Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — Barclays Capital High Yield Bond and Syndicated Loan Conference 2012
39 slides from Smithfield Foods's conference presentation, Mar 26, 2012
Slide 1: Barclays Capital High Yield Bond and Syndicated Loan Conference
Smithfielg wy RarCISYS Capital ‘High Yield Bond and Syndicated Loan Conference March 26, 2012
Slide 2: Kenneth M. Sullivan, Vice President of Finance and Chief Accounting Officer
Kenneth M. Sullivan Vice President of Finance and Chief Accounting Officer
Slide 3: Forward-Looking Statements
3 Forward-Looking Statements This presentation contains “forward-looking” statements within the meaning of the federal securities laws. The forward-looking statements include statements concerning the Company’s outlook for the future, as well as other statements of beliefs, future plans and strategi
Slide 4: Non-GAAP Measure Reconciliations
4 Non-GAAP Measure Reconciliations
Slide 5: Why Invest In SFD?
Why Invest In SFD?
Slide 6: Investment Thesis: Why Invest In SFD?
6 Investment Thesis Why Invest In SFD? Consistently Delivering Solid & More Predictable Earnings Focus On Growth In Packaged Meats Market Fundamentals Remain Supportive Positive Outlook For Fiscal 2012 & Fiscal 2013 Solid Financial Management Ongoing Share Repurchase & Debt Reduction Remain Prioriti
Slide 7: Consistently Delivering Solid & More Predictable Earnings
Consistently Delivering Solid & More Predictable Earnings
Slide 8: Consistently Delivering Solid Earnings
8 Consistently Delivering Solid Earnings $0.46 $0.80 $0.84 $0.85 $0.69 $0.76 $0.69 FY 11 Q1 FY 11 Q2 FY 11 Q3 FY 11 Q4 FY 12 Q1 FY 12 Q2 FY 12 Q3 Adjusted EPS Source: Refer to Non-GAAP measure reconciliations Smithfield is consistently delivering solid earnings with a positive outlook for the remain
Slide 9: Pork Segment Fueling Growth & Stability
9 Pork Segment Fueling Growth & Stability Note: Segment sales before inter-segment eliminations 71% 19% 9% 1% Sales Pork segment accounted for 71% of sales and 69% of operating profit in fiscal 2011 69% 20% 11% Operating Profit
Slide 10: Pork Segment Driving Earnings Growth
10 Pork Segment Driving Earnings Growth $219 $449 $483 $573 $753 $700 $- $200 $400 $600 $800 FY 07 FY 08 FY 09 FY 10 FY 11 TTM FY 12 Q3 P ork s e gm e n t adj u st e d o p e ra ti n g p rofit (i n milli o n s) Fresh pork Packaged meats Total Pork Note: Results represent management’s estimated alloca
Slide 11: Reduced Commodity Exposure
Reduced Commodity Exposure Lowered domestic corn market exposure by more than 40% since fiscal 2008 FY 08 – Beef Group divestiture FY 09 – U.S. sow herd reduction FY 11 – Sale of turkey interests and non-core hog farms More aggressive hedging to lock in margins and raising costs Hog Prod
Slide 12: Focus On Growth In Packaged Meats
Focus On Growth In Packaged Meats
Slide 13: Executing Strategy For Growth
13 Executing Strategy For Growth • Consumer marketing spending +20% in fiscal 2012 • 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 advert
Slide 14: Consumer-Winning Brands
14 Consumer-Winning Brands Note: Based on FY 12 Q3 YTD Pork segment packaged meats retail volume, including deli and direct store delivery Private Label/ Other 28% Core Brands 63% Non-Core Brands 9% Branded 72% Approximately three-quarters of Smithfield’s retail packaged meats sales are branded Twel
Slide 15: Core Brands Sales & Volume Growth
15 Core Brands Sales & Volume Growth 14% 5% 4% 3% 2% 25% 14% 8% 6% 9% John Morrell Armour Curly's Gwaltney Kretschmar YOY Volume Growth YOY Sales Growth Note: FY 12 Q3 retail packaged meats including DSD and deli
Slide 16: Gaining Distribution In Key Categories
16 Gaining Distribution In Key Categories Source: Information Resources, Inc. (IRI) 12 weeks ending 01/29/12 and Freshlook Marketing 12 weeks ending 01/01/12 +14% +8% +3% +3% +1% Dry Sausage BBQ Portable Lunches Deli Meats Marinated Pork YOY ACV % Growth
Slide 17: New Innovative Product Launches
Curly’s Sauceless BBQ Eckrich Bacon Covered Ham Farmland Re-sealable Thick Sliced Bacon Smithfield Ham Steaks with Glaze Smithfield PouchPack Bacon 17 New Innovative Product Launches
Slide 18: Richard Petty Motorsports NASCAR Partnership
18 Richard Petty Motorsports NASCAR Partnership Multiyear, integrated partnership with Richard Petty Motorsports NASCAR team Primary sponsor of No. 43 Ford Fusion in fifteen NASCAR races in 2012, including Daytona 500 Underscores strategy to activate brands with consumer-focused marketing
Slide 19: Market Fundamentals Remain Supportive
Market Fundamentals Remain Supportive
Slide 20: Fundamentals Remain Supportive
20 Fundamentals Remain Supportive Total U.S. protein production continues to contract 2012 Production Forecast Volatile grain and protein prices, as well as limited capital availability have limited expansion in pork industry Export demand for pork remains strong Pork production in EU decl
Slide 21: Economics Supportive of U.S. Pork Exports
$0.65 $0.65 $0.73 $0.76 $1.12 $1.22 $1.40 $1.81 U .S . B raz il EU M exi co Chin a Ko re a Rus si a Ja p an Economics Supportive of U.S. Pork Exports Live Hog Price Estimate ($ per pound) China-HK 39% Japan 22% Mexico 20% Korea 6% Russia 4% Other 9% Smithfield FY 12 Q3 YTD Export Markets by Volume 2
Slide 22: Hog Production Fundamentals Remain Intact
22 Hog Production Fundamentals Remain Intact $55 $60 $65 $70 $75 Ap r- 1 2 M ay -1 2 Ju n -1 2 Ju l- 1 2 Au g- 1 2 Se p -1 2 Oc t- 1 2 N o v- 1 2 De c- 1 2 Ja n -1 3 Fe b -1 3 M ar -1 3 Ap r- 1 3 Industry solidly profitable for next 12 months ISU Model Cost of Production 03/09/12 Live Hog Futures 03
Slide 23: International Segment Improving
Poland 41% Western Europe 39% Romania 9% Mexico 8% U.K. 3% International Segment Sales Animex & AgriPlus Campofrío Food Group (37% stock) Smithfield Prod & Smithfield Ferme Norson & Granjas Carroll de México (50% JV) Smithfield Foods, Ltd. 23 International Segment Improving Note: FY 12 Q3 YTD sales
Slide 24: Solid Financial Management
Solid Financial Management
Slide 25: Strengthened Balance Sheet
25 Strengthened Balance Sheet $4.0 $1.8 <$2.0 Net debt (in billions) Net Debt FY 09 Q1 FY 12 Q3 Target 7.3x 1.6x <3.0x Net debt to TTM adjusted EBITDA Net Debt to Adjusted EBITDA FY 09 Q1 FY 12 Q3 Target 56% 34% <40% Net Debt to Total Capitalization Net Debt to Capitalization FY 09 Q1 FY 12 Q3 Targe
Slide 26: Reduced Cost Profile
$69 $66 $60 $51 $48 $44 $42 FY 11 Q1 FY 11 Q2 FY 11 Q3 FY 11 Q4 FY 12 Q1 FY 12 Q2 FY 12 Q3 Quarterly Interest Expense ($ in millions) 26 Reduced Cost Profile Smithfield has eliminated $100 million in annual finance and interest expense
Slide 27: Extended & Smoothed Debt Maturities
27 Extended & Smoothed Debt Maturities $1 billion less long term debt $100 million less interest & finance expense New credit facilities=$1.2 billion Greater liquidity Lower rates/fees Efficient collateral utilization $ 6 3 7 $ 4 9 $ 9 0 3 $ 8 5 3 $ 3 $ 1 9 $ 5 0 0 $ 3 $ 2 4 $ 5 6 3 $ 5
Slide 28: Upward Ratings Trajectory
January 2011 February 2011 March 2011 August 2011 October 2011 January 2012 28 Upward Ratings Trajectory Fitch Upgraded to B+ Moody’s Upgraded to B1 stable Standard & Poor’s Upgraded to B+ Moody’s Upgraded to Ba3 Standard & Poor’s Upgraded to BB- Fitch Upgraded to BB-
Slide 29: Uses of Excess Cash
29 Uses of Excess Cash Ca sh Reinvest in packaged meats business Example – $85 million packaged meats expansion in Kinston, North Carolina Share repurchases Repurchased $111 million of stock FY 12 YTD Debt reduction Repaid $138 million of bonds FY 12 YTD Voluntary pension contribution Invested $100
Slide 30: Positive Outlook for Fiscal 2012 and Fiscal 2013
Positive Outlook for Fiscal 2012 and Fiscal 2013
Slide 31: Positive Outlook
Segment Normalized Operating Profit Range FY 12 YTD FY 12 Forecast FY 13 Forecast Fresh Pork $3-7 per head $10 per head Above normalized High end of normalized Packaged Meats $0.10-0.15 per pound $0.14 per pound High end of normalized High end of normalized w/ volume growth Hog Production $10-15 per
Slide 32: Why Invest In SFD?
Why Invest In SFD?
Slide 33: Investment Thesis: Why Invest In SFD?
33 Investment Thesis Why Invest In SFD? Consistently Delivering Solid & More Predictable Earnings Focus On Growth In Packaged Meats Market Fundamentals Remain Supportive Positive Outlook For Fiscal 2012 & Fiscal 2013 Solid Financial Management Ongoing Share Repurchase & Debt Reduction Remain Priorit
Slide 34: Barclays Capital High Yield Bond and Syndicated Loan Conference
Smithfielg wy RarCISYS Capital ‘High Yield Bond and Syndicated Loan Conference March 26, 2012
Slide 35: Appendix: Smithfield: A Leading Global Food Company
Appendix Smithfield: A Leading Global Food Company
Slide 36: Leading Positions In Pork Industry
36 Leading Positions In Pork Industry Sources: National Pork Board Spring 2009; U.S. Pork Powerhouses 2011 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
Slide 37: #1 U.S. Packaged Pork Company
Retail 39% Foodservice 16% Export 16% Deli 3% Processor/In dustrial 26% Volume 37 #1 U.S. Packaged Pork Company Retail 45% Foodservice 23% Export 13% Deli 7% Processor/In dustrial 12% Sales Note: FY 11 Pork segment sales and volume before inter-segment eliminations
Slide 38: Segment Overview
38 Segment Overview Fresh Pork Packaged Meats Hog Production International Fiscal 2011 Sales $4.6 billion $5.7 billion $2.7 billion $1.3 billion Fiscal 2011 Adjusted Operating Profit $407 million $347 million $215 million $116 million Fiscal 2011 Volume 27 million hogs 2.7 billion pounds 16 million
Slide 39: Barclays Capital High Yield Bond and Syndicated Loan Conference
Smithfielg wy RarCISYS Capital ‘High Yield Bond and Syndicated Loan Conference March 26, 2012
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