Smithfield Foods, Inc. Common Stock Barclays 19th Annual Global Consumer Conference

Yeah. Well, thanks, Ben, and thank you all for being here. I was wondering what it would look like if we scheduled this over lunch. I think I now have my answer. It is great to be here, Ben. This has been a great conference. A little bit about Smithfield. For those of you who don't know us very well, we've been in business. Actually, last week was our 90th anniversary, so we've been in business for a long time. I would tell you, we are a very different company today than we have ever been in our history. What we have built pre-coming back to the U.S. IPO market was a much more durable earnings model, and it's really been built around three priorities.

Grow our packaged meats business, improve whole hog utilization in our fresh pork business, and then rightsize our hog production segment. We've been executing on those three strategies for a number of years now. The second quarter and first half of the year was really a good example of how that strategy is working for us. We did deliver record-setting second quarter and first half operating profit, and that was despite a consumer environment that, quite frankly, remains very challenged. Commodity markets on the input side of our business that have remained much more, or become much more volatile. Earlier this week, I'm sure you saw, we did announce that our upstream segments, particularly in our fresh pork business, have been unfavorably impacted by some of those market pressures I was just talking about.

The USDA pork cutout, particularly the ham primal within that cutout, has declined significantly since we gave that outlook back in early August. That's resulted in an overall lower outlook for that part of our business. To a lesser extent, we did lower our Q3 outlook for hog production. Hog prices have come down in correlation to the cutout that we were just talking about. While we're seeing pressure in these two parts of our business, we are still extremely encouraged by the momentum that we're continuing to see in our packaged meats business. We are expanding our distribution. We've gained share in key categories. We're seeing returns on innovation across our portfolio. We're also attracting younger consumers, so we're seeing a younger consumer base buying our product. We're really excited about how the business is continuing to evolve.

And most importantly, I would tell you what is different today than at any other time in our history is the strength of our balance sheet. We have an extremely strong balance sheet, and that gives us a lot of financial flexibility as we continue to think about growth, and continue to think about investing for the long-term health of the business, as well as creating value for our shareholders. Overall, while the operating environment is very dynamic, Ben, we feel really good about where we are positioned in this environment and on our ability to execute. We can open up to questions if you have them.

Yeah. Again, I would lead off with the guidance. We reaffirmed our packaged meats guidance.

Yes. We are still really excited and see a lot of momentum carrying into the second half of the year for our packaged meats business.

The call down was really isolated to the commodity inputs on the fresh pork and hog production side of the business. First, one of the main things that changed since our August report is in the USDA pork cutout. That cutout declined a lot further than our expectations, and it really compressed the overall industry gross margin spread. Specifically, again, inside of that cutout, when you look at the ham primal component of the cutout, ham values have declined materially. They are down about 25%, or came down about 25% down in the low $70s. That is for a number of reasons, whether you can point to the ham market, you can point to recovery in Mexico, for example, of some of their herd.

You can look at total international markets. It just has created a lot of short-term pressure on the ham complex, which in turn drove that spread compression. When you look at the spread altogether, the spread was down about 50% compared to July. August compared to July. It was down 50% compared to August of 2025. A lot of short-term volatility compressing that spread on the fresh pork side. Then on the hog production side, the way hogs are priced in the U.S. through the CME index, a large part of that is tied to the meat values. As we have seen meat values come down, we have seen a corresponding decrease in the revenue side in our hog production operations. Bottom line, what I would tell you is this is not anything structural. We are still executing our strategies. We are still investing in our businesses.

This is really what I think is some short-term volatility that we are seeing in the commodity markets.