Smithfield Foods, Inc.

Good day, and welcome to the Smithfield Foods 4th Quarter 2025 Financial 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 withdraw 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 fourth quarter and full year 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. Finally, all references to retail volume and market share are based on Cercana Mueller Plus data. With me this morning are Shane Smith, President and CEO, Mark Hall, CFO, Dee France, President of Package Meats, and Donovan Owens, President of North America Fork. I will now turn the discussion over to Shane. Shane? Thank you, Julie.

Good morning, everyone. 2025 was an outstanding year. solid execution on our strategies, drove record profits, expanded margins, and increased cash flow. We set the foundation for multi-year growth while maintaining a very strong financial position, investing in our business and returning value to our shareholders. Last January, we returned to the U.S. equity markets through an IPO that reintroduced us as the new Smithfield. While our history spans 90 years, The transformation underway over the past decade has fundamentally reshaped Smithfield into a leaner, more profitable, and strategically focused company. We streamlined our package meets portfolio, exited non-core and high-cost operations, accelerated automation, and built an accountable culture focused on profitable growth. This hard work prepared us for the IPO. In 2025, first year as a public company, we delivered on our commitments, record operating profit, record net income, strength in margins, and disciplined execution across all segments. Importantly, these results were broad-based, reflecting the power of our diversified product portfolio, our vertically integrated model, and our relentless focus on operational excellence. The advantages of our model were clear in 2025, and we see further opportunities for coordination across the value chains. I'm pleased to announce that we have named Donovan Owens President of North America Pork. Under Donovan's leadership, the fresh pork segment adjusted operating profit increased to $209 million in 2025 from $30 million in 2022. This performance demonstrates our improved agility, channel mix, and disciplined operating focus. Under the new structure, fresh pork, hog production, and commodity risk management will report to Donovan. Donneville will also oversee our Mexico operations, which are an integral part of our North America growth strategy. We are excited about the opportunity to unlock additional synergies across our upstream businesses in this new structure. Now I'd like to review our fiscal 2025 accomplishments in more detail. On a consolidated basis, adjusted operating profit increased 30% to $1.3 billion, with profit margin expanding to 8.6%. up from 7.2% in 2024. Each segment executed effectively. Package Meats delivered its fourth consecutive year of operating profit above $1 billion and its second highest profit year despite higher raw material costs and a cautious consumer spending environment. Fresh pork demonstrated strong execution amid a compressed industry market spread and trade disruptions due to tariffs. and hot production achieved its highest profit year since 2014, reflecting improved operations and market conditions. Across the company, continuous improvement and productivity initiatives delivered meaningful cost savings. Our rock-solid balance sheet with net debt to adjusted EBITDA just 0.3 times at the end of the year provides us with the financial flexibility to support our growth strategies and return value to our shareholders. In 2025, we return value to shareholders through dividend payments of $1 per share. Today, we announced a quarterly dividend of 31.25 cents per share, and we anticipate paying annual dividends of $1.25 per share in 2026. In January, we entered into a definitive agreement to acquire Nathan's Famous for $102 per share. Successfully closing this acquisition will be immediately accretive and will secure a core national brand and create meaningful growth and synergy opportunities. In February, we announced that we have initiated the approval process to invest up to an estimated $1.3 billion over the next three years to build a new state-of-the-art packaged meats and fresh pork processing facility in Sioux Falls, South Dakota. Building this innovative new plant from the ground up will represent one of the largest investments in American agriculture and will modernize our manufacturing footprint and unlock long-term costs and efficiency benefits. Now let's turn to our growth outlook for fiscal 2026. Protein demand is strong and growing across consumer demographics, valued for its nutrition and health benefits. Pork, which is not our only protein but is our primary offering, is well positioned within the protein complex. Pork presents a strong relative value to beef and its nutritional profile with lean cuts like pork tenderloin, offers a superior nutritional alternative to chicken breast. Pork is also central to Asian and Latin cuisines, which are popular with U.S. consumers, particularly among Gen Z and millennials. We believe all these factors serve as a long-term tailwind for pork, and we expect 2026 to be another year of increased profitability, driven by margin expansion, disciplined cost management, and continued execution of our four strategies. Our five strategic priorities remain unchanged. Increase package meets profit through mix, volume growth, and innovation. Grow fresh pork profit by maximizing the net realizable value across channels in a best-in-class cost structure. Achieve a best-in-class production cost structure. Drive operating efficiencies in manufacturing, supply chain, distribution, procurement, and SG&A. and evaluate synergistic M&A opportunities. First, in packaged meats, which is our largest and most profitable segment, we are meeting the demand for protein with convenience, flavor, and value through our strong brand portfolio, as well as our private label offerings. Our strategy to grow packaged meats operating profit centers on three levels, mix improvement, volume growth, and innovation. So first, product mix. we remain focused on accelerating the shift toward higher margin value added product categories and expanding unit velocity while reducing volume of lower margin commodity top product categories. Coming out of 2025, we saw strong momentum in these value added categories. In the fourth quarter, we grew units and market share in our four higher margin focus areas of lunch meat and cooked dinner sausage, among others, and we expect these higher margin categories to again achieve strong volume growth in 2026. Second, volume growth. We participate in 25 key package meat subcategories at retail, 10 of which are valued at over a billion dollars. In 2025, we grew branded volume share in six of these billion-dollar-plus categories. This volume growth reflected strong increases in our points of distribution led by our national brands. Looking ahead, we see continued white space opportunities to grow volume and increase market share in each of these categories. We are driving volume in today's economy by delivering quality protein at a good value. Our portfolio of quality branded products spans multiple categories and price points and is an important competitive advantage for Smithfield. A great example is Logitech. We are attracting and retaining consumers within our branded portfolio even as they trade up and down the value spectrum. If they choose private label, we benefit as well. Over the past several years, we have improved private label profitability, which represents just under 40% of our retail channel sales. We are also supporting our brands by investing in direct-to-consumer advertising and effective trade and promotion. In 2025, we increased food service sales by 10%. driving higher sales volumes with both new and existing customers. Our success in food service reflects our position as a scale trusted provider of high quality products, as well as our ability to deliver value added solutions to save our food service customers time and money. We are also very agile in helping food service customers launch limited time offers, which help drive traffic. In 2025, we introduced 57 new limited-time offers, which gave consumers reasons to keep coming back. Despite food-away-from-home inflation nearly double that of food at home, we successfully grew food service volume 2% in 2025. In 2026, we expect to increase package meats volume across the retail and food service channels, driven by product innovation, strong marketing, advertising, and trade investments. Next, product innovation. Innovation is an important pillar of our Package Meets Growth strategy. We focus on introducing new flavors, convenient and easily prepared offerings, and premium offerings. We have numerous innovative product offerings planned for 2026 in the retail channel for our three national brands, Smithfield, Eckridge, and Nathan's. So, in summary, we expect to grow Package Meets profitability by focusing on three levels. makes improvement, volume, and innovation. Now let's talk about our second core growth strategy, increasing fresh pork profitability. We are focused on maximizing net realizable value across channels and continuing to improve operating efficiencies. 2025 was a dynamic year for fresh pork due to both compressed market spreads and trade disruptions. Historically, compressed market spreads, the price between hogs and meat, significantly reduced profitability. However, our Fresh Pork team demonstrated agility and delivered strong profitability even in tighter markets due to our improved cost structure and diversified channel strategy. In 2025, Fresh Pork profitability was strengthened by sales and volume growth in the U.S. retail channel, with profit enhanced by value-added case-ready items. We also grew volume and profitability in our pet food and pharmaceutical channels, executing well on our next best-sell strategy. In addition, we continue to deliver operating efficiencies and cost savings, which help mitigate the impact of the compressed market spread on segment profitability. In 2026, our priorities include growing volume in the U.S. retail channel, emphasizing higher-margin value-added case-ready and marinated offerings, expanding adjacent channel opportunities such as pet food and pharmaceuticals, increasing automation, plant efficiency, yield optimization, and supply chain savings, and optimizing harvest levels across our network. By focusing on these priorities, we will continue to outperform the market. Now, to our strategy to optimize hog production. We continue to progress toward a best-in-class cost structure in hog production. In 2025, we outperformed the Iowa State benchmark for hog role profitability reflecting improved genetics, feed management, and herd health. In 2026, we will continue to focus on improving our operations, including herd health and feed conversion. We're also excited about unlocking more opportunities across our hog production and fresh pork segments under Donovan's leadership. With respect to the number of hogs internally produced, in 2025, we produced 11.1 million hogs, which is down from $17.6 million at the high point in 2019 and from $14.6 million in 2024. This reduction reflects the transfer of $3.8 million to our external joint ventures, which was consistent with our right-sizing strategy. Over the medium term, we continue to target producing approximately 30% of Freshport's needs internally. We believe this will provide an optimal balance of assured supply and cost-risk management. Next, our strategy to optimize operations and deliver operating efficiencies in manufacturing, supply chain, distribution, procurement, and SG&A was a meaningful contributor to our improved profitability in 2025. In 2026, we are looking to accelerate the use of innovative technologies across all aspects of our business. We are increasingly leveraging advanced technology to become a more efficient business and to further strengthen our competitive position. We deploy this technology to drive innovation, productivity, and optimize performance on our farms, in our processing facilities, and across our corporate functions. For example, we recently formed a co-sourcing partnership with a third-party technology provider that will provide the benefits of artificial intelligence and robotic process automation for administrative and transactional work in our finance operations. This partnership gives us immediate access to the latest technology and provides flexibility as technology change continues to accelerate. Finally, we continue to evaluate opportunistic M&A to support our growth strategies. In January, we entered into an agreement to acquire one of our top national package meat spreads to make us famous. Successfully closing the acquisition will secure our rights to this iconic brand into perpetuity and enable us to maximize Nathan's famous brand growth across the retail and food service channels. With this acquisition, we will own all our major package meats brands. We will remain disciplined in evaluating additional, complementary, and synergistic M&A opportunities. In summary, we have returned to the U.S. equity market well-positioned to deliver reliable, repeatable earnings and cash flow growth. Our business model has never been stronger. Our high-performing, vertically integrated model, led by PackageMeets, provides a competitive advantage and supports sustainable margin expansion over the long term. We are investing capital in a disciplined manner to support our growth strategies, to generate attractive returns, and to build sustainable long-term value for our shareholders. With that, I will turn it over to Clark to review our financials in more detail.