HOG PRODUCTION DIVISION MEAT PROCESSING DIVISION

Transcription

1 HOG PRODUCTION DIVISION MEAT PROCESSING DIVISION

2 Prerequisites for Success in Animal Protein Industry Proximity to Grain Growing Area Arable Land Fresh Water Climate Accessibility to Infrastructure Strong Local Market Optimal Population Density Labor Availability Proximity to Export Markets Political Stability 2

3 Market Proximity POLAND ROMANIA 61 M 58 M 3

4 Romania Agricultural Key Data Area: 23.80m HA Population: 19.94m Arable Land: 9.38m HA Statistics * Grain Production (in Metric Tons): Romania West Region Corn: 8.9m 1.4m Wheat: 8.4m 1.0m * Hog Production Sow Inventory 0.12m Commercial 4.4m - 2.3m internally produced piglets - 1.6m imported feeder pigs Backyard Pigs 1m (estimated) * Pork Consumption: kg/capita 4

5 Romania Economics Key Data Real GDP - RO vs. EU (%) Romanian Inflation Rate 7,3 6,3 4,8 5,6 3,5 3,8 2,8 3,2 2,2 7,9 2 1,7 0,7 1,8 1,8 2,1 1,3 0,4 0,4-0, Q ,8 5,6 6,1 5,8-1,1 3,4-4,5 3,2 1,4 1,6-6, , , RO EU Estimate Exchange Rate Romanian Min Gross Wages (RON/ EUR) ,24 4,21 4,24 4,46 4,42 4,44 4,45 4,49 4,53 3,68 3,34 4,01 4,06 4,22 3,47 3,05 3,18 3,05 3,33 3,35 2,44 2, EUR/ RON USD/ RON RON EUR Jan 1, Jul 1, Feb, 2017 Source: Romanian NIS (INS), RNB (BNR), EU World Bank, Ro Gov. Estimations 5

6 RO VAT (%) Sept 1, Romania Economics Key Data Jun 1, 2015 Others Books &Newspapers/ Access to Tourism Attractions Social Buildings Food Standard Quota Bread/ Meals &Grains Jan 1, ,84 CONSUMER PRICE INDEX (%) 107,85 105,59 106,09 105,79 103,33 103,98 101,07 99,41 98, May ,28 9,06 RO/ EU Area/ USA Reference Interest Rate 15,46 ROBOR - EURIBOR - LIBOR 6,46 6,21 5,31 4,81 3,31 1,92 1,75 1,23 1 1,25 0,88 0,25 0,25 0,25 0,25 0,54 0,25 0,16 0,25 0,05 0,27 0, NBR Key Data ECB Refi Rate Fed Funds 4,7 8,38 10,65 6,17 6,05 6,05 4,68 2,89 2,44 1,7 0,7 1,01 1,36 1,02 0,19 0,29 0,78 0,83 0,08-0,13-0,25 1,43 0,25 0,3 0,58 0,31 0,25 0,26 0,61 0, Q ROBOR EURIBOR LIBOR Source: Romanian NIS (INS), RNB (BNR), EU World Bank, Ro Gov. Estimations 6

7 Smithfield Romania - Key Data mil hogs to be slaughtered - Contract Growing entered rapid development stage % Fresh 17% Carcass 19% Semi- Processed - 1 mil hogs were produced and slaughtered - Operations efficiency maximized and plans for next stage of growth are developed % Domestic 26% Export Net Meat Sales $211m Integration 100% - Steady state in sow inventory is reached - All greenfield investments in farms and feed mills are finalized; acquired 11k Ha of land 2009 Number of Sows 52k Hogs Produced 1.1m Employees 2,200 - Smithfield Foods made its first investment in RO - Produced and Slaughtered 0.1 mil hogs CY 16 Data, Employees Plant & Farms

8 Smithfield Romania Integrated Model and Industry Leader 1.1mill Hogs produced in 2016 Farms Structure 52k Sows in 5 Farms 1 Boar Stud 542k Grow-out Spaced; over 80 Farms - 433k (75%) Company Owned - 110k (25%) Contract Growers SMITHFIELD ROMANIA 38% of sow inventory 25% of total slaughtered hogs Feed Mills 2 Feed Mills Total Weekly Capacity 14k tons 140k ton of Grain Storage Slaughterhouse Capacity Slaughtering 600 hogs/hr. Primal Cuts 300 hogs/hr. Rendering Capacity 30k tons/yr. per Category 8

9 Smithfield Romania Vertical Integration Food Safety Management Provision of Own Animal Feed Respected Brands Consumers & Customers Feed Production Feed Quality Management 25% of Fresh Meat Production in RO Meat Processing/ Branded Fresh Meats Hog Production 100% AWR Compliance Traceability Bio-security Control 9

10 Smithfield Romania Growth Plans 1. First step of growth in pork production is slaughtering of more than 2 m hogs in Source hogs from SFD integrated farms and by purchasing on the free market 3. Develop production of value added products to complete the vertical integration model 10

11 Opportunities to Grow Together with Smithfield Romania s Integrated Model 1. Contract Grower Producer 100% integrated into SFD 2. Contract Grower Producer buying the inputs from SFD and selling back the pigs to SFD for a market value 3. Independent producer selling market hogs to SFD at market value 11

12 Contract Grower Producer 100% Integrated into SFD Model Smithfield Romania: Supplies the pigs Continues owning the pigs & market risk Provides feed, Vet services, etc. Provides procedures & training - Other as needed (e.g. permit assistance) Contract Grower: Takes no market risk and receives predictable income Has no cash requirements Provides assets, staffing & utilities Responsible for animal care, maintenance, slurry & permits Contract Summary: Long term contract (up to 10 years or more) Grower payment depends on performance - Fixed base payment - Bonus payment based on productivity 12

13 Contract Grower Producer Buying Inputs from SFD and Selling Market Pigs to SFD Smithfield Romania: Supplies sells to the grower: pigs, feed and medication Provides procedures & training Other as needed (e.g. permit assistance) Contract Grower: Takes the risk of market volatility Buys inputs from SFD and sells market pigs to SFD, all at market price Offsets the cost of inputs for the cost of the pigs Has low cash requirements Contract Summary: Long term contract (from 1 to 10 years) Market value is set based on the local prices 13

14 Independent Producer Selling Market Hogs to SFD Smithfield Romania: Long term buyer of your hogs Trustworthy partner Independent Producer: Has secured and stable market for the hogs Can take advantage of any existing synergies with the own business Producers takes the risk of market volatility Contract Summary: Potential contract for part of the supply (short term) Market value is set based on the local prices 14

15 Other Opportunities in Romania 1. EU is financing farm construction from 50% to 90% 2. Smithfield can provide parcels for farm construction 3. Smithfield has significant experience in the permitting process 4. State is currently offering financial aid to farmers for improved animal welfare 15

16 Thank you!