Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — Lehman Brothers 2nd Annual Back-To-School Consumer Conference (September 2008)
41 slides from Smithfield Foods's conference presentation, Sep 3, 2008
Slide 1: Lehman Brothers 2nd Annual Back-To-School Consumer Conference
Smithfield Lehman Brothers 2"4 Annual Back-To-School Consumer Conference C. Larry Pope President and Chief Executive Officer Smithfield Foods, Inc. September 3, 2008
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: Agenda
Agenda 1. Who is Smithfield? 2. Current environment 3. What is Smithfield doing? 4. What does the future look like? 5. Why should | own Smithfield? Smithfield 6:04 (04 eajowvy”
Slide 4: Who is Smithfield?
1. Who is Smithfield? Smithfield 6:04 (04 eajouvy”
Slide 5: Fiscal 2008: Smithfield At A Glance
Fiscal 2008: Smithfield At A Glance 1 Sales: $9.6 billion| | Sales: $1.2 billion| | Sales: $2.4 billion| _| Sales: $0.1 billion Operating Profit: |_| Operating Profi Operating Profit: |_| Operating Profit: + World's largest pork + Subsidiaries in Poland, + World's largest hog + Comprised of turkey p
Slide 6: Market Leader: #1 Hog Production
Prestage Farms’ 2% Market Leader: #1 Hog Production Christensen Farms 3% Other 66,000 producers 66% Smithfield 6:04 (04 eee
Slide 7: Market Leader: #1 Pork Processing
Market Leader: #1 Pork Processing Smithfield 6:04 (04 eee
Slide 8: Market Leader: #1 Turkey Processing
Market Leader: #1 Turkey Processing Smithfield 6:04 (4 eau
Slide 9: Market Leader: Packaged Meats
Market Leader: Packaged Meats Bais Waten@ooked Hams 6% Smoked Sausay 6% Dry Sausage 6% Smithfield 6:04 (04 eajowvy”
Slide 10: Current environment
2. Current environment Smithfield 6:04 (04 eajouvy”
Slide 11: Current Environment
Current Environment + _ Difficult environment to maintain margins as a result 0 - Sharply higher input costs year over yeart * Hog production — Average feed cost increase=37% or $476 million + Pork processing — Average increase in hog cost=3.5% or $143 million - Highly volatile and sharply higher ma
Slide 12: Impact of Corn Prices on Raising Costs
Impact of Corn Prices on Raising Costs 2 $65 $7. $60 sa %e33 ] $650 $5.50 _ 3 2 g of $.30/bushel $4.50 2 corn equates ze _to $ticwt race increase in 0 $ $2.50 $20 $1.50 FYo4 FYO5 FYO6 FY07 FY08 FY09Q1 /—?Raising costs —*—Com prices 2 , Smithfield gi (oi epost"
Slide 13: Industry Raising Costs and Hog Price Futures Curves
Industry Raising Costs and Hog Price Futures 2 Curves $54 per cwt g g 8 —? Industry raising costs —®=ISM hog prices 13 Smithfield 6:04 (04 eajowvy”
Slide 14: Current Environment
Current Environment 2 + — Surprising profitability in fresh pork - Meat prices have kept pace with higher live hog prices — Why? Export demand has been excellent! — What's driving this? + Cheap U.S. dollar + Herd liquidation is occurring + High hog and protein prices outside the U.S. + Bottom line —
Slide 15: Shifting Pork and Hog Production Profitability
Shifting Pork and Hog Production Profitability 2 $600 z § ss00 = $400 £ = $300 a 2 $200 { & s100 so FYO4 FYO7 $100 $98.1 [@ Pork Operating Profit BHP Operating Profit 15 Smithfield 6:04 (04 eee
Slide 16: U.S. Pork Export Growth and Forecasts
U.S. Pork Export Growth and Forecasts 2 consecutive year for record high exports and growth of 3- Smithfield 6:04 (04 eee
Slide 17: Smithfield Foods Exports
Smithfield Foods Exports 2 Te Russia Other! 1% Canada 1.1 billion pounds, +46% YOY Total FY09Q1 export volume= 2% Steer omensnteemesiaeyenis ms ters twat coon ome gS Sasi ese san otras Fa Hos Moonee ons Powe SSAMEHFIENA G04 (cod. Respond”
Slide 18: Cheap U.S. Dollar
Cheap U.S. Dollar go-unr s0eN ‘20-990 Lo-deg 2o-une 2oeW 90-990 90-des gone go4dy 0-980 $090 sone soudy so-uer 70-190 voine vody youer £0390 eoine eoudy eouer Smithfield 6:04 (04 eajowvy” 18
Slide 19: Worldwide Sow Liquidation
Worldwide Sow Liquidation 10% 5% 0% 5% + % annual change in sow population 25% 19 Smithfield (01 caps” (Sow: Eurotel by Agwovi mal ie Seid wonton
Slide 20: Hog Carcass Values
Hog Carcass Values carcass values | ® are at an all time high level, but comparatively very low on @ Week Ending July 21,2007 8 Week Ending July 19, 2008 20 Smithfield 6:04 (04 eee
Slide 21: What is Smithfield doing?
3. What is Smithfield doing? Smithfield 6:04 (04 eajouvy”
Slide 22: What is Smithfield doing?
What is Smithfield doing? 3 + Selling beef processing and cattle feeding operations . Merging Groupe Smithfield into Campofrio + Reducing our herd + Rightsizing operations + Focusing on improving fresh pork operations + Realigning our management team . continuing to move our packaged meats business
Slide 23: Sale of Beef Processing and Cattle Feeding Operations To JBS
What is Smithfield doing? 3 Sale of Beef Processing and Cattle Feeding Operations To JBS Definitive agreement to sell beef processing and cattle feeding operations to JBS S.A. for $565.0 million in cash + Proceeds from the sale of Smithfield Beef's live cattle inventories, together with Smithfield’s
Slide 24: Campofrio — Groupe Smithfield Merger
What is Smithfield doing? 3 Campofrio — Groupe Smithfield Merger + Creates largest packaged meats producer in Europe, three times nearest competitor, with $3 billion in sales + Market leader in Spain, France, Portugal, The Netherlands and Belgium + — Smithfield to own 37 percent of public company +
Slide 25: Reducing herd and right-sizing operations
What is Smithfield doing? 3 + Reducing our herd In February, announced plans to reduce U.S. sow herd by four to five percent, or 40,000 to 50,000 sows Ultimately will result in production of 800,000 to 1,000,000 fewer market hogs annually + Right-sizing our operations Closed seven processing plants
Slide 26: Realigning our management team
What is Smithfield doing? 3 + Reali |g our management team to maximize potential of our interdependent operating company structure - George H. Richter named president and chief operating officer of pork group + Presidents of Smithfield Foods' five pork processing companies report to him + Focus on p
Slide 27: Working to Improve Packaged Meats Margins
What is Smithfield doing? 3 Working to Improve Packaged Meats Margins Fresh Meat Traditional Products! Convenience Products” Volume] 4.0 billion Ibs. | 2.0 billion Ibs. 1.1 billion Ibs. 27 ERA RMAs Sant fel Got oi. Reports” aston prec —soetag, shed Nam ois ad et eps
Slide 28: Packaged Meats Margin (EBT) Growth
What is Smithfield doing? Packaged Meats Margin (EBT) Growth $ percwt $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 + $4.38 $8.83 FY 2005 FY 2006 28 FY 2007 FY 2008 Smithfield 6:04 (04 eajowvy”
Slide 29: Packaged Meats FY2008 YOY Volume Growth
What is Smithfield doing? 3 Packaged Meats FY2008 YOY Volume Growth 20% Traditional 12.6% 40.7% 10.0% 10.1% Product’ 10% Convenience Product? Gs 29 peda petted buon Besos forage ele i, proses ed Smithfield 6:04 (04 eee aston prec —soetag, shed Nam ois ad et eps
Slide 30: Improving our liquidity position
What is Smithfield doing? Improving our liquidity position $1,000 + (in millions) Total=$1.2 billion BFY08Q4 @ Incremental LT liquidity @ Beef transaction © Cattle liquidation ere conga Sins 30 eaten cong tena Smithfield 6:04 (04 eajowvy”
Slide 31: Corn and Soybean Meal Sensitivity: Accumulated Working Capital Requirements
Corn and Soybean Meal Sensitivity: 3 Accumulated Working Capital Requirements $200 $150 $100 $50 Hi t . Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 +15% 0 +30% 31 Smithfield 6:04 (04 eee Pages er
Slide 32: Debt to Total Capitalization
Debt to Total Capitalization 3 60% 58% 56% 54% | 53% $750 milion | °4% from the sale of | 52% beef 50% processing and cattle feeding | 48% operations will | 46% 44% 42% 40% FYo1 FOZ FOS FOS FYo7 FOB FYO91Q Pro forma post a closing Smithfield 6:04 (04 eeu
Slide 33: What does the future look like?
4. What does the future look like? Smithfield 6:04 (04 eajouvy”
Slide 34: What does the future look like near-term?
4 What does the future look like near-term? + Near-term the volatility of all the markets makes for a choppy business climate — Input costs continue to be uncertain — Hog supplies are expected to continue to shrink to match demand - Export demand will likely remain excellent - Margins on packaged me
Slide 35: What does the future look like longer-term?
What does the future look like longer-term? 4 ee + Hog production — Feed costs should stabilize at some level - Supplies should shrink to match demand - Profitability is expected to return + Fresh pork margins should return to more normalized levels, although likely somewhat higher than the past due
Slide 36: What does the future look like longer-term?
4 What does the future look like longer-term? + Packaged meats business should continue to deliver better and better margins and propel the company forward as a result of = Streamlined highly-efficient operations - Continued shift toward convenience products - Focused sales and marketing effort + We
Slide 37: Why should I invest in Smithfield?
5. Why should | invest in Smithfield? Smithfield 6:04 (004 Raju”
Slide 38: Why should I invest in Smithfield?
Why should | invest in Smithfield? 5 * | believe this will be a profitable industry and will deliver on my return * | want to invest in the player with a market leading position = Hog Production #1 — Fresh Pork Processing #1 — Bacon Business #1 + Raw #1 + Precooked ial — Ham Business #1 + Packaged #
Slide 39: Why should I invest in Smithfield?
Why should | invest in Smithfield? 5 + Business continues to migrate up the value chain and is moving more and more toward a consumer packaged goods play and less tied to a pure commodity play = 100 brands in every category and every market in 12 countries marketing to every segment of the market +
Slide 40: Why should I invest in Smithfield?
Why should | invest in Smithfield? 5 + Strong experienced management team that knows how to react to changes in the industry's dynamic + Earnings stream is spread across the supply chain from Hog Production > Fresh Pork > Packaged Meats + Large domestic business plus large European business Smithfie
Slide 41: Smithfield
Smithfield