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Consolidating the Concentrated

Mike

Well-known member
Meat Processor Considering a Buyout
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By BLOOMBERG NEWS
Published: January 23, 2007
Swift, the beef and pork producer, said yesterday that it was considering a possible buyout after receiving “unsolicited inquiries” during the last six months.

JPMorgan Chase has been hired to help review strategic and financial alternatives, including a sale, “a merger, strategic partnerships or refinancing,” Swift said in a statement.

Swift, which is based in Greeley, Colo., has had just one profitable quarter since November 2004 as beef exports have been slow to return after countries lifted bans on United States supplies after the appearance of mad-cow disease. Earlier this month, Swift reported a second-quarter loss of $12 million, and last week it said it would cut 70 jobs at its Greeley headquarters as part of a plan to reduce overhead costs.

Cattle Buyers Weekly, a cattle industry newsletter, reported last week that Swift’s principal owners, HM Capital Partners, of Dallas, might break the company up and sell its parts to rivals Tyson Foods, Cargill and Smithfield Foods.

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Mike

Well-known member
Posted on Tue, Jan. 23, 2007email thisprint this
Smithfield shares rise with rumors
Eagle news services
Shares of Smithfield Foods Inc. soared the most in seven weeks on speculation that the world's largest pork producer will buy some of the assets of rival Swift & Co. should that company be broken up and sold.

Smithfield, which owns the Farmland Foods plant in Wichita, rose 52 cents, or 2.1 percent, to $25.28 in New York Stock Exchange composite trading, the biggest one-day gain since Dec. 1. Shares of the Smithfield, Va.-based company have fallen 12 percent in the past year.

Cattle Buyers Weekly, a beef industry newsletter, said last week that Greeley, Colo.-based Swift's owner, HM Capital Partners LLC, is discussing a sale and that Smithfield, the fifth-largest U.S. beef packer, could buy Swift beef plants in Hyrum, Utah, and Dumas, Texas, as well as a pork plant in Worthington, Minn.

Swift, the third-largest U.S. beef and pork producer, has apparently hired investment bank JPMorgan Chase & Co. to assist with a sale, the newsletter said, without saying where its information came from.

Tyson Foods Inc. is the biggest U.S. beef processor, followed by Wichita-based Cargill Meat Solutions.
 

Mike

Well-known member
(970) 506-7490
SWIFT & COMPANY REPORTS FOURTH QUARTER
AND FULL-YEAR FINANCIAL RESULTS
Liquidity Remains Strong Despite Continued Adverse Market Conditions;
Company to Pursue Further Operational Initiatives in FY07
GREELEY, COLO., August 23, 2006 – Swift & Company, the world’s second-largest processor of fresh
beef and pork products, today reported net sales of $9.35 billion for its fiscal year ended May 28, 2006,
compared to net sales of $9.67 billion in the prior fiscal year. The net sales decrease primarily reflected
lower selling prices in Swift Pork and lower volumes in Swift Australia, partially offset by a 0.5 percent
increase in the Australian dollar to US dollar exchange rate compared to the prior-year period.
 

Ben Roberts

Well-known member
Jason said:
According to some 'experts' here, Swift was just losing money on paper.


Jason, in 2002 I came on this board and made the statement that,packers often show losses on paper, that reflect their annual profits. You, did not believe me when I made that statement then, am I to believe that now,you understand how they can do that.

Best Regards
Ben Roberts
 

agman

Well-known member
Jason said:
According to some 'experts' here, Swift was just losing money on paper.

You need to check the credibility of those experts. They are losing "real" money. Their reported losses are likely understated. Do those experts know how they report earnings versus other public packers? Ever heard of EBITA earnings? Check it out and you will quickly learn that their losses are likely understated under their reporting method.

The disruption and inherent costs from the ICE raid may have driven the final nail in the coffin. If they are dissolved Smithfield and National are likley buyers of their beef plants. I have not heard Tyson mentioned.
 

Jason

Well-known member
Thanks Agman. If it wasn't clear, I was being using sarcasm when I refered to "experts".

Losses are very real if a company is picked apart.

The same thing is occuring in ranch country in Canada. There are producers in trouble and their herds are being picked off by those who are a bit more stable, or think they are.
 

DiamondSCattleCo

Well-known member
:roll: Instead of guessing, why don't you guys actually read their financial reports?

http://www.swiftbrands.com/media/releases/FY07Q2_Press_Release.pdf

818 million in total debt, 500 million of that not on the revolving line of credit (in other words, debt from purchases, not normal operating).

$32 million EBITDA. In other words, they weren't operating under negative margins, however they couldn't service their debt load with current margins. In other words, they overspent and are paying the price. I don't feel at all sorry for them, just like I don't feel sorry for a producer who gets greedy, borrows a whack of money to expand, and then falls short when his margins get tighter.

So much for 2007 "losses". :roll: 2006 was a different year for them, but they still have 240 million of revolving credit available to them. This is not a company in trouble, but rather a company who's getting out while the gettins good.

Rod
 

Jason

Well-known member
Nice snippets Rod.

How about the BEEF division?


Swift Beef
Swift Beef's second-quarter net sales increased 6.3 percent to $1.43 billion compared to $1.34 billion in the prior-year period. Selling price increases of 5.2 percent were accompanied by volume increases of
1.1 percent.
Swift Beef's second-quarter EBITDA improved to a loss of $18 million from a loss of $30 million in the prior-year period. The EBITDA improvement resulted from a net sales increase reflecting the selling price and volume increases noted above, which more than offset higher raw material costs. EBITDA in the current year was also affected by increases in freight and packaging costs that were more than offset
- 1 -
by reductions in workers compensation and employee medical costs based on receipt of updated actuarial reports, as well as reductions in management incentive accruals and lower utility costs. Selling, general, and administrative costs were lower year-over-year, principally reflecting reduced professional fees and the previously mentioned reduction in management incentive accruals.


That bit from the report shows a LOSS of $18Million before taxes depreciation and amortization.

Now tell us how they planned to lose money, or that is just a paper loss? That is a cash operating loss on beef.

I agree that if it is because they got greedy they are in trouble, but come on, this is the world's second largest packing company.

How can a small, no experience, producer owned, no other division company expect to come in and save producers? That is my point. Producers need to know what kinds of losses are out there instead of blaming packers for their troubles.

Yep a company getting out while the getting is good.... unsolicited inquires, broken up and sold, phrases of a going concern for sure. [/quote]
 

DiamondSCattleCo

Well-known member
Jason, they weren't discussing selling JUST the beef division, but rather the entire company so why would I look at _just_ the beef division numbers? :roll:

Rod
 

Jason

Well-known member
This is Ranchers.net the beef division is what pertains mostly to us. The rest is interesting, but even with diversifyed holdings thay can't survive losing money.

Producer ventures that have been planned and have or will fail need to understand the business climate out there.

It is very tough to survive the way things are, running in blind because Joe at the coffee shop claimed packers make $400 a head isn't a great business plan.
 
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