Meat&Poultry - January 2013 - 10

Success is
a Matter
of System
Business Notes
Pope talks
2Q results,
strategy for
2013
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With companies like Kraft
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various components of
their businesses, it has become
commonplace for securities
analysts to view companies in
terms of their parts rather than
as a whole. PepsiCo Inc. has
garnered such attention as well
as Smithfi eld Foods Inc., the
world’s largest pork processor.
On Dec. 6, the company issued its fi nancial results for the second quarter
Larry Pope
of fi scal 2012 and in a conference call with analysts, Larry Pope, president and
CEO, offered his opinion on why it would not make sense to separate Smithfi
eld’s meat-processing and hog-raising operations.
“I’ve looked at that idea,” Pope said in response to an analyst’s question re-
garding a spin-off. “It’s complex and not easy to do. And you’d be surprised how
integrated this business is, particularly the pieces [and] how they tie together.”
But in earlier comments, Pope described Smithfi eld Foods as “essentially
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two companies” made up of a commodity-based live production company
and a fresh and processed consumer packaged-meats company.
“The consumer packaged-meats company generates, just the packaged
meats side, approximately $6 billion in annual sales, larger than many of our
competitors in the same packaged-meats space,” Pope said. “That business,
combined with our fresh-pork business, generates $600 million to $700 million
in operating profi ts and even more on an EBITDA basis.
“If you value this segment like our competitors, I think you will see this
business alone is essentially worth more than the whole market capitalization
of Smithfi eld Foods. That means our live production and international business
all combined are worth very little.”
Pope said that what the company’s hog-production operations may lack in
profi tability is balanced by their strategic value.
“The farms make a difference,” he said. “We can do things on the farm
that get us business no one else can do.”
For the quarter ended Oct. 28, Smithfi eld Foods had income of $10.9 mil-
CSB-System International, Inc. USA
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lion, equal to 7 cents per share on the common stock, which compared with
income of $120.7 million, or 74 cents per share, during the same quarter of
the previous year. Sales for the quarter were $3,225.8 million, down 3 percent
from $3,312.6 million during the same quarter of the previous year. ■
10 • Meat&Poultry • January 2013 • www.MeatPoultry.com
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MEATXPO 13
The Mirage Hotel, Las Vegas, NV USA
February 10-13, 2013
Booth #1317
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Meat&Poultry - January 2013

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