SMITHFIELD FOODS INC Q3 FY2026 earnings call

• Strategic Resilience & Growth: Packaged Meats demonstrated resilience, achieving its fifth consecutive year of over $1 billion in operating profit. The segment gained volume and share in its five largest categories (smoked ham, uncooked bacon, packaged lunch meat, hot dogs, cooked dinner sausage) despite industry declines.
• M&A Integration: Completed the acquisition of Nathan's Famous, securing rights to the brand in perpetuity. The deal is immediately accretive to adjusted EPS and offers opportunities for growth in food service and protein diversification.
• Upstream Optimization: Entered a new long-term supply agreement with a joint venture partner to reduce internal hog production by approximately 900,000 head annually, reducing capital and earnings exposure to commodity volatility.
• Innovation & Brand Building: Launched new premium products including Smokehouse Reserve bacon flavors, Brock flavors, and cranberry brown sugar glazed spiral hams. Expanded Prime Fresh portfolio with rotisserie chicken. Increased marketing investment focusing on national brands (Smithfield, Eckrich, Nathan's).
• Operational Efficiency: Mitigated inflationary headwinds through operational efficiency in manufacturing and procurement. Capital investments continue to generate solid returns, supporting top and bottom-line growth.

• Packaged Meats: Sales were $2 billion (down 5.2% YoY, driven by a 5.3% decline in average sales price offsetting 0.2% volume growth). Operating profit increased to $230 million (up $4 million YoY) with an expanded margin of 11.6%. This segment contributed approximately 58.8% of total company operating profit.
• Fresh Pork: Sales were $1.8 billion (down 17% YoY, reflecting an 11.4% decrease in average selling price and a 6.3% decline in volume). The segment reported an operating loss of $89 million compared to an operating profit of $10 million in the prior year quarter. This segment negatively impacted consolidated results.
• Hog Production: Sales were $691 million (down 15% YoY, driven by lower sales to joint venture partners and a 5.2% decline in average selling price). Operating profit was $34 million compared to $89 million in the prior year quarter.

• Total Company Sales: Updated outlook to down low single digits (previously roughly flat), primarily due to lower pork complex values.
• Total Company Operating Profit: Full-year adjusted range of $900 million to $1 billion (previously higher), driven by pressure in fresh pork and hog production.
• Packaged Meats: Full-year operating profit narrowed to a range of $1.09 billion to $1.14 billion (midpoint modestly increased), reflecting two months of Nathan's Famous results and a 53rd week.
• Fresh Pork: Full-year range of a loss of $50 million to break even, reflecting continued pressure on product values, processing spreads, and channel profitability.
• Hog Production: Full-year range of a loss of $25 million to a profit of $25 million, primarily reflecting lower hog prices in the fourth quarter.
• Capital Expenditures: Expected spend between $350 million to $375 million in 2026 (excluding Sioux Falls facility), with more than half focused on projects supporting growth.
• Dividends: Anticipated annual dividend of $1.25 per share for fiscal 2026.

• Commodity Market Volatility: Sharp decline in pork value chain due to softer domestic demand and global oversupply of pork, particularly in key export markets like Mexico and China.
• Consumer Pressure: U.S. consumers remain pressured by persistent inflation, high gas prices, and reduced SNAP benefits, leading to selective buying and reduced consumption levels.
• Export Challenges: Erosion of export opportunities due to increasing pork supply in key markets and ongoing tariffs.
• Input Cost Inflation: Elevated transportation costs due to carrier supply constraints, as well as high diesel and resin costs following geopolitical events (Iran conflict).
• Regulatory/Permitting Risks: Setbacks in obtaining conditional use permits for the proposed new Sioux Falls processing plant may delay construction timelines.

Q: Max Gumport (BNP Paribas) asked about consumer demand softness in packaged meats, specifically regarding changing preferences and potential impacts from GLP-1 drugs on consumption patterns. / A: Steve France noted that while consumers are cautious and seeking value, they are not walking away from purchases but are being highly selective. He stated that preparing meals at home remains compelling due to rising restaurant costs, and Smithfield’s diverse portfolio allows them to offer choices across price points. Regarding GLP-1s, he observed that protein remains a core component of home-prepared meals, supporting both retail and food service demand.