaged meats producer in Europe • Strong branded and private label shares in France, Belgium, Netherlands, Portugal and Germany • 50/50 joint venture between Smithfield and Oaktree Capital Management • Smithfield contributed assets of Jean Caby and €50 million in cash Groupe Smithfield S
Slide 24: Groupe Smithfield Strategies
• Leverage major positions in cooked ham, dry ham and dry sausage • Margin improvement – Improve raw material procurement – Optimize manufacturing platform – Operational improvements through Jean Caby-Aoste merger – Move Jean Caby/Aoste toward high end of private label market • Remain well-positione
Slide 25: Poland
• Animex is largest meat and poultry processor in Poland • #1 hog producer • #1 pork processor • Using vertical integration to expand business • Export markets include several EU countries, Japan, Korea and U.S. Poland
Slide 26: Poland Strategies
• Substantially increase hog production and pork processing volume in next three years • Significantly increase export sales in next three years • Maintain 65/35 percent ratio packaged meats versus fresh pork • Become low-cost producer/processor Poland Strategies
Slide 27: Poland Operations Projections
Poland Operations Projections 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 FY03 FY04 FY05 FY06 FY07 FY08 FY09 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 Sows Market Hogs Hog Processing
Slide 28: Romania
Romania • Country is substantial net importer of pork • Smithfield is country’s largest meat processor • Company has invested over $400 million in both hog production and pork processing
Slide 29: Romania Strategies
Romania Strategies • Revitalize the pork industry in strong pork-consuming country • Develop fully vertically integrated business model and infrastructure • Efficiently utilize mothballed pork processing plant reopened in 2006 • Replace imported pork with domestically produced product
Slide 30: Pork Consumption Growth for Key Countries
Pork Consumption Growth for Key Countries Source: United States Department of Agriculture, USDA Foreign Agricultural Service's Production, Supply and Distribution 0% 2% 4% 6% 8% 10% 12% United States EU-25 Japan South Korea Philippines Brazil Mexico Russian Federation China Vietnam Romania World
Slide 31: Pork Imports as a Percentage of Consumption
Pork Imports as a Percentage of Consumption Source: United States Department of Agriculture, USDA Foreign Agricultural Service's Production, Supply and Distribution 0% 10% 20% 30% 40% 50% 60% 70% 80%
Slide 32: The Smithfield Advantage
The Smithfield Advantage The Smithfield Advantage • Independent operating company structure that takes advantage of the entrepreneurial spirit and regional opportunities while achieving the benefits of a global operation • Lean corporate structure that maximizes earnings potential of independent ope
Slide 33: The Smithfield Advantage
• Large base of recognized national and regional brands that provide protection against an adverse event from jeopardizing the total company • Extremely large distribution system that provides access to all channels of distribution, both retail and foodservice, across the U.S. and increasingly acros
Slide 34: The Smithfield Advantage
• Management team with a long history of successfully integrating both large and small acquisitions into immediately accretive operations • Management team adept at managing during difficult times to achieve higher levels of profitability in good times • Management team with a proven track record of
Slide 35: a re
a re hfield
Slide 36: Appendix: Profile and EBITDA Reconciliation
Appendix Profile and EBITDA Reconciliation
Slide 37: Segment Profiles
Pork Segment Sales: $7.9Bn Int’l Segment Sales: $1.0Bn Beef Segment Sales: $2.6Bn Hog Production Segment Sales: $1.8Bn Other Segment Sales: $0.1Bn • World’s largest pork processor • Processed 24.5 million hogs. 52% of revenues derived from packaged meats • Sold approximately 3.1 billion pounds of fr
Slide 38: Hog Production
Hog Production (number of market sows in production) • Produces 17.9 million hogs (includes Premium Standard Farms) • FY2007 sales $1.8 billion (includes intersegment sales) Approximately 78% of Prestage Farms’ hogs are sold to Smithfield Foods, Inc. under long-term contract. ² Includes acquisition
Slide 39: Pork Processing
Other 23% Hormel 7% Swift & Company 11% Tyson 19% Excel (Cargill, Inc.) 9% 31% #1 Pork Processing (% of hogs processed) • Processes 30.7 million hogs (includes Premium Standard Farms) • FY 2007 sales $7.9 billion ¹Includes acquisition of Premium Standard Farms in May Source: United States Industry D
Slide 40: Beef Processing
Beef Processing (% of cattle processed) • Processes 2.1 million cattle • FY 2007 sales $2.6 billion Source: United States Industry Data Successful Farming Other 11% Swift & Company 22% Excel (Cargill, Inc.) 23% 6% Tyson 30% National Beef 8% Market Leader #5
Slide 41: Cattle Feeding
Cattle Feeding (% of cattle produced) • Produces 1.3 million cattle • FY 2007 sales $1.5 billion ² Five Rivers is Smithfield Foods’ joint venture with ContiGroup Companies Includes 100% of the revenues of joint ventures Source: USDA, Cattle Buyer’s Weekly, CattleFAX, Company Estimates Note: Other=89
Slide 42: Turkey Processing
49 percent-owned joint venture established in October 2006 Includes 100% of the revenues of joint ventures Source: United States Industry Data Successful Farming Turkey Processing (% of turkeys processed) • Processes 43 million turkeys • FY 2007 sales $870 million ² Market Leader #1 Other 41% Cargil
Slide 43: Proven Management Team
Proven Management Team Proven Management Team Joseph W. Luter, III Chairman Smithfield Foods, Inc. 27 Years in the Industry 27 Years at Smithfield 31 Years in the Industry 11 Years at Smithfield 30 Years in the Industry 11 Years at Smithfield 36 Years in the Industry 4 Years at Smithfield 14 Years i
Slide 44: EBITDA Reconciliation
EBITDA Reconciliation (in millions) Cook's /Armour- Eckrich Butterball* Groupe Smithfield* Premium Standard Farms Net Income $ $ $ $ Add: Interest Depreciation & Amortization Taxes - EBITDA $ $ $ $ * Butterball and Groupe Smithfield are presented at 49% and 50%, respectively.
Slide 45: a re
a re hfield