Hormel Foods Corporation

Hormel Foods Corporation 1 Agenda • Company Overview • Current Market Conditions • Strategies for Creating Value • Summary •Q & A 2 Legal Disclosure • This presentation may contain information that is “forward-looking” as defined in the Private Securities Litigation Reform Act of 1995. • Any “forward -looking” statements are based on current expectations that are subject to risks and uncertainties, which could cause actual results to differ. • Please refer to the risk factors discussed in the company’s annual report on Form 10-K. 3 • FY ‘03 sales $4.2 billion • Market cap. $4.2 billion • 1.5% dividend yield • Shareholder return (CAGR) – 1 year = 45% – 5 year = 13% – 10 year =15% • 16,000 employees Company Strengths • Strong brands across broad portfolio – 32 brands with #1 or #2 market share –premium priced – national distribution • Steady earnings growth – earnings growth in 18 of the last 20 years • Consistent dividend history – 38 years of consecutive dividend increases – never missed a dividend (public since 1928) • Strong balance sheet/cash flow – 23 percent debt/capitalization ratio – 14X EBITDA/interest coverage 5 Company Structure FY 2004 YTD Q2 Hormel Foods Corporation Grocery Products Refrigerated Foods Jennie-O Turkey Store Specialty Foods All Other 16% Sales 48% Sales 21% Sales 10% Sales 5% Sales 32% Profit 34% Profit 20% Profit 7% Profit 7% Profit Meat Products Diamond Crystal Dan's Prize Brands Foodservice HRL HealthLabs Vista Specialty Products International Century Foods 6 Grocery Products 16% of Sales, 32% of Operating Profit Three Major Groups “Pure Packaged Foods Business” •Heat and Eat HORMEL & STAGG chili, KID’S KITCHEN, DINTY MOORE, MARY KITCHEN •Recipe/Ingredient SPAM, HORMEL chunk meats, bacon bits, meat spreads, HERB-OX bouillon •Ethnic HERDEZ, CHI-CHI’S, DONA MARIA, MARRAKESH EXPRESS, HOUSE OF TSANG, PATAK’S 7 Refrigerated Foods 48% of Sales, 34% of Operating Profit Segment Activities “Value-Added Protein Business” •Hog procurement/processing -6.8 million head/year •Retail & Foodservice sales -fresh pork HORMEL ALWAYS TENDER -processed meats CURE 81, BLACK LABEL, DI LUSSO, BREAD READY, HORMEL 8 JENNIE-O Turkey Store 21% of Sales, 20% of Operating Profit Leader in Turkey Industry • Largest turkey processor – 17% of industry • Only turkey company in all segments – retail fresh, retail proc’d, retail frozen, deli, foodservice, whole birds 9 Specialty Foods 10% of Sales, 7% of Operating Profit • Diamond Crystal Brands • Hormel HealthLabs • Specialty Products • Century Foods 10 All Other 5% of Sales, 7% of Operating Profit • Hormel Foods International – export sales – international joint ventures • Dan’s Prize, Inc. – cooked beef • Vista International Packaging, Inc –casings 11 A Balanced Business Model Packaged Foods Protein -Stable earning Significant growth -Strong margins and margin expansion potential One side hedges the other throughout the protein cycle. 12 Strong Financial Results Three & six months ending April 24, 2004 • Operating EPS up 54%* for quarter and 32%* YTD – exceptional demand for value-added protein products • Sales up 14% for quarter and 13% YTD • Weakness in Grocery Products – higher pork and beef raw material costs – comparison against exceptional prior year *Adjusted non-recurring net earnings/expenses 13 Lower Protein Inventories April 2004 Compared to April 2003 • Pork Down 13% • Beef Up 8% • Chicken Down 12% • Turkey Down 6% Source: USDA Monthly Cold Storage Report - May 20, 2004 14 Stable Protein Supply Outlook • Pork Up 2% • Beef Down 3% • Chicken Up 3% • Turkey Down 5% • Total Up 1% Source: Sparks Companies, Inc. 15 Higher Protein Markets $ per cwt May 04 May 03 Change • Pork - Cut-out $ 82 $ 61 34% • Beef - Cut-out 157 140 12 • Chicken - Breast 242 166 46 • Turkey - Breast 190 119 60 - Thigh Meat 92 53 74 16 Higher Grain Markets May 04 May 03 Change • Corn (bushel) $2.84 $2.39 19% • Soy Meal (ton) $301 $195 54% 17 Strategies for Creating Value • Improve product mix. • Contemporize established products. • Support Foodservice growth. • Grow the International business. • Identify and pursue high potential businesses. • Exercise financial discipline. 18 Brand the Fresh Meat Case Beef, Pork, Turkey and Chicken 19 Improve Product Mix “We are mainstreaming turkey” Bratwurst Holiday Whole Birds Fully Cooked Entrees 20 More Brands = More Profits Branding/Margin Trends Segment Oper. Profit % of Branded Products % of Sales 85% 9% 80% 8% 75% 70% 7% 65% 6% 60% 5% 55% 50% 4% 1997 1998 1999 2000 2001 2002 2003 2004 1997 1998 1999 2000 2001 2002 2003 2004 (est) (est) 21 Contemporize Established Products SPAM Singles DINTY MOORE “Bowl out of the Box” New 36% YTD 22 Contemporize Established Products HORMEL Bacon Bits PATAK’S Fully Cooked Rice 22% YTD New 23 Hormel Foodservice Growth Last Four Quarters (Sales $) Q3 Q4 Q1 Q2 +22% +9% +10% +15% ‘02 ‘03 ‘02 ‘03 ‘03 ‘04 ‘03 ‘04 24 Foodservice Successes Growth in the Last Twelve Months +13% +27% +38% +304% Premium Bacon 25 Hormel Foodservice Success Pre-sliced • Direct sales force Meats – chef-to-chef program •“Pre”strategy Pork • On trend portfolio O ssobuco –ethnic – BBQ BBQ • Food safety expertise Ribs 26 Grow International Business • Export Pure Foods - Hormel Foods new plant – SPAM & STAGG chili Philippines – fresh pork items • Focused on developing markets for processed meats Retail Presence in China • Foodservice opportunities • Targeting selected international markets – Philippines – China 27 Identify High Potential Businesses Ethnic Mexican = Italian = Chinese = Indian = Mediterranean = 28 Exercise Financial Discipline • Prudent allocation of funds • Strong cash position and debt capacity • Consistent dividend history • Strong corporate governance 29 Use of Cash Flow • Acquisitions – Must meet financial benchmarks – EVA measures ongoing performance • Share repurchase/dividend increases 30 Summary • Strong brands • Diversified product mix stabilizes business in a difficult environment • Deliver products that meet the consumer’s needs • Improving product mix • Strong financial position 31 Hormel Foods Corporation 32.

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