SMITHFIELD FOODS INC Q2 FY2025 earnings call

• Packaged Meats: Largest and most profitable segment, 55% of consolidated sales. Focus on enhanced product mix, volume growth, and innovation. For example, quarter hams, packaged lunch meat, and dry sausage are higher-margin categories. Volume expected to be up ~1% YOY. Deep innovation pipeline with new products targeting consumer preferences.
• Fresh Pork: Focus on maximizing product value across channels. Team demonstrated agility in navigating tariff disruptions and executing strategies to maximize product values.
• Hog Production: Raised full-year operating profit outlook by $50 million due to solid execution on internal efficiency initiatives and more favorable market conditions. Actively resizing business to reduce self-produced hogs.
• Operations and efficiencies: Benefits from automation and multiyear efforts to drive operational efficiencies in manufacturing, supply chain, etc.
• M&A: Evaluating synergistic M&A opportunities across North America.

Packaged Meats segment delivered adjusted operating profit of $296 million with an adjusted operating profit margin of 14.2%, representing 55% of consolidated sales. Fresh Pork segment reported adjusted operating profit of $30 million with an adjusted operating profit margin of 1.4%, up from $17 million and 0.9% in Q2 2024. Hog Production segment delivered adjusted operating profit of $22 million, versus a loss of $10 million in Q2 2024, driven by improved market conditions and a more efficient cost structure.

• Raised 2025 adjusted operating profit outlook.
• Packaged Meats segment still anticipates adjusted operating profit in the range of $1.05 billion to $1.15 billion.
• Fresh Pork segment still anticipates adjusted operating profit between $150 million to $250 million.
• Hog Production segment raised anticipated adjusted operating profit range by $50 million, to between breakeven to a profit of $100 million.
• Total company adjusted operating profit outlook in the range of $1.15 billion to $1.35 billion.

Risks include factors identified in the release, annual report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission, which could cause actual results to differ materially from expectations and projections, such as consumer spending, geopolitical, and tariff uncertainties.

Q: Congrats on a very strong second quarter. Wanted to understand consumer shift within Packaged Meats brands and private label trends. Also, on Hog Production and its impact on Fresh Pork.

A: Steve France mentioned retail food and beverage spending is soft with consumers hesitant, weather unpredictable, and inflation pressing wallets. Circana data shows Packaged Meats volume share up 60 basis points. Private label business provides competitive advantage. On Hog Production, Shane Smith said they have visibility into back half, comfortable raising guidance, looking at futures markets and USDA reports, expecting pork production increase but slaughter levels down, believing to support pork prices.

Q: On Packaged Meats raw material input increases and profitability outlook.

A: Shane Smith and Steve France said Packaged Meats business has efficient cost structures, private label has formula-based pricing, confident in guidance with product mix shift to higher-margin categories.

Q: On Hog Production mark-to-market and hedging impact.

A: Mark Hall said average market hog selling price flat YOY inclusive of hedging, second quarter results impacted by $15 million mark-to-market adjustment related to positions materializing in second half, business performing well to raise outlook.

Q: On Packaged Meats volume performance in second half.

A: Steve France said confident in second half volume with new innovative items rolling out, foodservice sales up 9.5% in Q2, product innovation fueling growth.

Q: On competitive environment for Packaged Meats, promotional activity.

A: Steve France said focused on quality merchandising, increasing feature and display activity by 200 basis points, driving industry-leading profit margin.

Q: On value-added shift in Packaged Meats, capacity.

A: Steve France and Shane Smith said value-added shift successful, capital spend on capacity for higher-margin categories, relationships with customers giving insight for capital investment.

Q: On Hog Production guide, upside potential.

A: Shane Smith said anticipate being at higher end of range, some conservatism baked in, will provide more details later.

Q: On market share in uncooked breakfast and dinner sausage, seasonality.

A: Steve France said those are focuses but with better opportunities elsewhere. Steven J. France said Q4 has more seasonal hams, Q3 typically softer from profitability standpoint.