Smithfield Foods, Inc.

Good day, and welcome to the Smithfield Foods first quarter 2025 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to answer your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Julie McMeaton, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Smithfield's first quarter 2025 earnings call. Earlier this morning, we announced our results. A copy of the release, as well as today's presentation, are available on our IR website, investors.smithfieldfoods.com. Today's presentation contains projections and other forward-looking statements. that are being provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions, or beliefs about future events or performance that do not relate solely to historical periods. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release, in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the Securities and Exchange Commission. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or other factors. Please refer to our legal disclaimer on slide two of the presentation for more information. Today's presentation will also include certain non-GAAP measures, including but not limited to adjusted operating profit and margin, adjusted net income, adjusted earnings per share, and adjusted EBITDA. For reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our slide presentation on our website. With me this morning are Shane Smith, President and CEO, Mark Hall, CFO, Dee France, President of Packaged Meats, and Donovan Owens, President of Fresh Pork. I will now turn the discussion over to Shane. Shane?

Thank you, Julie. Good morning, everyone. I am pleased to report that we are off to a solid start to fiscal 2025. We delivered first quarter adjusted operating profit of 326 million and adjusted operating profit margin of 8.6%. This marked an 86% increase compared to adjusted operating profit of 176 million and 5.1% in the first quarter of 2024. In fact, our first quarter operating profit and net income results were a record first quarter for the company. Interestingly, None of the business segments individually had a record quarter. The results were truly a reflection of strategy execution across the segments and the strength of our vertically integrated model. Our strong improvement reflects more favorable market conditions in hog production, as well as solid execution on our strategies across the business. Looking at profits by segments. Our packaged meat segment delivered adjusted operating profit of $266 million and an impressive adjusted operating profit margin of 13.1%, even as we navigated higher raw material input costs and a later Easter this year. We continued to increase sales of higher margin products, such as packaged lunch meats and dry sausage, and we achieved operating efficiencies in our packaged meat segment. Our fresh pork segment reported adjusted operating profit of $82 million, with an adjusted operating profit margin of 4%. Executing our strategy to maximize product values across multiple channels helped offset the impact of the tighter industry market spread this year. Our hog production segment delivered adjusted operating profit of just over $1 million, which marks an outstanding turnaround from a loss of $174 million in the first quarter of 2024. The increase was driven by improved market conditions and a more efficient cost structure on our retained farms. Across the organization, our team's relentless focus on driving efficiencies and delivering cost savings paid off with lower manufacturing, distribution, and SG&A costs year over year. we continue to unlock value through operational improvements by fostering a culture of continuous improvement. In summary, our strong Q1 profit growth versus last year reflects solid strategy execution across our packaged meats, fresh pork, and hog production segments, as well as dramatically improved market conditions in the hog production industry. Additionally, we continue to prioritize a strong balance sheet and financial position. We ended the quarter with a net debt to adjusted EBITDA ratio of just 0.7 times, well below our policy of two times. This gives us the financial flexibility to support our growth strategies and to deliver long-term shareholder value. Now turning to our outlook for fiscal 2025. Today, we reaffirmed our fiscal 2025 outlook that we introduced on March 25th. Our 2025 outlook calls for increased sales and operating profit despite challenging market conditions, and Mark will review the details in a few moments. I'd like to briefly review the key initiatives underway to deliver growth. First, in packaged meats. We plan to continue to grow operating profit through ongoing product mix improvements, volume growth, and innovation. Packaged meats is our largest and most profitable segment, representing 54% of consolidated sales, with 98% of our packaged meats SKUs sold here in the United States. We remain focused on increasing the mix of higher margin product categories, such as packaged lunch meat and dry sausage. This is evidenced by the shift in our mix away from large holiday hams to more everyday items. From 2019 to 2024, our ham category volume decreased slightly while the unit velocity dramatically increased by 22% and the profit per pound improved significantly. Dry sausage is another way to improve our product mix. From 2019 to 2024, we grew dry sausage units by 37%. Our ability to grow this category has been supported by increased capacity, including the acquisition of a dry sausage facility in Nashville last summer. Sales of dry sausage products such as pepperoni and salami are expected to grow at a faster rate than the overall packaged meats category. We have significant potential to expand distribution of our Carondo and Margarita dry sausage brands, which have ACVs of about 40% compared to our Smithfield consolidated ACV of 93%. During the first quarter, we executed well on our mix shift strategy as evidenced by our double digit volume growth in both lunch meat and dry sausage. Turning to volume, we expect packaged meats volume to be up about 1% year over year. We are currently the number two branded provider of packaged meats by volume in the 25 key categories in which we compete. Ten of those categories have a market size of more than $1 million, and we strive to grow share in each of these categories. One of our major focus areas in 2025 is the continued growth in our Smithfield Prime Fresh packaged lunch meats. Packaged lunch meat represents a $6.3 billion market opportunity, and we have the number five position and an 8% share. Based on Cercana data, Smithfield Prime Fresh posted the largest volume share gain of any branded packaged lunch meat for the 52 weeks ended March 30, 2025. Consumers are increasingly looking for value and our portfolio offers quality branded products across multiple categories and price points. This helps us attract and retain consumers even as they may look to lower priced options. If they choose Private Label, we are well positioned to capture more Private Label sales volume. Private Label is a key competitive advantage for Smithville. The elevation of Private Label with retailers and food service operators requires them to work with trusted partners like us who can consistently and reliably deliver high-quality products. Our strength in private label has helped transform the relationship we have with our customers into a strategic multi-year planning approach encompassing both our branded and private label products. This is exemplified by the recognition of our Smithfield food sales team who are delivering outstanding service and category management to our retail customers. In March, our teams were recognized by Harris Teeter as 2024 Partner of the Year for Meat and by Save Mart as 2024 Best Meat Supplier of the Year. Finally, looking at innovation. Addressing consumer trends to shift away from buying large holiday hams to more everyday purchases has been a focus of our innovations. Smithfield Prime Fresh has been one of our biggest wins in this endeavor, while also addressing consumer convenience trends. Fixed quarterweight hams represent another successful product innovation to address more everyday use occasions for consumers. For the 52 weeks ended March 30th, Smithfield branded quarterweight hams gained the most share of any branded or private label offering in the smoked ham specialty cuts category, according to Cercana. We conduct consumer research to determine what is trending with consumers and attracting new purchasers. We have a strong pipeline of new products scheduled to launch throughout 2025. These new products target consumers through line extensions of our trusted brands, new flavors, and more convenient packaging and sizing options. Moving to our second core growth strategy, optimizing our fresh pork operations. We see further opportunity to grow fresh pork operating profit in 2025 by maximizing the net realizable value of each hog and driving best-in-class operating efficiency. We continue to closely monitor the tariff and geopolitical environment, which is very fluid. We have an experienced team that has worked together for more than 20 years and has navigated through numerous cycles. While we are not immune to the impact of tariffs, we have built flexibility into our system and established multiple outlets for our fresh pork products. I thought it would be helpful to explain how we determine the optimal sales channels for fresh pork. We utilize four main sales channels. The first and most important is producing and transferring high-quality fresh pork raw materials to our packaged meat segment. We recognize a greater value for the company overall by further converting our fresh pork raw material and selling it through our packaged meat segment. Second, we focus on our domestic retail and food service partnerships to increase margins by growing the mix of value-added products we offer. We are the market leader in marinated fresh pork with more than a 40% branded volume share in the category. We continue to innovate in fresh pork by meeting customer and consumer needs just as we do in packaged meats. Third, we have a well-established international sales channel, and we export to more than 30 countries around the globe. In 2024, Smithfield's export sales accounted for 13% of total company sales, with the vast majority of that from our fresh pork segment. The key to our export strategy is identifying the optimal market for our products. We continue to execute our next best-sell strategy, evaluating our options in response to the recent tariff actions. We believe our 2025 operating profit outlook range for fresh pork addresses tariff risk. Finally, we have adjacent business lines, including skins for snacking, pet food and pet treats, and pharmaceuticals, focusing on whole hog utilization. Our multiple scale channels represent a real point of differentiation for our business based on the dynamic market environment we can uniquely pull different levers across our channels to maximize profitability. We believe this is one of the main competitive advantages of our leadership position as the number one pork processor in the industry. Regardless of the external environment, our fresh pork segment maintains a relentless focus on improving operating efficiencies, and we expect to deliver additional savings in 2025. Our focus on optimizing our operations goes beyond our packaged meats and fresh pork segments. In our hog production segment, we are pleased to report a $1 million profit in the first quarter. This strong rebound from the first quarter of 2024 reflects both improved industry market conditions, as well as our focus on operating a best-in-class cost structure on our retained farms through genetic transformation, herd health improvements, and procurement and nutrition savings. We are making great progress toward actively resizing our business. We have reduced the number of company-owned hogs produced from a high point of 17.6 million in 2019 to an expected roughly 11.5 million in 2025. Over the medium term, we plan to further reduce our internally produced hog volume to approximately 30% of the needs of our fresh pork segment. The recent transition of 3.8 million hogs to external producers is going very smoothly. These agreements assure a consistent supply of hogs from established farming operations with longstanding relationships with Smithfield and will reduce our exposure in the commodity markets as we reduce the number of hogs we directly own. Across the entire company, we drive a culture of continuous improvement. Each year, we look for new ways to improve operating efficiency and to reduce our cost basis with a goal to more than offset inflation. We expect efficiency savings to again contribute to enhanced profitability in 2025. We achieve improvements across our manufacturing platform through initiatives such as automations. Within our supply chain, we strive to improve service to our customers while optimizing cost. And in procurement and SG&A, we are continuously looking for ways to reduce overall spend. In conjunction with this effort, we reduced headcount in certain corporate and operations functions during the first quarter, streamlining our operations and improving our overall cost structure. And finally, we continue to evaluate opportunistic M&A in North America to support our growth strategies. In summary, we delivered solid first quarter results that position us well to achieve our outlook for 2025 and to support our growth over the long term. With that, I'll turn it over to Mark to review our financials in more detail.