Smithfield Foods 2012 Integrated Report
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2012 INTEGRATED REPORT We combine Leading Brands and a Commitment to Sustainability to produce Good Food. Responsibly.® 130388_AR_C_Spread 9/17/12 6:35 PM Page 2 OUR OPERATIONS ABOUT THIS REPORT CONTACT US The feedback we have received on our performance and communications efforts has proven very valuable to our company. Through independent operating companies and joint ventures, as well as our stake in Europe’s Welcome to the Smithfield Foods1 2012 Integrated FORWARDLOOKING INFORMATION Report—our first to combine our annual financial We hope that you will continue to communicate with us as we proceed along our performance improvement journey. largest packaged meats provider, Smithfield Foods’ operations extend to 12 countries. results with our sustainability reporting. Our This report contains “forward-looking” statements within the DENNIS H. TREACY STEWART T. LEETH sustainability strategy is based on our core values meaning of the federal securities laws. The forward-looking Executive Vice President Assistant Vice President, Environmental and organized by five pillars that represent our key statements include statements concerning our outlook for and Chief Sustainability Officer and Corporate Affairs, and Senior Counsel UNITED STATES areas of sustainability focus: animal care, employees, the future, as well as other statements of beliefs, future plans +1 757 365 3000 +1 757 365 3000 environment, food safety and quality, and helping and strategies or anticipated events, and similar expressions [email protected] [email protected] h California h Nebraska communities. In this summary report, we report on concerning matters that are not historical facts. Our forward- h h Colorado New Jersey our progress and performance in each area. We have looking information and statements are subject to risks and WILLIAM D. GILL KEIRA L. LOMBARDO h Georgia h North Carolina also identified and report on a sixth pillar, value uncertainties that could cause actual results to differ materially Assistant Vice President, Vice President, Investor Relations h Illinois h Ohio creation, recognizing that this concept underpins from those expressed in, or implied by, the statements. These Environmental Affairs and Corporate Communications h h Oklahoma our sustainability strategy and connects it with our risks and uncertainties include the availability and prices of Indiana +1 757 356 6700 +1 757 365 3000 h h Iowa Pennsylvania business results. live hogs, raw materials, fuel and supplies, food safety, live - [email protected] [email protected] h Kansas h South Carolina stock disease, live hog production costs, product pricing, the h Kentucky h South Dakota Integrated reporting is rapidly evolving, and there is not competitive environment and related market conditions, risks facebook.com/SmithfieldFoods @SmithfieldCSR youtube.com/SmithfieldFoods h Maryland h Texas yet a standardized approach. We expect our re por t ing will associated with our indebtedness, including cost increases due h Massachusetts h Utah continue to progress over time, and we wel come feedback to rising interest rates or changes in debt ratings or outlook, h h Minnesota Virginia on how we might improve our approach. hedging risk, operating efficiencies, changes in foreign currency INTEGRATED REPORTING INDEX h Missouri h Wisconsin exchange rates, access to capital, the cost of compliance with In preparing our first integrated report, we considered the guidance of the This report, with the exception of the Form 10-K, is printed on Neenah Paper Classic Crest Recycled To produce this report, we used the results of an updated and changes to regulations and laws, including changes in International Integrated Reporting Council (IIRC). Integrated re porting is evolving rapidly, and we expect our own reporting to continue to evolve as well. Below is 100 Bright White stock. This paper contains 2012 mate riality analysis and the Global Reporting Initiative accounting standards, tax laws, environmental laws, agricultural a high-level mapping of our report to the content elements recommended in the 100 percent post-consumer recycled fiber and was (GRI) G3 Guidelines, which provide a recommended laws and occupational, health and safety laws, adverse results IIRC integrated reporting framework. made using 100 percent renewable electricity. We achieved the following by printing on this stock sustainability reporting framework and indicators. We also from ongoing litigation, actions of domestic and foreign instead of virgin paper: reviewed recommendations pub lished in 2011 by the governments, labor relations issues, credit ex posure to large IIRC REPORTING MAJOR REPORT PAGES International Integrated Reporting Council (IIRC), which aims customers, the ability to make effective acquisitions and CONTENT ELEMENT SECTIONS ADDRESSING MEXICO Trees saved 139 to establish a global integrated reporting framework. (See successfully integrate newly acquired businesses into existing Organizational overview Our Business Journey 10 Integrated Reporting Index on inside back cover.) operations, our ability to effec ti vely restructure portions of our and business model Our Family of Companies 40 Water saved 3,371 gallons operations and achieve cost savings from such restructurings Operating context, including Chief Executive Officer Letter 1 Solid waste not In fiscal 2012, we retained an independent consultancy to and uncertainties described under “Item 1A. Risk Factors” in risks and opportunities Our Business Journey 10 produced 3,847 pounds conduct third-party pre-assurance of selected performance our annual report on Form 10-K for the fiscal year ended Governance & Management 16 Value Creation 12–15, 21, 25, Energy saved 44 million BTUs data and adherence to the AA1000 Assurance Standard April 29, 2012. Readers are cautioned not to place undue 28, 33, 35, 37 (2008) principles. (See smithfieldcommitments.com for reliance on forward-looking statements because actual results Strategic objectives Our Business Journey 10 Carbon emissions more information.) may differ materially from those expressed in, or implied by, Key Commitments 7 not generated 13,158 pounds the statements. Any forward-looking statement that we BELGIUM Governance and remuneration Governance & Management 16 Unless otherwise indicated, the information and metrics make speaks only as of the date of such statement, and we FRANCE within this report pertain to Smithfield Foods’ inde pen dent undertake no obligation to update any forward-looking Performance Key Data Summary 6 GERMANY Core Reporting Areas 12, 20, 24, operating companies and invest ments in which we have statements, whether as a result of new information, future 27, 32, 34 ITALY a majority (51 percent or more) interest. We also discuss events, or otherwise. Comparisons of results for current and Future outlook Chief Executive Officer Letter 1 our management approach to contract farming. Although any prior periods are not intended to express any future THE NETHERLANDS Our Business Journey 10 Non-GAAP Measure Reconciliation for POLAND contract farms are managed under the same animal care trends or indications of future performance, unless ex pressed Pork Segment Profitability Chart on Page 10 (in millions) FY 09 FY 10 PORTUGAL and environmental standards as Smithfield-owned farms, as such, and should only be viewed as historical data. we do not provide performance data for these operations Operating profit —Pork segment $395 $539 ROMANIA Add: Pork segment restructuring because they are independent businesses. We primarily use and impairment charges 88 34 Designed and produced by RKC! SPAIN American measurement metrics and American numbering More comprehensive (Robinson Kurtin Communications! Inc) Pork segment adjusted EBIT $483 $573 UNITED KINGDOM when reporting the performance of our U.S. and inter na - sustainability information will be available Content developed by BuzzWord, Inc. Operating profit —Pork segment $395 $539 tional operations. at smithfieldcommitments.com in October 2012, Less: Operating profit —Fresh pork (76) (61) Photography by Timothy Llewellyn Add: Packaged meats restructuring including full GRI B-level reporting. and impairment charges 67 17 (except pages 20 and 36) Packaged meats adjusted EBIT $386 $495 Printed by J.S. McCarthy Operating profit —Pork segment $395 $539 Less: Operating profit —Packaged meats (319) (478) Joint ventures Wholly owned Campofrío Food Group, S.A., a 1 Smithfield Foods, Inc., is a holding company with a number of independent operating companies (IOCs). Throughout this report, Add: Fresh pork restructuring Smithfield Foods operations publicly traded company of which the term “Smithfield” is utilized for ease of reference to indicate one or more of these independent operating companies. and impairment charges 21 17 Smithfield Foods owns 37 percent Smithfield should not be confused with The Smithfield Packing Company, Incorporated, which is one of Smithfield’s IOCs. Fresh pork adjusted EBIT $ 97 $ 78 TABLE OF CONTENTS Chief Executive Officer Letter 1 Management 51 Ask the Chief Sustainability Officer 4 Corporate Information 52 Our Business Journey 10 Contact Us 53 Value Creation 12 MAPS, DIAGRAMS, AND MAJOR TABLES Governance & Management 16 Animal Care 20 Map of Operations Foldout Employees 24 Key Data Summary 6 Environment 27 Key Commitments 7 Food Safety & Quality 32 Value Creation & Risk Management 14 Helping Communities 34 10-Year Financial Summary 48 International Operations 36 Cumulative Total Return