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Smithfield Foods (NASDAQ: SFD ) is a producer and processor of pork, and is the largest producer of pork-based products in the world . Domestically, SFD has a top market share in several prepared food categories, such asBuildingBenjamins is a free stock picking and market commentary investment newsletter. Building Benjamins is the DBA (doing businesses as) publishing entity for Tradition Investment Management, LLC, a registered investment adviser. Benjamin Halliburton, our founder, also founded Tradition Ca ...

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Financial Performance - Sales for the three months ended March 30, 2025, were $3,771 million, an increase of 9.5% compared to $3,444 million for the same period in 2024[8] - Gross profit for the same period was $510 million, up 40.9% from $362 million year-over-year[8] - Net income from continuing operations attributable to Smithfield was $224 million, representing a 96.5% increase from $114 million in the prior year[8] - Comprehensive income attributable to Smithfield for the three months ended March 30, 2025, was $267 million, compared to $105 million for the same period in 2024[9] - Operating profit for the consolidated entity was $321 million for Q1 2025, compared to $163 million in Q1 2024, marking a significant increase of approximately 96.3%[35] - Other comprehensive income for the three months ended March 30, 2025, was $43 million, compared to a loss of $24 million for the same period in 2024[99] Assets and Equity - Total assets as of March 30, 2025, were $11,146 million, a slight increase from $11,054 million at the end of 2024[12] - Total shareholders' equity increased to $6,225 million as of March 30, 2025, compared to $5,834 million at the end of 2024[12] - Cash and cash equivalents at the end of the period were $928 million, down from $943 million at the end of 2024[12] - Accounts receivable increased to $680 million as of March 30, 2025, from $494 million as of December 29, 2024, indicating a rise of 37.6%[57] - Total inventories decreased slightly to $2,385 million as of March 30, 2025, from $2,412 million as of December 29, 2024[59] Cash Flow and Capital Expenditures - The company reported net cash flows used in operating activities of continuing operations of $(166) million for the three months ended March 30, 2025[14] - Capital expenditures for the same period were $79 million, compared to $92 million in the prior year[14] - The company completed its IPO on January 29, 2025, issuing 26,086,958 shares at $20.00 per share, raising net proceeds of $236 million[92] Segment Performance - The Packaged Meats segment generated sales of $2,024 million in Q1 2025, compared to $1,999 million in Q1 2024, reflecting a year-over-year increase of about 1.3%[35] - The Fresh Pork segment reported sales of $2,033 million in Q1 2025, up from $1,938 million in Q1 2024, indicating a growth of approximately 4.9%[35] - The Hog Production segment reported sales of $932 million in Q1 2025, compared to $706 million in Q1 2024, representing an increase of approximately 32%[35] - The Packaged Meats segment's operating profit was $266 million in Q1 2025, compared to $286 million in Q1 2024, showing a decline of about 7%[35] - The Fresh Pork segment's operating profit was $82 million in Q1 2025, down from $110 million in Q1 2024, showing a decrease of 25.5%[35] Strategic Initiatives - The company completed the acquisition of a dry sausage production facility for $38 million on July 30, 2024, to enhance its value-added packaged meats business[45] - The carve-out and distribution of European operations to WH Group was completed on August 26, 2024, marking a strategic shift in geographical focus[39] - The company will supply approximately 3.2 million hogs annually to Murphy Family Farms as part of its restructuring strategy[52] Derivative Instruments and Hedging - As of March 30, 2025, the total fair value of derivative instruments was $47 million, an increase from $15 million on December 29, 2024[63] - The notional volume of open derivative instruments designated in cash flow hedging relationships included 722,379,000 pounds of lean hogs and 37,180,000 bushels of corn[68] - For the three months ended March 30, 2025, the total derivative loss recognized in sales was $2 million, compared to a loss of $12 million for the same period in 2024[74] - The company recognized pre-tax gains of $45 million on commodity contracts in other comprehensive income for the three months ended March 30, 2025[68] Legal and Contingent Liabilities - The company reported contingent liabilities of $141 million related to litigation matters[122] - The company made aggregate payments of $194 million to settle class claims in antitrust price-fixing litigation[124] - The company intends to vigorously defend against ongoing antitrust litigation claims, including those related to wage-fixing violations[127]

Financial Performance - Smithfield Foods reported net sales of $3.8 billion for the first quarter of fiscal 2025, an increase of $327 million or 9.5% compared to the same period in 2024[4]. - Operating profit reached $321 million, up $158 million or 97% year-over-year, with an operating margin of 8.5%, compared to 4.7% in Q1 2024[4][6]. - Adjusted operating profit was $326 million, reflecting an increase of $150 million or 86% from the first quarter of 2024, with an adjusted operating margin of 8.6%[4][6]. - The Hog Production segment saw a significant increase in sales, rising by $226 million or 32.0% to $932 million compared to Q1 2024[5]. - Packaged Meats operating profit was $266 million, with an operating profit margin of 13.1%[4][6]. - Sales for the three months ended March 30, 2025, increased to $3,771 million, up from $3,444 million for the same period in 2024, representing a growth of 9.5%[23]. - Net income from continuing operations attributable to Smithfield for the three months ended March 30, 2025, was $224 million, compared to $114 million for the same period in 2024, reflecting a 96.5% increase[29]. - Adjusted EBITDA from continuing operations for the three months ended March 30, 2025, was $396 million, compared to $261 million for the same period in 2024, indicating a growth of 51.8%[32]. - The net income margin from continuing operations improved to 6.0% for the three months ended March 30, 2025, compared to 3.3% for the same period in 2024[32]. - Net income from continuing operations increased to $912 million for the twelve months ended March 30, 2025, compared to $798 million for the previous year, representing a growth of 14.3%[35]. - Adjusted EBITDA from continuing operations rose to $1,514 million, up from $1,379 million, reflecting an increase of 9.8% year-over-year[35]. Financial Position - The company maintains a strong financial position with $3,230 million in available liquidity, including $928 million in cash and cash equivalents[7]. - The net debt to Adjusted EBITDA ratio stands at 0.7x as of March 30, 2025, indicating a solid leverage position[7]. - Total current assets increased to $4,334 million as of March 30, 2025, from $4,202 million as of December 29, 2024, marking a rise of 3.1%[25]. - Total liabilities decreased to $4,921 million as of March 30, 2025, from $4,934 million as of December 29, 2024, showing a reduction of 0.3%[25]. - Cash and cash equivalents at the end of the period were $928 million, down from $943 million at the beginning of the period, a decrease of 1.6%[27]. - The ratio of total debt and finance lease obligations to net income from continuing operations improved to 2.2x, down from 2.5x[35]. - The ratio of net debt to adjusted EBITDA from continuing operations decreased to 0.7x, compared to 0.8x in the prior year[35]. Future Projections - Smithfield anticipates total company sales to increase in the low-to-mid-single-digit percent range compared to fiscal year 2024[13]. - The company projects adjusted operating profit for the Packaged Meats segment to be between $1,050 million to $1,150 million for fiscal 2025[13]. - An annual dividend rate of $1.00 per share is expected for fiscal 2025, with quarterly dividends of $0.25 per share[8]. Operational Changes - The company undertook a workforce reduction initiative, resulting in a total severance cost of approximately $9 million[29]. - The company reported a reduction in workforce resulting in a cost saving of $9 million during the quarter[38]. - The company incurred $6 million in insurance recoveries, impacting the overall financial results positively[38]. - The Hog Production Reform initiative contributed an additional $1 million to the operating profit for the quarter[38]. - The company is focusing on market expansion and new product development to drive future growth[36].

Financial Performance - Fiscal Year 2024 net sales reached $14.1 billion, with an operating profit of $1.1 billion and an adjusted operating profit of $1.0 billion, marking a significant increase from $258 million in 2023[4] - For the twelve months ended December 29, 2024, net income from continuing operations was $798 million, compared to a loss of $133 million in the prior year[25] - The company reported a net income of $970 million for the twelve months ended December 29, 2024, compared to $23 million in the previous year[30] - Operating profit for the twelve months ended December 29, 2024, was $1,118 million, a significant recovery from a loss of $56 million in the prior year[25] - Adjusted operating profit for the twelve months ended December 29, 2024, was $1,024 million, up from $258 million in the previous year, indicating a significant improvement[44] Segment Performance - Packaged Meats segment achieved an operating profit of $1.2 billion, with an operating margin of 14.0%, up 70 basis points from 12.9% in fiscal 2023[4] - Fresh Pork segment operating profit increased to $266 million in fiscal 2024, compared to $117 million in 2023[6] - Hog Production segment profitability saw a $600 million increase, although it reported an operating loss of $144 million in fiscal 2024[6] - The Packaged Meats segment's adjusted operating profit is expected to be between $1.05 billion to $1.15 billion for fiscal year 2025[12] Cash Flow and Liquidity - The company generated $916 million in cash flows from operating activities and ended fiscal year 2024 with a net debt to Adjusted EBITDA ratio of 0.8x[7] - The company had $3.245 billion in available liquidity as of December 29, 2024, consisting of $943 million in cash and cash equivalents[7] - Cash flows from operating activities of continuing operations for the twelve months ended December 29, 2024, were $916 million, an increase from $688 million in the previous year[30] - Cash, cash equivalents, and restricted cash at the end of the period (including discontinued operations) increased to $943 million from $687 million in the previous year[31] Future Projections - For Fiscal Year 2025, the company expects total adjusted operating profit to be between $1.1 billion to $1.3 billion, with sales growth projected in the low-to-mid-single-digit percent range compared to fiscal year 2024[12] - Capital expenditures for fiscal year 2025 are projected to be between $400 million to $500 million, focusing on profit improvement and maintenance projects[12] - A quarterly cash dividend of $0.25 per share was declared, anticipating an annual dividend rate of $1.00 per share for fiscal year 2025[8] Balance Sheet Highlights - Total assets decreased to $11,054 million as of December 29, 2024, down from $13,317 million a year earlier, indicating a reduction of 16.9%[27] - The company’s total current liabilities decreased to $1,706 million as of December 29, 2024, from $2,450 million a year earlier, a reduction of 30.3%[27] - The company’s additional paid-in capital decreased to $3,102 million as of December 29, 2024, down from $4,152 million in the previous year[27] - The total debt and finance lease obligations decreased to $2,002 million as of December 29, 2024, from $2,033 million in 2023[42] Profitability Metrics - The company reported a net income margin from continuing operations of 5.6% for the twelve months ended December 29, 2024, compared to a loss margin of 0.9% in 2023[39] - The operating profit margin for the three months ended December 29, 2024, was 8.5%, compared to a margin of (2.9)% for the same period in 2023[44] - The company reported an operating profit margin of 7.9% for the twelve months ended December 29, 2024, compared to 1.8% for the previous year[44] - The company achieved an adjusted operating profit margin of 7.2% for the twelve months ended December 29, 2024, compared to 1.8% in the previous year[44] Other Financial Impacts - The company recognized $86 million in employee retention tax credits during the second quarter of 2024, impacting cost of sales and SG&A[33] - The company incurred litigation charges of $196 million during the three months ended December 31, 2023, impacting overall profitability[45] - Incremental costs from property destruction amounted to $4 million for the twelve months ended December 29, 2024[44] - The West Coast exit and hog production reform incurred costs of $7 million during the twelve months ended December 29, 2024[44]

Debt and Financial Obligations - As of December 29, 2024, the company had $2,002 million in total debt and finance lease obligations, with $2,303 million in undrawn capacity[227]. - The Senior Revolving Credit Facility allows for an increase in commitments up to $500 million before maturity[228]. - The company may face limitations on additional borrowings and investments due to covenants in its debt agreements[231]. - A breach of covenants could lead to defaults, requiring immediate repayment of outstanding amounts[232]. - The company’s ability to generate sufficient cash flow to service its debt obligations is uncertain and may be affected by various external factors[237]. - Future refinancing of debt may occur at higher interest rates, increasing financial strain[238]. - The company’s secured indebtedness could limit its ability to raise additional capital or pursue business opportunities[231]. - The company’s future cash flow generation is uncertain, which may affect its ability to service debt obligations[237]. - The company’s variable rate indebtedness exposes it to interest rate risk, potentially increasing debt service obligations[240]. Shareholder and Corporate Governance - WH Group owns approximately 92.7% of the company’s outstanding shares, qualifying it as a "controlled company" under Nasdaq rules[245]. - WH Group beneficially owned approximately 92.7% of the outstanding shares of common stock as of March 24, 2025[245]. - WH Group's control allows it to designate a majority of the directors on the board, impacting corporate governance and shareholder actions[247]. - The concentration of ownership by WH Group may deprive other shareholders of opportunities to receive a premium for their shares during a sale[249]. - If WH Group sells a controlling interest in the company, shareholders may not realize any change of control premium on their shares[250]. - Certain directors may have conflicts of interest due to their equity interests in WH Group, potentially affecting decision-making[252]. Dividends and Related Party Transactions - The company expects to pay annual dividends equal to 50% of its net income, subject to board discretion[271]. - The company has historically paid dividends to WH Group annually, along with special dividends in some years[271]. - The company is engaged in related party transactions with WH Group, which may create perceived conflicts of interest[255]. Market and Economic Risks - Changes in U.S.-PRC relations may adversely impact the company's business and market price of its common stock[257]. - The company may not be able to sustain an active trading market for its common stock, impacting its ability to raise capital[266]. - The company faces risks related to exchange rate fluctuations for shareholders whose principal currency is not the U.S. dollar[272]. - The company may experience significant stock price volatility due to various market factors, including operational results and investor sentiment[267]. - Changes in national or global economic conditions, including inflation and interest rates, could adversely affect the demand for the company's products[190]. Operational and Supply Chain Risks - The company relies on specific suppliers for key ingredients, including sodium and seasonings, which could pose risks if supply disruptions occur[118]. - Disruptions in the supply chain could lead to increased costs and affect the company's ability to meet demand, impacting overall financial performance[119]. - The reliance on third-party service providers for transportation and cold storage poses risks, as failures by these providers could result in additional costs[149]. - Increased distribution costs, including freight and cold storage, could adversely affect the company's financial condition and results of operations[154]. - The company incurs significant legal and regulatory expenses as a public entity, which diverts management attention from revenue-generating activities[260]. Competition and Market Dynamics - The food industry is highly competitive, with numerous brands competing for shelf space and sales, particularly in the Packaged Meats and Fresh Pork segments[123]. - The protein industry faces competition from large multi-brand packaged foods businesses and other protein sources, with principal competition from other pork processors[125]. - Competitors may have greater resources and innovation capabilities, potentially allowing them to bring new products to market faster[126]. - Changes in consumer preferences and negative perceptions of brands could lead to reduced demand and price reductions for the company's products[131]. Regulatory and Compliance Risks - The company is subject to extensive governmental regulations, requiring significant compliance expenditures, which may impact operations and financial results[197]. - The EPA proposed more stringent effluent limitations for wastewater discharges from meat and poultry facilities, which could require material capital expenditures[215]. - The company is subject to examination of its tax returns, and adverse outcomes could negatively impact its financial condition and results of operations[193]. - The company may incur increased costs related to the assessment and disclosure of climate-related risks and targets due to new SEC rules[219]. - The company may face increased litigation risks related to climate-related disclosures, which could adversely affect future results and financial condition[219]. Employee and Labor Relations - As of February 28, 2025, the company had approximately 34,000 employees in the U.S. and 2,500 in Mexico, with 46% of the workforce covered by collective bargaining agreements[169]. - Labor relations issues may arise, potentially leading to strikes or work stoppages, which could disrupt operations[169]. Product Development and Innovation - The company regularly conducts research and development to innovate new products, but success depends on anticipating consumer preferences and regulatory compliance[124]. - The company may struggle to develop and market new products successfully, which could impact growth, sales, and profitability if new products do not gain market acceptance[127]. Risk Management and Internal Controls - The company has implemented risk management and hedging programs, but these may not fully mitigate volatility in earnings due to commodity price fluctuations[115]. - The company may face challenges in maintaining effective internal controls over financial reporting, which could affect its stock price[261]. - Cybersecurity risks are increasing, with potential significant costs to address incidents that could harm the company's reputation and financial standing[159]. Legal and Reputational Risks - The company may experience fluctuations in quarterly results due to seasonality and changes in promotional activities[153]. - Product recalls or contamination issues could lead to significant losses and damage to the company's reputation, impacting financial results[142]. - The company faces potential legal proceedings and regulatory investigations that may result in significant expenses and reputational damage[205].