Smithfield Foods, Inc. · NASDAQ:SFD
Smithfield Foods — J.P. Morgan Global High Yield & Leveraged Finance Conference (February 2013)
30 slides from Smithfield Foods's conference presentation, Feb 26, 2013
Slide 1: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. Morgan Global High Yield & Leveraged Finance Conference February 26, 2013
Slide 2: Timothy Dykstra, Vice President and Corporate Treasurer
Timothy Dykstra Vice President and Corporate Treasurer Smithfield Foods, Inc.
Slide 3: 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 4: Non-GAAP Measure Reconciliations
4 Non-GAAP Measure Reconciliations
Slide 5: Leading Positions In Food Industry
Leading Positions In Food Industry
Slide 6: Leading Positions In Pork Industry
Sources: National Pork Board Spring 2011; U.S. Pork Powerhouses 2012 Leading Positions In Pork Industry 26% Tyson 17% Swift 11% Excel 9% Hormel 9% Triumph 5% Seaboard 4% Others 19% Pork Processing 15% Triumph 6% 4% 3% 3% 3% Others 66% Hog Production Seaboard Maschhoffs Prestage Iowa Select 6
Slide 7: #1 U.S. Packaged Pork Company
Retail 52% Foodservice 30% Deli 10% Processor/In dustrial 5% Export 3% Volume #1 U.S. Packaged Pork Company Retail 48% Foodservice 32% Deli 13% Processor/In dustrial 4% Export 3% Sales Note: FY 13 H1 packaged meats third party sales and volume 7
Slide 8: Market leader with top three position in ten key product categories
8 Market leader with top three position in ten key product categories 44% 33% 21% 21% 16% 15% 15% 14% 9% 9% Specialty Ham Cuts Smoked Hams Bacon Marinated Pork Dinner Sausage Dry Sausage Portable Lunches BBQ Meats Meatballs Service Deli Smithfield Market Share #1 #1 #1 #2 #2 #2 #2 #3 #2 #2 Source: I
Slide 9: Delivering Higher Quality & More Consistent Earnings
Delivering Higher Quality & More Consistent Earnings
Slide 10: Packaged Meats Driving Sales
Hog Production 20% International 9% Packaged Meats 38% Fresh Pork 33% Pork 71% 10 Packaged Meats Driving Sales Note: FY 13 H1 segment sales before inter-segment eliminations Packaged meats accounted for 38% of sales in the first half of fiscal 2013
Slide 11: Retail Brand Strength
11 Retail Brand Strength 74% 75% 26% 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 01/27/13, Nielsen Perishables Group 52 weeks ending 12/29/12, and internal
Slide 12: 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 13: Delivering Core Brand Growth In Packaged Meats
13 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 14: Dry Sausage Increasing Share
6.6 % 30.2 % 19.3 % 12.3 % Dry Sausage Increasing Share 14 Source: Information Resources, Inc. (IRI) 13 weeks ending 01/27/13 2.6% 28.9% 19.4% 10.5% 9.6% 4.1% Total Packaged Meats Category 2.6 % 19.1 % Dinner Sausage 1.1 % 86.0 % Portable Lunches 3.8 % 26.3 % 23.1 % Bacon
Slide 15: Expanding Distribution
+18.5 +15.8 +13.0 +5.8 +3.3 +2.2 Portable Lunches Deli Meats Packaged Lunch Meat Dry Sausage Dinner Sausage Bacon Smithfield lead brand (ACV point change) Expanding Distribution 15 Note: ACV=All commodity volume; Source: Information Resources, Inc. (IRI) 13 weeks ending 01/27/13 and Nielsen Perishab
Slide 16: Volume Gains Across All Key Trade Channels
16 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 17: 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 18: Creating Creditor and Equity Shareholder Value While Maintaining Conservative Balance Sheet
Creating Creditor and Equity Shareholder Value While Maintaining Conservative Balance Sheet
Slide 19: Creating Creditor and Equity Shareholder Value
19 Creating Creditor and Equity Shareholder Value $522 $78 $600 $190 $190 $201 $60 $261 $913 million $138 million $1,051 million FY 11 FY 12 Total Creditor Actions 2011 Bonds 2013 Bonds 2014 Bonds $189 million $386 million $576 million FY 12 FY 13 Total Equity Actions Share Repurchases Smithfield em
Slide 20: 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 21: Reduced Cost Profile
$266 $245 $177 $168 FY 10 FY 11 FY 12 TTM FY 13 Q2 Annual Interest Expense ($ in millions) 21 Reduced Cost Profile Smithfield has eliminated $100 million in annual finance and interest expense
Slide 22: Upward Ratings Trajectory
Upward Ratings Trajectory 22
Slide 23: Continued Positive Outlook
Continued Positive Outlook
Slide 24: 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 25: 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 26: Pork Exports Remain Strong
150 200 250 300 350 400 Ja n Fe b Ma r Ap r Ma y Ju n Ju l Au g Se p Oc t No v D ec milli o n p o u n d s U.S. Pork Exports +3% in 2012 2010 2011 2012 Source: Foreign Agricultural Trade of the United States (FATUS) Pork Exports Remain Strong 26 Mexico 28% Japan 24% China/H K 21% Russia 7% Canada 5%
Slide 27: Economics Supportive of U.S. Pork Exports
$0.69 $0.74 $0.78 $0.78 $0.87 $1.00 $1.18 $1.19 $0.65 Chil e Mexic o Braz il EU Kore a Japa n Ch in a Aus tra lia Live Hog Price ($ per pound) U.S. Live Hog Price ($ per pound) 27 Economics Supportive of U.S. Pork Exports Note: Live hog cost estimate week ending 02/02/13; EU is average of Denmark, F
Slide 28: Commodity Risk Actively Mitigated
28 Commodity Risk Actively Mitigated Note: ISM live hog prices for May-12 to Jan-13; Live hog futures for Feb-13 to Apr-13; Pre-interest industry raising cost based on futures curves for grains on 02/20/13 $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 29: 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 30: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. Morgan Global High Yield & Leveraged Finance Conference February 26, 2013