SFD - NASDAQ

Good day, and welcome to the Smithfield Foods Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Julie MacMedan, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Smithfield's Fourth Quarter and Full Year 2025 Earnings Call. Earlier this morning, we announced our results. A copy of the release as well as today's presentation are available on our IR website, investors.smithfieldfoods.com. Today's presentation contains projections and other forward-looking statements that are being provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions or beliefs about future events or performance that do not relate solely to historical periods. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release, in our annual report on Form 10-K, our quarterly reports on Form 10-Q and our other filings with the Securities and Exchange Commission. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. Please refer to our legal disclaimer on Slide 2 of the presentation for more information. Today's presentation will also include certain non-GAAP measures, including, but not limited to, adjusted operating profit and margin, adjusted net income, adjusted earnings per share and adjusted EBITDA. For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our slide presentation on our website. Finally, all references to retail volume and market share are based on Circana, MULO+ data. With me this morning are Shane Smith, President and CEO; Mark Hall, CFO; Steve France, President of Packaged Meats; and Donovan Owens, President of North America Pork. I will now turn the discussion over to Shane. Shane?

Thank you, Julie. Good morning, everyone. 2025 was an outstanding year. Solid execution on our strategies drove record profits, expanded margins and increased cash flow. We set the foundation for multiyear growth while maintaining a very strong financial position, investing in our business and returning value to our shareholders. Last January, we returned to the U.S. equity markets through an IPO that reintroduced us as the new Smithfield. While our history spans 90 years, the transformation underway over the past decade has fundamentally reshaped Smithfield into a leaner, more profitable and strategically focused company. We streamlined our Packaged Meats portfolio, exited non-core and high-cost operations, accelerated automation and built an accountable culture focused on profitable growth. This hard work prepared us for the IPO. In 2025, our first year as a public company, we delivered on our commitments, record operating profit, record net income, strengthened margins and disciplined execution across all segments. Importantly, these results were broad-based, reflecting the power of our diversified product portfolio, our vertically integrated model and our relentless focus on operational excellence. The advantages of our model were clear in 2025, and we see further opportunities for coordination across the value chain. I'm pleased to announce that we have named Donovan Owens, President of North America Pork. Under Donovan's leadership, the Fresh Pork segment adjusted operating profit increased to $209 million in 2025 from $30 million in 2022. This performance demonstrates our improved agility, channel mix and disciplined operating focus. Under the new structure, Fresh Pork, Hog Production and Commodity Risk Management will report to Donovan. Donovan will also oversee our Mexico operations, which are an integral part of our North America growth strategy. We are excited about the opportunity to unlock additional synergies across our upstream businesses in this new structure. Now, I'd like to review our fiscal 2025 accomplishments in more detail. On a consolidated basis, adjusted operating profit increased 30% to $1.3 billion, with profit margin expanding to 8.6%, up from 7.2% in 2024. Each segment executed effectively. Packaged Meats delivered its fourth consecutive year of operating profit above $1 billion and its second highest profit year despite higher raw material costs and a cautious consumer spending environment. Fresh Pork demonstrated strong execution amid a compressed industry market spread and trade disruptions due to tariffs. And Hog Production achieved its highest profit year since 2014, reflecting improved operations and market conditions. Across the company, continuous improvement and productivity initiatives delivered meaningful cost savings. Our rock-solid balance sheet with net debt to adjusted EBITDA of just 0.3x at the end of the year provides us with the financial flexibility to support our growth strategies and return value to our shareholders. In 2025, we returned value to shareholders through dividend payments of $1 per share. Today, we announced a quarterly dividend of $0.3125 per share, and we anticipate paying annual dividends of $1.25 per share in 2026. In January, we entered into a definitive agreement to acquire Nathan's Famous for $102 per share. Successfully closing this acquisition will be immediately accretive and will secure a core national brand and create meaningful growth and synergy opportunities. In February, we announced that we have initiated the approval process to invest up to an estimated $1.3 billion over the next 3 years to build a new state-of-the-art packaged meats and fresh pork processing facility in Sioux Falls, South Dakota. Building this innovative new plant from the ground up will represent one of the largest investments in American agriculture and will modernize our manufacturing footprint and unlock long-term cost and efficiency benefits. Now, let's turn to our growth outlook for fiscal 2026. Protein demand is strong and growing across consumer demographics, value for its nutrition and health benefits. Pork, which is not our only protein, but is our primary offering, is well positioned within the protein complex. Pork presents a strong relative value to beef and its nutritional profile with lean cuts like pork tenderloin offers a superior nutritional alternative to chicken breast. Pork is also central to Asian and Latin cuisines, which are popular with U.S. consumers, particularly among Gen

Thanks, Shane, and good morning to everyone joining the call. Our strong 2025 results reflect the consistent execution and resilience of our teams. We closed the year with an outstanding fourth quarter. Total company sales increased 7% for the fourth quarter and 10% for the year with growth across all segments, reflecting higher market prices across the pork value chain and Packaged Meats ability to maintain pricing discipline through innovation and brand power. Record fourth quarter adjusted operating profit of $402 million fueled our record full year 2025 adjusted operating profit of $1.3 billion. Full year adjusted operating profit margin increased an impressive 140 basis points to 8.6%. Fourth quarter adjusted net income from continuing operations attributable to Smithfield was $329 million, which was our second highest on record. This helped us deliver a record $1 billion for the full year. Adjusted diluted EPS for the fourth quarter was $0.83 per share, up from $0.52 per share in 2024 and for the full year was $2.55 per share, representing a 36% increase from 2024. Now, on to our fiscal year 2025 segment results. Packaged Meats delivered fiscal year 2025 adjusted operating profit of $1.1 billion, which was the second highest profit on record and an adjusted operating profit margin of 12.4%. This strong profitability in the face of raw material input cost increases of $525 million and a challenging consumer spending environment demonstrates the success of our Packaged Meats segment strategy. Packaged Meats fiscal 2025 sales of $8.8 billion increased by 5.3% compared to fiscal 2024. This was driven by a 5.6% increase in average selling price with roughly flat sales volume. Industry-wide, volume growth has been challenged due to inflation and consumers' tight budgets. As Shane mentioned, we were able to maintain volume through the power of our strong branded portfolio, complemented with private label options and our diversified product portfolio offering convenience, flavor and value. The higher average selling price was driven primarily by higher market prices across the pork value chain with key raw materials such as bellies, up 19%; trim, up 19% to 35%; and ham, up 9% year-over-year. Next, Fresh Pork. For 2025, we delivered $209 million in adjusted operating profit despite $135 million year-over-year decline in the industry market spread, truly an outstanding job by the Fresh pork team. As Shane mentioned, Fresh Pork executed well on maximizing the net realizable value of each hog and continue to deliver operating efficiencies and cost savings, which largely mitigated the impact of the compressed market spread and export market disruption on segment profitability. Fresh Pork sales of $8.3 billion increased 6% year-over-year, primarily driven by a 5.8% increase in the average selling price and roughly flat volume. The higher average selling price was driven primarily by higher market prices across the pork value chain. Turning now to Hog Production. Hog Production generated $176 million in adjusted operating profit, the highest since 2014. The strong results were driven by improved commodity markets as well as actions we've taken to optimize our operations. 2025 Hog Production sales of $3.4 billion increased by 13% year-over-year. This was despite a 23% or approximately 3.4 million head reduction in the number of hogs produced as part of our planned rationalization strategy. The sales increase was primarily due to higher external sales to our new joint venture partners, both from ongoing sales of grain, feed and other services as well as from the initial transfer of commercial hog inventories. Our average market hog sales price was up 8.9% year-over-year, inclusive of the effects of hedging. Adjusted operating profit for our Other segment, which includes our Mexico and Bioscience operations, of $45 million increased $10 million compared to 2024. We see the Mexico market as a big opportunity for future growth. Our corporate expenses came in $26 million below the prior year, reflecting our disciplined cost management strategies. In summary, we delivered a record 2025 operating profit and net income due to solid consistent execution across our operations. Next, let's review our strong financial position and cash flow generation. At the end of 2025, our net debt to adjusted EBITDA ratio was 0.3x, well below our policy of no less than 2x. Our liquidity at the end of the year was $3.8 billion, including $1.5 billion in cash and cash equivalents. This is well above our liquidity policy threshold of $1 billion. During 2025, we generated cash flows from operations of over $1 billion, and it would have been a record of nearly $1.3 billion when adjusted for the repayment of an accounts receivable monetization facility. Capital expenditures for 2025 were $341 million compared to $350 million for 2024. Approximately 50% of our planned capital investments each year are to fund projects that will drive both top and bottom line growth. This consists primarily of various plant automation and improvement projects, as we continue to lower our manufacturing cost structure and better utilize labor. Reinforcing our commitment to return value to shareholders, we paid $1 per share in annual dividends in 2025. And as Shane mentioned today, we announced that our Board declared a quarterly dividend of $0.3125 per share and that we anticipate paying annual dividends of $1.25 in 2026. Our ample liquidity, including sizable cash balance and robust cash flow supports our investment in business growth and shareholder return while maintaining a strong financial position. Now, on to our outlook for fiscal 2026. First, I'd like to share our thoughts on potential market tailwinds and headwinds that could impact our 2026 results. First, tailwinds. We expect protein to remain in high demand in 2026 and for pork to be well positioned as a healthy, affordable option for consumers. We also see raw material costs as a tailwind. While we expect input costs to remain elevated by historical standards, they should be slightly lower than in 2025. Our raw material assumptions are supported by the USDA outlook for pork production to be up 2.5% in 2026. That said, we're monitoring herd health as a key variable impacting the outlook for U.S. pork production and raw material costs. Potential headwinds that we're monitoring include a continued cautious consumer spending environment and a dynamic geopolitical environment. It's still too early to predict the full impact from the conflict in Iran, but there are 3 main components of our business that this could impact. First, the direct impact of fuel costs such as diesel; second, corn prices, which are tightly correlated to the oil markets; third, the petroleum-derived supplies that we use such as resin-based packaging. Based on what we know today, we believe our outlook incorporates identified risks, but it will depend on the duration of the conflict. With these assumptions as a backdrop, our outlook for fiscal 2026 called for continued margin expansion driven by the strategies Shane just reviewed. This includes continued innovation, improved asset utilization, accelerated automation initiatives and cost savings that will help us achieve another record-setting year. First, we anticipate total company sales to be up low single digits compared to fiscal 2025. Our outlook for segment adjusted operating profit is as follows: for Packaged Meats, we anticipate adjusted operating profit in the range of $1.1 billion to $1.2 billion. For Fresh Pork, we anticipate adjusted operating profit of between $200 million to $260 million. And for Hog Production, our anticipated adjusted operating profit range is $150 million to $200 million. As a result, we anticipate total company adjusted operating profit in the range of $1.325 billion to $1.475 billion, reflecting broad-based performance. Please note that our outlook reflects 53 weeks of operations in 2026 and does not include the impact of the proposed Nathan's Famous acquisition and investment in the new processing facilities in Sioux Falls, South Dakota. Our targeted capital spend for 2026 will be in the range of $350 million to $450 million. In addition, subject to permitting and other approvals, we expect to invest up to $1.3 billion over the next 3 years to construct the new state-of-the-art Packaged Meats and Fresh Pork processing facility in Sioux Falls. We currently anticipate groundbreaking to commence in the first half of 2027 and for operations to commence by the end of 2028. We'll provide more updates as we progress. In summary, 2025 demonstrated that our key strategies are working. We expect 2026 to be another year of increased profitability, as we continue to execute our core strategies. Now, I'll ask the operator to open up the call for Q&A. Operator?

[Operator Instructions] And today's first question comes from Megan Clapp with Morgan Stanley.

I guess, maybe to pick up, Mark, where you left off there, I wanted to start with the Packaged Meats outlook specifically. You talked about low single-digit top line growth for the total company. I guess...

Megan, did we lose you?

Sorry, can you still hear me?

Yes, you cut out for a second, though, Megan.

Okay. Okay. I'll start over. So Packaged Meats outlook, I wanted to ask about that. As we think about the top line guide, you talked about low single-digit growth for the total company. Should we be thinking about Packaged Meats kind of in that range? And then, from a margin perspective, if we just kind of take the midpoint of your profit guidance, I think it does imply some modest margin expansion, but, yes, still kind of well below where you've been historically. And, Mark, you kind of talked about this a little bit in your remarks, but maybe you can just help us understand a little bit more of the puts and takes on margins, as we think about the year ahead in terms of input cost inflation, continued mix benefits, and then, anything you're taking into account on consumer demand given some of the macro factors?

Thanks, Megan, for the question. So just on the top line, it's important to note that the low single-digit revenue growth year-over-year includes $230 million of one-time inventory sales to the joint ventures in 2025 that, that won't repeat. So that's about 150 basis points. And then, consistent with the comments, we're looking for lower markets year-over-year with the USDA call for pork production to be up about 2.5% year-over-year. So that's going to have a ripple effect throughout the segment. And I'll let Steve talk specifically to the top line on Packaged Meats.

Thank you for the question. So I'd start out by saying that nothing has really changed with respect to our long-term outlook for Packaged Meats margins. In the short term, as Mark had mentioned, consumers are definitely stretched, and I would say that the grocery and foodservice industry are seeing people spend less or trade down to less expensive items or items that deliver more value. And think about the fact that in 2025, our raw material costs were up over $525 million. So although we do expect to see lower raw material costs, as Mark had mentioned, they're still going to be elevated versus historical norms. Now, despite some of these headwinds, we do believe that we are better positioned than most companies due to the family of brands and also the extensive product portfolio that we have. And as you know, we have a very successful private label business, which does provide us the ability to capture those consumers, as they move up and down those different price points. And by doing that, so when you think about the family of brands that we have and also the private label that we have, it actually helps to minimize some of the financial exposure that we have with consumers, as they do move up and down that pricing spectrum. Now, we are focused on building long-term value, but it's also about protecting our near-term profits. So that means we are investing in our brands. We're funding our innovation that aligns with consumer trends. We also continue to shift, as Shane had mentioned during his opening comments, shift our mix from commodity items to higher-margin value-added products. And then, we're also, of course, spending capital to expand on capacity where it supports our long-term growth and profitable growth. So as Shane and Mark had mentioned, for our outlook for 2026, at this point, it really reflects the best view that we have today. And it's really guiding our Packaged Meats profit to that $1.1 billion to $1.2 billion, which we believe represents a healthy level of profitability in the face of really cautious consumer spending, higher-than-normal raw material markets. And, of course, there's a big unknown tied to the Iranian war that's currently going on. So at the end of the day, we are very -- we still -- we are confident in the outlook that we have, and we'll be able to address some of these challenges as they come at us throughout the year.

Great. That's super helpful. And just a follow-up on Hog Production. So the guide for the year, $150 million to $200 million would suggest similar profitability to '25 at the midpoint. And the futures curve at this point does seem to imply similar producer profit levels as well. At the same time, you've talked extensively, including in the remarks here, about the structural improvements you're seeing in your own business and even talked about perhaps monitoring the herd health as a potential tailwind. So maybe you can just help us understand a little bit more about what's embedded in the guide from an industry perspective? And what you're seeing in terms of supply today and -- versus your own internal cost improvements?

Yes, Megan, when you look at supply, we don't see right now any material level of expansion taking place outside of productivity and improvements in health. And I think that's what the USDA is modeling it as well with their 2.5% increase. And as you know, when you look at last year, the real true impacts of the health across the U.S. industry really didn't become apparent until we were in -- really into the second quarter. So we're monitoring what's going on as a part of overall health and how that will impact meat in the back half of the year. We do think that the guide that we issued this morning encompasses what we see today from the grain markets, from the changes in diesel fuel that we're seeing have an impact on things like freight and animal movements. So we feel comfortable where we are. We think it feels like we're back in somewhat of a normal cycle in that Q1-Q4 versus Q2-Q3 scenario. And of course, as you know, we have different hedging strategies that we take advantage of throughout the year. So we're really comfortable with the guidance that we've issued today in hog production. To your point, we have seen some real structural changes in our business. And the genetics that we've talked about for the last couple of years, that really helped us in 2025. We saw a lean pig cost that was down probably 8% year-over-year, better feed initiatives and livability initiatives. Our overall feed cost was down over 5%. And so we're seeing all of those things manifest in the earnings. And so again, I think we're really comfortable with the guidance with what we see today.

And our next question today comes from Ben Theurer with Barclays.

Shane, Mark and team, 2 quick ones. So first of all, as we look into like the value chain as a whole, and we've kind of like talked a little bit about the Hog Production just now and before that about the Packaged Meat segment. So picking up on what's in the middle in the Fresh Pork segment. Clearly, it was, call it, potentially a somewhat challenging 2025 with all the trade restrictions, et cetera. But as we move into 2026 and as you kind of like pointed to the puts and takes, can you maybe elaborate a little bit more on the Fresh Pork business itself, what to think about, a, seasonality? And b, what are like the more Fresh Pork-specific risks and opportunities for 2026 in contrast to 2025? That would be my first question.

Yes. So, Ben, maybe I'll start and then hand over to Donovan. 2025, I'm really proud of how the Fresh Pork team executed. We saw $135 million degradation in the gross market spread, but yet our profits were only down about $17 million. And so we saw growth in retail and sales volumes. I think that was 4% in sales and 5% in U.S. retail channel volume, really leaning into the case-ready part of the business. But also looking at some of those alternative channels that we've discussed before with our pet food business and our pharmaceutical business. And so I would say the Fresh Pork team in the face of what was a really dynamic and ever-changing 2025 did an excellent job in executing that next best sales strategy. Donovan, do you want to add to that?

Yes. I think Doug (sic) [ Ben ], and Shane, you said it well in your opening remarks. But yes, 2026 for Fresh was a challenging year. I think it led off with what Doug (sic) [ Ben ] might be referring to as the tariffs. So the tariffs started to have some impact. It had some impact on the year. But as we look at how we rebounded in our net realizable value efforts in 2025, they paid dividends. I mean, we focused on our core strategy of looking at our Fresh Pork, Fresh Pork value-added business, as Shane has mentioned earlier. Growing our Fresh Pork in that arena is going to be pivotal in 2026, as it was in 2025. So we're going to focus on our case-ready value-added pork. We're going to focus on our marinate offerings. We're also going to focus on our branded effort, branded fresh pork to tie into our Packaged Meats portfolio. So we want to connect the dots, Doug (sic) [ Ben ], on all of our business. I think that's been an opportunity for Smithfield for a while and leverage our strength of our Packaged Meats business and start putting our name on our Fresh Pork portfolio of Smithfield, not just a brand that we have to fight with other -- with our competitors in the industry. So look forward to it, Ben, sorry for that. I got your name mixed up. But nonetheless, 2026, I feel very confident that we will continue our strategy on fresh pork and look forward to improved results.

Awesome. And then, real quick on the capacity expansion project, Sioux Falls. I think you said groundbreaking first half 2027. So probably within the CapEx of that $1.3 billion, probably nothing yet to be contemplated for 2026. But how should we think about the CapEx needs for that project splitting that into what would be '27 and '28? And how do you think about just the general timeline? If you could refresh me on that one, that would be much appreciated.

Yes. So, Ben, as you indicated, there is no capital included in our estimate of $350 million to $450 million for the current year. So there may be some incremental spending towards the end of the year, but the most significant portion of the spend will come in '27, '28 and a little bit of spillover into '29. So anticipate groundbreaking, as you said, in early 2027, hopefully, to have the first products running down the line at the end of 2028. And I would say that the capital spending will be paced pretty evenly throughout the construction period.

Our next question today comes from Leah Jordan at Goldman Sachs.

I wanted to follow up on Megan's question within Packaged Meats. Just seeing if you could provide more color on how we should think about the margin cadence in that segment as we go through the year. And any timing impacts we should keep in mind? I mean, we're going to be lapping some different input costs as we go through the year as well as potential shift in Easter and as well as the 53rd week.

Sure. Thank you for the question. So first, when you think about margins and also how that would potentially tie to promotions, what we're focused on is really -- it's on the quality merchandising side. So it's really going after the quality of it versus quantity because typically, if you're going after the quantity, you're going to run into some potential challenges from being unprofitable. But what we continue to see is improvement with our promoted volume sold as feature and display. And when we do that, that by far is the most impactful promotional vehicle. So we'll continue with our current promotional strategy, although the reality is we're not just counting on promotions to drive our volume, we're actually very fortunate because our consumers are incredibly loyal and our brands perform because people trust us to deliver that same great quality, flavor, value every time. And that consistency that we built over decades shows up in every product. And our customers and consumers know that they can count on us. So -- the other part of your question was, I guess, consistency. And when -- reality is when you look at the first half and second half of the year, it's -- even though we have some seasonality between different items, between seasonal hams, we also have growing items during the summer, but the reality is when you look at first half and second half, they're basically fairly equal from a profitability standpoint.

Leah, the only thing I would add there, and I think this was part of your question, we will see Easter a little earlier this year. So there will be some Q1 impact of last year we would have saw in Q2. And the 53rd week actually will fall at the end of December, which would be post-Christmas for us.

Right. So to Shane's point, on a segment profit margin perspective, it's a little lighter in the first and fourth quarters because of that seasonal ham influence.

That's very helpful. And then just for a follow-up, I wanted to ask on the feed side, given lower feed costs were such a tailwind for you in Hog Production last year, and now, we've got maybe some potential headwinds emerging, so how are you planning for feed over the coming year? What have you locked in so far? And just any color around assumptions within the guidance range and your flexibility there? Should we see some movement?

Yes. On the feed side, and Leah, we don't necessarily talk specifically about our hedge positions, but we do use corn and soybean meal contracts to help lock in when we think it's advantageous. So -- but I would tell you, our overall feed strategy is more than just a grain. It's being efficient in what we do. It's about the livability, the animals coming out that we've been putting grain into. What I would tell you, as it relates to feed for 2026, we are seeing some increases, and those spikes coincide with what we see taking place in the Middle East. I think we've been very in front of that, I would say, as far as our hedging strategies and how we think about locking in those grain costs as we go forward. So I think, again, as I mentioned earlier, I think we're in a pretty good position, as we look at 2026 from where we stand on corn. And keep in mind, as we go through the year, the later in the year we get, the feed cost, that fed cost of corn really would show up in the back part of the year and into 2027. So I think from a 2026 standpoint, we're pretty well positioned. And we think, again, that guidance that we issued encompasses that variability that we think we'll see in corn.

And our next question today comes from Heather Jones at Vertical Group (sic) [ Heather Jones Research LLC ].

I wanted just to ask a quick clarifying question on the extra week. So I think you talked about expecting a low single-digit volume increase in -- on the Packaged Meat side in retail and foodservice. I was wondering, is that adjusted for the extra week? Or is it largely due to the extra week, so we should expect most of that increase in Q4?

That includes the extra week. So the extra week is falling after the Christmas holiday this year. So it's -- seasonally, it's a softer week in the year as all the loading has gone on leading up to the holiday season. So from a volume and profitability standpoint, it punches below the average week's weight.

Okay. So you're expecting growth in the other quarters as well, not just the Q4?

Correct.

Okay. And then, I just wanted to ask about the Hog Production outlook, and just, how you all are thinking about the cadence of that 2.5% growth? Because my understanding is that there was some expectation that there would be like an easy comparison because of the PED and PRRS we had in '25. But PRRS has hit pretty hard again. I think it's in the upper Midwest. And so I was wondering, do you think the 2.5% takes that fully into effect? And how you're thinking about industry volumes year-on-year as the year progresses?

Yes. If I understood your question correctly, we are hearing that same thing that you just mentioned that PRRS is really beginning to show up in the Midwest. But again, I think our guidance, as we've issued this morning, takes that into account, both from what we expect to see on a seasonality basis between Q1 and Q4 and in the middle part of the year as in Q2 and Q3. So we think from a disease standpoint, from a corn standpoint, transportation that we've got those things embedded. And of course, as we move through the year, things will become much clearer, and we'll continue to update that guidance as we move through the year. But as it sits today, we feel really comfortable with that range that we printed this morning.

And our next question today comes from Chris Downing of Bank of America.

This is Chris on for Pete. You noted that acquiring Nathan's will eliminate licensing fees and allow you to capture the full retail margin with immediate earnings growth expected. Can you quantify for us how much of the anticipated accretion comes from recapturing licensing economics versus incremental operating synergies? And how quickly those benefits should scale post close?

Yes, Chris, I'll begin, and maybe, I'll throw it over to Steve or Mark. As we're -- really kind of limited on what we can say and what we can share. Once we close this transaction, once we successfully close it, we'll be able to share a lot more detail on both our plans and some of the inherent numbers. But as it sits today, we're really limited in what we can share until the deal actually closes. Steve, do you want to add some things on Nathan's?

Yes, I can just add a couple of things. And first and foremost, we're very excited on the Packaged Meat side of the business about Nathan's and what that represents for the future of Smithfield. So we know the Nathan's brand incredibly well. Obviously, we've been making products for years and selling it into the retail channel. So there's virtually no integration risk, and that's a really big deal from an M&A standpoint. Owning the brand, that would let us scale, scale with utilizing our marketing, innovation and also distribution across retail. And then ultimately, we'd have access to that foodservice channel, which again would be a big plus for the total Smithfield business. I would like to share more about what we have planned. But at this point, since the deal is not finalized, I'm going to have to wait until the transaction closes. But it's a great question. We're very excited about the opportunity to purchase Nathan's.

Yes. And, Chris, the only other thing I would add to that is we do believe that the transaction will be immediately accretive to our earnings. And I think you can look at Nathan's disclosures and really get to the crux of your question about what that licensing fee has been.

And our next question today comes from Max Gumport with BNP.

I was hoping to turn back to Sioux Falls. Obviously, it's a very big investment for the company. I realize it's early, but any color or quantification you can provide on the benefits that you will receive? It's replacing a very old plant. I think it's over 100 years old, so maybe particularly on the cost side, what this means for efficiencies, automations and cost savings?

Yes, Max. I'm really excited about this investment in Sioux Falls. And to your point, it's a large investment, but it's necessary. Sioux Falls is a key part of not only our Fresh Pork business, but also our Packaged Meats strategy in general. And so that facility is over 100 years old. And as you can imagine, there's a lot of upkeep on that facility. But not only that, the footprint of that facility makes it very difficult to implement some of the automation and technology that we as a company are really rolling out across our footprint. When this facility is done, it will be the largest fresh combined, Fresh Pork and Packaged Meats facility in our system. We are anticipating a best-in-class facility that will just deliver significant efficiency gains to both Fresh Pork and Packaged Meats. So I'm really excited about the investment. We're anticipating it's going to have a really strong intern investment, and we expect to see those benefits in year 1, as we move to that optimal production level. But the interesting thing about Sioux Falls for us is it's a key part of the country. There's a tremendous culture of Hog Production in that part of the country. And from a vertical integration standpoint, that plant is less than 1% vertically integrated. So this investment is not only good for us, it's good for South Dakota agriculture, the surrounding regions and American agriculture in general. And like I said in my opening comments, this investment really represents one of the largest single investments in American agriculture that I'm aware of. And so we, as a company, are extremely excited about the opportunity to do this. I think it's going to be transformative for us as a company. And I think it's going to lead the way in the industry, as it relates to cost structures, to competitiveness. And so I'm really looking forward to getting this project done.

Great. And then, on the first quarter, I realize we're essentially through the first quarter at this point already. So I was hoping maybe for a bit more color on any initial thoughts on the sales and profit realized, maybe you don't typically guide by quarter, but just given that there's essentially only a week left or so, maybe a bit of color on how the first quarter is looking.

Yes. It's really about continuing execution of our strategies, continue to improve that mix within the Packaged Meat side of the business, appealing to the consumer across that price spectrum, whether it's in our branded portfolio or in private label. And again, continuing optimization of our net realizable value within Fresh Pork. So we're seeing continued execution of our strategies, and we look forward to a solid first quarter. We'll be back in front of you in, what, about 5 weeks, I think, to report on the first quarter, but things are shaping up.

We have time for one more question today. And our final question comes from Saumya Jain with UBS.

Congrats on the quarter. A quick one. With more CapEx spend, as you noted in '27 and onwards, would you see more upgrades or bolt-ons on current facilities or acquisitions of new ones? And what would drive one versus the other?

Yes. So in terms of CapEx, again, the uptick in '27 and '28 is related to the Sioux Falls build-out. Our guide for this year is really in that $350 million to $450 million range. And what you've seen is over the recent past, we've really worked significantly to optimize our network and improve our cost structure. So most recently, we announced the closure of 2 lease facilities in Elizabeth, New Jersey and in Springfield, Massachusetts, and we're folding those into existing operations. So that along with the transfer of the $3.8 million head that Shane mentioned in Hog Production to our joint venture partners, it really brings reduced requirements for maintenance CapEx across the network. So we're going to continue to invest about half of that CapEx figure on growth capital and about the other half on infrastructure, so maintenance types of projects. But we have plenty of opportunities to invest in growth capital, drive capacity expansions and cost savings projects through automation. So again, the $350 million to $450 million is all encompassing on the base business with incremental spend related to Sioux Falls in '27, '28 and '29.

Great. And then real quick, I noticed that the market share in the hot dogs Packaged Meat subcategory changed from third to fourth. So I guess just wanted to understand what was driving that last quarter. And how do you view your acquisitions of Nathan's then changing the competitive dynamic in the space?

No, it's a good question. So, as far as the total hot dog category, so this is for the total industry, obviously, we're seeing some historic beef markets, which is resulting in consumers seeking value or gravitating down to private label or value tiers. Now, keep in mind, when I say that, that even when they gravitate down into private label, we have the ability to capture that consumer with some of the private label products that we do produce or some of the regional brands that fit that value tier. Now, if you look at the total category, so not just where we were, but for the total hot dog category for the U.S., in Q4, the sales were down 5.2%. And for total 2025, sales were down 4.8%. Now, with all that said, despite some of the category declines and some of the consumer shifting, we're still able to grow our Nathan's volume share, unit share and dollar share in Q4. So we also increased our points of distribution by over 19% in 2025, and that's on the Nathan's brand. So that really highlights the strength of the brand and also consumer loyalty. So despite some of the category declines that we saw within the hot dog space, we're very comfortable with where we are from a Nathan's performance and also what we expect to see in 2026.

That concludes our question-and-answer session. I'd like to turn the conference back over to President and CEO, Shane Smith, for closing remarks.

Thank you, and thanks to everyone who joined our call today. I want to thank all of our Smithfield Foods employees for their exceptional execution in 2025. It truly was an outstanding year, and we're proud that our strategies drove record results, but we're not stopping here. Instead, we're constantly challenging ourselves to grow our business and continuously improve our operations. I'm looking forward to speaking to you again when we report our first quarter results. Thank you.