Wh Group Ltd Ord

Good evening, analysts and investors. Welcome to the third quarter 2025 results presentation of WH Group. I'm Guo Lijun, Executive Director and Chief Executive Officer of WH Group. Joining us today are members of the management teams from WH Group and our subsidiaries, Shuanghui Development, Smithfield Foods, and Morlini Foods, including Mr. Wan Long, Chairman of the Board and Executive Director of WH Group, Mr. Wan Hongwei, Vice Chairman of the Board of WH Group and Chairman of Shuanghui Development, Mr. Ma Xiangjie, Executive Director of WH Group and President of Shuanghui Development, Mr. Liu Songtao, Executive Vice President and Chief Financial Officer of Shuanghui Development, Shane Smith, President and CEO of Smithfield Foods, and Mark, CFO of Smithfield Foods, Luis, CEO of Merlini Foods, Joanna Yan, Chief Financial Officer of WH Group, Vice President of WH Group, Zhou Xiaoming. Today's presentation will be divided into two parts. First, we will present the financial and operational performance for the first three quarters of the year, followed by the Q&A session. So let me walk you through the company's performance in the first three quarters. In the first three quarters of 2025, packaged meat sold was 2.231 million metric tons, 2.2% decline year over year. Pork sold was 2.967 million metric tons, 8.4% increase year over year. Revenue declined. $20.47 billion, 8.5% higher than last year. EBITDA, $2.496 billion, 10.7% higher year-over-year. Operating profit, $1.92 billion, 7.3% higher year-over-year. Profit attributable to owners of the company, 1.168 billion U.S. dollars, 8% higher year over year. Basic earnings per share, 9.10 U.S. cents per share, 8% higher than last year. So in the first three quarters, the company has exhibited growth in volume, revenue, as well as profit. Now look at the business performance by segment. Packaged meats contribute to 50% of our revenue and 83% of our operating profit. Pork is 40% of the revenue and 20% of the profit. Other business is 8.7% of the revenue and contributed to a loss of $58 million, which includes other business as well as the corporate expenses. If you look at the performance by region, North America represented 54% of the revenue and 51% of the operating profit. China represents 30.8% of the revenue and 37.6% of the operating profit. European business is 15.2% of the revenue and 11.5% of the operating profit. So North America generated more than 50% of both the revenue as well as operating profit. In the first three quarters of 2025, hog prices in China fell continuously due to sufficient supply and weak demand. In the U.S., performance of hog production business improved significantly as feed prices continued to decline while hog prices increased. In Europe, hog prices decreased as hog supplies recovered. The number of slaughter hogs in China increased by 1.8% to 530 million heads in the first three quarters of 2025. In the U.S., the number of slaughter hogs decreased by 1.3% to 81.7 million heads in the first eight months of the year. In the first three quarters of 25, the average hog price in China was removed 15.1 per kilogram, a decrease of 10.7% year-over-year. In the U.S., the average hog price was $1.6 per kilogram, up 13.2% year-over-year. In Europe, the average hog price was Euro 1.52 per kilogram, down 6.5% year-over-year. The average pork cutout value in the U.S. was 2.29 U.S. dollars per kilogram in the first three quarters, an increase of 8.7% year over year. The industry market spread narrowed as hog prices increased more than pork values. In China, For the first three quarters, the operating profit was $724 million, 0.7% decline year-over-year. Packaged meats operating profit $689 million, year-over-year decline of 4.8%. Pork operating profit $35 million, year-over-year decline of 14.6%. In North America, operating profit was $981,016.6% higher year-over-year. Packaged meats operating profit was $796 million, 6.8% lower year-over-year. Pork operating profit $275 million, 2.43 times higher than last year. In Europe, operating profit $221 million, 1.8% decline year-over-year. Package meats, $111 million, 5.7% higher than last year. Pork, $78 million year-over-year, decline of 22%. In terms of our strategies, WH will continue to consolidate global resources, leverage synergies, adhere to the business philosophy of improved mix, adjust price, and control costs, and the strategy of industrialization, diversification, internationalization, and digitalization to enhance our leading position in a global medium. Business priorities number one, continue to improve the pork business, optimize cost structure, improve hog production KPI, grow the fresh meat sales volume, and strengthen market competitiveness. Number two, adhere to the two adjustment and one control strategy for packaged meat business, expand market network, optimize sales channels, and strengthen competitive advantage to drive steady improvement in sales volume and profits. Continue to optimize our business portfolio, steadily achieve protein diversification, further strengthen our global business footprint, mitigate risks, improve quality, and enhance efficiency. Number four, explore and leverage AI to continuously advance industrial intelligence, promote digitalization upgrades in production, sales, and business management to reduce cost and enhance efficiency. the company will maintain the momentum of steady growth, build a solid foundation for long-term sustainable development. So that's all for the presentation. Now we will move on to the Q&A.

If you have any questions, please raise your hand.

The first question will come from Luo Chen of BofA.

Hello, everyone. Congratulations on the very successful performance as usual. Because there is a live broadcast online, my two questions are answered in Chinese. The first question may be a question that many investors in the capital market are concerned about, which is our shareholding. Because this year, At the end of last year, there was a $0.04 medium-term stock market. So I would like to ask the management level about what kind of value does the end-term stock market have? At the same time, this year, due to some operations in the capital market, we have also issued Special dividend. uh uh uh Because it is a relatively light season in tradition. Then how do we look at the whole year now? This is the growth rate of pig farming. And then on the other hand, uh, currently, uh, the U.S. is now, uh, pig farming is more than a year. Uh, with this pig farming, the effect of this low number is slowly decreasing. Uh, uh, Two questions.

First question relates to shareholder return. The company has declared a 20 Hong Kong cents dividend, interim dividends earlier this year. So if we add this up with the final dividend for 24, so the total was, so the last year the final dividend was 40 cents. So what's the company's guidance for the upcoming final dividend to be declared next year? And the company has also declared special dividend of 48 Hong Kong cents this year because of certain capital market related transactions. Does the company expect the possibility of further special dividends in the future? And secondly, relates to the U.S. business. In the first three quarters, the U.S. hog production has achieved $15 per head of operating profit. And considering the fourth quarter is typically a seasonally challenging quarter for hog production business, what is the company's outlook for profitability of hog production in the fourth quarter? And because the positive momentum for the hog price has been maintained for more than a year, and the higher hog prices has already put a lot of pressure on the operating profit of packaged meats, which has been visible in this quarter's performance. So what's the company's outlook for packaged meats profits per metric tons? And what would be the company's outlook for for hog production, fresh pork business for the next two quarters.

Just one more clarification. I'd like to clarify that I'm actually looking for the four-year OPP plan for the hog production business, whereas for the entire U.S. business, given all the moving parts of the three different businesses, what's our growth outlook? for the entire U.S. business in the coming one or two quarters. Are we looking for positive growth in the coming one or two quarters?

Thank you. 第一个问题我来回答。 因为我们今年调整了我们分红的比例, 由以前的不低于30%调整到了不低于50%。 This is the first one. The second one is this year. The special bonus of $0.48 per share is mainly due to the cash we received from the US market. We distributed the share to the shareholders. In the later stage, we do not have a clear plan for the special bonus.

In terms of shareholder return, as you know, we have adjusted our dividend payout policy from no less than 30% of net profit to 50%. In the interim dividend, we paid 20 Hong Kong cents. But for the full year, our guidance is still to follow our policy of no less than 50% of the payout ratios. For the special dividends of 48 Hong Kong cents that were paid this year, it is because of the IPO of Smithfield as well as the subsequent sell-down, in Smithfield, and we have returned all the proceeds from the sell-downs to the shareholders. At this point, we do not have any plans for further special dividends. So the next question relates to the U.S. business. We'll ask Shane and Mark to answer.

Yeah, so I'll talk to the first question around the U.S. hog production, and you're correct. We've had a really strong year this year in hog production, and while a lot of that has been related to the overall revenue side of the business, meaning the pricing dynamics in hog production, there's also been a tremendous amount of work internally to improve our call structures, and that's through things like genetic improvements, health and nutrition improvements, and things like that to improve our cost structure. You know, we reissued guidance this morning, and as you saw, the now expected return for 2025 is between $125 and $150 million of segment profit in the hog production business. And you're right, there is some seasonality when we look at the fourth quarter, but we expect the fourth quarter to be positive as well, to end that year, again, within that range of $125 million. to $150 million. Now, looking forward, we are seeing some strength in the futures markets as we look at the first and second quarter of next year. Now, right now, we'll continue to monitor that and follow that. And as you know, we have different hedging techniques where we see opportunities to lock in acceptable levels of margin. We may take advantage of that So we are bullish on hog production. I think the team there has done a nice job. And you couple that with, again, the revenue, the strength and the revenue side of the equation. And we've had a really nice year in hog production. You know, again, we reaffirm our guidance in package needs for the remainder of the year, but we are seeing pressure in that business. You know, when we look at the underlying commodity markets, you know, you see bellies up, trim up, and hands up, and that's put pressure on the margins of that business. But we've been able to increase our pricing alongside that. So we're really pleased with how that business has done as well. Yeah, I think in the long term, and Mark, you jump in as well, but I think the long-term algorithm for packaged meats really hasn't changed. Right now, again, we're in a period of high raw material cost, which is pressuring margins to some extent. But we do expect to see that normalized, and we'll come out of this cycle even stronger than we went in. Mark, I don't know if you'd add anything there.

Yeah, no, I would just add that we continue to execute our strategies and stay true to those strategies. You know, we continue to improve our mix, a mix of higher value-added, higher margin items. We continue to appeal to consumers across that price spectrum and private label, which is a real competitive advantage for us. And we continue to do a really good job of taking costs out of our plants and our supply chain and SG&A. So we expect to continue to outperform our peers from a margin perspective in packaged meats.

On the other hand, at the cost end, we have made a lot of improvements through our own efforts, including genes, including the health and nutrition of pigs. Um, um, In general, we are optimistic about the performance of the pig farming industry. In terms of meat products, there is indeed a certain pressure at the cost end. Because the prices of pork belly, minced meat, and hind legs have been rising, which has also affected the profits of our meat products. But we have also maintained our overall profit level through the rise in prices. So we are also satisfied with the performance of meat products. In terms of our outlook, we have once again confirmed that we expect to see the latest profits for meat products throughout the year. Although we are now facing a situation where the price of raw materials is relatively high, the market will still normalize in the future. After the market normalizes, the performance of our meat products will be even better. And Mark also added that we are also continuing to implement our strategy in terms of meat products, including optimizing our product structure, selling more high-value and high-profit products in the product, including our very strong cut product to meet the needs of more diversified consumers. Then at the cost end, Thank you very much. Congratulations. If you have any questions, please raise your hand.

The next question is from Morgan Stanley's Lou Chao. Please ask.

Hello, thank you for the opportunity to ask a question. I have two questions about China's business, because the US business was relatively clear just now. First of all, I saw that in the third quarter, China's meat products business achieved a very good total profit and single ton profit. If my Um, 记录是正确的话,看到单吨实际上是历史的新高了,也就是说每吨做到了五千两百多块钱。 So I would like to ask, from the perspective of the next four seasons and next year, how do we look at the single-seater profits of the entire land? First of all, it may be related to it, that is to say, how much is due to a continuous price drop? How much is our part of this cost management, that is to say, storage management? How much of this cost advantage can be continued until next year? Um, um, um, So two questions from Lillian of Morgan Stanley.

So the first question relates to China's packaged meat business. In the third quarter, China packaged meat business has achieved a very strong profit as well as profit per metric tons. The profit per metric ton of 5,200 renminbi is probably a historical record. So what's the company's outlook for fourth quarter and the 2026 in terms of profit per metric ton for packaged meats? And for the strong profits of packaged meats, how much is driven by low hog prices and how much is driven by the company's management of cost as well as the inventories? And how much of these benefits of lower hog prices can be sustained or carried over to next year? And also, what's the company's outlook for hog prices for next year? And secondly, for fresh pork business, the company has good volume growth in the first quarter. And what are the changes in the product mix in terms of fresh and frozen? And what's the company's outlook in terms of profit per ton and volume for fresh pork?

这两个问题请我们双汇的管理层解答。

I would like to answer two questions related to the issue of party profit. You are not wrong. There are more than 5,000 tons of meat. This is the best record in our history. The reason is three aspects. The decline in cost, the decline in cost and the adjustment of results. But I think the decline in cost plays a major role. And the main price of three-degrees is more than we expected. Only the . . . In the fourth quarter, we have this strategy. The fourth quarter is to increase the use of the market. This is a time-consuming competition. This is a time-consuming competition. The use of the market needs to be increased. The second is to increase the market share of the two-data products. Especially high-cost products will have a better market share in the fourth quarter. It is also to reduce the profit. So the merit of the 40th century must be lower than that of the 3rd century. Our whole year should still be the same as last year. This is the merit of the 40th century. The next year's merit will continue the trend of the 40th century. From the current perspective, the master of the next year may be Herdius. Herdius is an increase in merit. But in the next year's world competition, no matter who wins or loses, our overall strategy is to win and win. This means that we should maintain a standard of not exceeding the standard, or even increase the standard to a larger scale. Therefore, next year, the standard of the Japanese army does not want to have a higher standard. Last year, it was 4,000 units. This year, it is expected that it will be 4,000 units this year. Next year, the probability will be such a number. Then, we will increase the scale of the Japanese army. This is the first question.

The first question relates to package mates. You're correct that the 5,200 or maybe per metric ton profit is a record level, and there are primarily three reasons. One is cost, second is expense, and third is the mix. The hot prices has declined more than we had expected, and on the other hand, we didn't increase too much expenses. In the fourth quarter, there are a few factors to consider. First is that we will step up our investments in marketing to support our market competition. And secondly, we will promote more value for money products, which will have a good volume growth. So both of these two factors will be negative for profit per metric tons. So we believe the fourth quarter profit per metric ton for packaged meats will be lower. The full year and the full year guidance for profit per metric ton will be 4700 per renminbi, largely consistent with last year. For next year, we believe the hog prices is expected to continue to be lower. But on the other hand, there will be a lot of competition in the market. And our strategy will be to stabilize our profit and expand our volumes. So we do not expect to achieve a higher profit per ton for packaged meats. And we will probably maintain around 4,700 level.

To answer the second question, in the 40th century, the profits of raw materials and domestic meat will achieve a greater degree of growth. However, the income of imported meat will decrease due to the influence of tariffs. In the winter, the profit of raw materials and domestic meat will increase. This is the first one. The second one is that in the next year, the Provincial Provincial Department of the Provincial Provincial Department of the Provincial Provincial Provincial Provincial Provincial Provincial Provincial Provincial Provincial Provincial

The second question on fresh pork. In the fourth quarter, for the domestic meat, we believe the volume and the profit will both increase. But for the imported meat, the profit will decrease primarily because of the tariff. And overall, our profit for fresh pork will remain under pressure. For the strategy next year, in fresh pork, it is consistent with package meats. Our strategy is to stabilize our profit but expand our volumes. So we want to maintain our profit per head while expand and grow our volumes. And this strategy will be followed in the next two to three years.

Okay, thank you, President Ma.

Thank you. Okay, next is Song Ting from Ruiyin. Please ask a question.

Hello, can you hear me?

Yes, we can hear you.

Thank you, Mr. Guo. Thank you for sharing with us. I have three questions for you. First, on the group level, we see that the overall operating profit of the third quarter is very stable, but the net profit has increased significantly. I understand that there are some technical or one-time factors in the middle. Can you explain to us the difference between the net profit and the net profit? It mainly depends on which accounting tables. In the future, for example, in the fourth quarter, is there any similar impact? 那第二个问题是跟进一下美国这边,刚刚美国的管理层也提到就是收猪养殖这个板块,我们未来也会考虑就是套期保值吗? 我想请问一下就是历史上或者目前我们套期保值的策略或者占比是多少? 是可以理解成就是明年我们会加大这个套期保值的比例吗? Thank you.

The first question is from our CFO, Anna.

The three questions from Veronica of UBS, the first one on WH Group profit, we noticed the net profit growth is faster than the operating profit growth, which suggests there are some items below operating profit that has positively impacted net profit? Can the company provide explanations for these non-operating items or counting items? And will these items continue to impact the resulting fourth quarter? And secondly, relates to the U.S. hog production business. As Shane mentioned earlier, that we can use the hedging to lock some of the profits when the market opportunities are appropriate. So what's the company's strategy in terms of hog production hedging? And what's the percentage of hedging? And does your comment earlier suggest that we will plan to step up the percentage of hedging positions next year? And the third question, as Mr. Ma has commented earlier, the hog price will remain low next year. So how will that impact the Shuanghui hog production business in terms of our plan as well as profit?

Veronica, let me answer your first question. The difference between operating profits and tax profits will include other benefits and costs. China China China China China China Thank you. Thank you.

So between the operating profit and net profit, there are a couple of non-operating items, such as gains from asset disposals, some gains from the insurance claims, and some expenses related to the plan closures and hog production reformations, as well as certain provisions for litigations. Okay. So compared to last year, we had higher gains related to insurance claims. So that's a positive year over year compared to last year. And also for the plant closures, last year we had more expenses related to plant closures and the hog production reformations, which is the amount was higher. recognized last year, whereas this year the amount is very low, so that's also positive year over year. But there are a number of factors that may be offsetting each other. And we will invite Shane and Mark to discuss the question related to hedging strategy.

Yeah, I think as it relates to hedging, you know, it's really important to view hedging as part of our overall broader strategy. So that works alongside both our operational and our financial decisions as we think about performance in hog production. You know, there are timing differences in how hedging results are recognized. But overall, our approach is always really focused on supporting those overall performance objectives. And you asked specifically about percent of hedging and things like that. And we don't give or talk about or give away how we're positioned in the market. But overall, the philosophy in hedging is really about risk management. And we're not trying to make market predictions. We really use hedging techniques to reduce exposure to different market price fluctuations. And we build hedging positions when conditions are favorable that enable us to really limit our downside risk. And so, again, from a hedging standpoint, we don't give away or talk about the positions that we're in, but that is kind of the philosophy we take. It's just part of an overall broader strategy as it relates to hog production.

The overall idea and strategy is to support the overall goal of our profit. We do not treat this as a prediction, but rather as a tool for risk management. um um

The third question is about raising pigs in China.

What is the explanation of the management of the meeting? Okay, I will answer the questions about the management of the meeting. There are three questions. The first is the price of the price of the price of the price of the price of the price of the price of the price of the price of The cost of our motherland has a more obvious gap than that of our country. Motherland's economy is still in decline, but it is clear that in 2024, it will fall. This is the second point. The third point is that in 2026, the rate of decline in the cost of our motherland will be greater than the rate of decline in the price of our motherland. So three comments related to your question, hog production in China.

First, on hog prices, we expect the hog prices for 2026 will be lower in the first half and higher in the second half, but on average will be one renminbi per kilo lower than 2025. And secondly, for our hog production business specifically, The business has improved significantly compared to last year, and our cost has come down quite a bit. But there remains a gap with the first-year players in China. And we continue to lose money in hot production in China, but year over year, it has shown very substantial improvements. And thirdly, for 2026, we believe the speed of the magnitude of reduction in our own hog production costs will be larger than the decline in hog prices. So we expect hog production business in China to be profitable next year versus a loss in 25, even though the profits will not be very substantial.

I understand very clearly.

Thank you for your sharing. Okay, the next question is from Zhou Yang from Kaohsiung.

Please ask a question. Thank you for the opportunity to ask this question. I am Zhou Yang from Kaohsiung. I have two small questions here. I would like to ask the management team again. The first is about our Chinese business. We see that the sales of meat products in Sanjidu have achieved a stable small-scale growth. But I remember when we were in the second half of the year, we mentioned this year's three-season and four-season, especially the four-season side, a more progressive goal. At present, I would like to ask if we have seen any challenges in the sales of meat products and the high-end management industry mentioned that our four-season side will produce more cost-effective products and want to steadily expand. So how do we look at the sales of meat products in the four-season and the next year? Thank you.

Two questions from Valerie of Goldman. First one on China package-made business. In third quarter, the package-made business volume has increased slightly or largely consistent with last year. But in the interim results early release, the management has talked about more ambitious growth of volumes for package-made in the third quarter and particularly in fourth quarter. So what kind of challenges does the management see in China's package-made market? As mentioned earlier, the company expects to launch more value-for-money products in the fourth quarter, and what will be the company's guidance for volume in the fourth quarter and 2026? And the second question relates to European business. Based on the numbers, it looks like the European hog production in the third quarter was under a bit of pressure. And what's the management's outlook for the fourth quarter for all the three business lines?

第一个问题由我们双会的管理层来解答。

I would like to talk about a small number of issues related to meat production. In recent years, the first wave has been a bit lower. In the second wave, we have achieved a stable growth in the third wave. In the fourth wave, we expect to achieve a relatively obvious growth. There are several aspects to consider. First, in the fourth wave, we need to increase the consumption of raw materials in China. In the past few years, the consumption of raw materials in China has been relatively low. However, in the fourth wave, we have developed a strategy to increase the market support. This is the most important thing for us. The second one is that we have been implementing a professionalization reform in the past few years, and the effect is still being reflected. We started in the first quarter, and the effect is still being reflected in the second and third quarters, and the effect is still being reflected in the first quarter. The third one is the growth of our new channel. The growth of our new channel this year is 9% and the growth of the second channel is more than 30% and the growth of the third channel is about 35%. We expect that the growth of the fourth channel will be bigger. This is the third one. Let's put our small amount on it. The fourth one, we are promoting some high-cost products. So this kind of small meat. So the domestic consumption trend is a two-dimensional. High-end consumption is in the low-end special channels. There are also many consumption opportunities. So we have been trying to promote high-cost products for several years. So this high cost-performance product is also increasing in quantity, and the quantity is getting bigger and bigger. The fifth thing is that we will make a lot of innovations in the market, including some digitalized negative energy. This is also what we started to do in the beginning of this year. In the fourth quarter, it will be better in advance, so we expect that the sales of the fourth quarter will be better than the previous quarter. As for next year, we have such a trend. In recent years, the first quarter has been poor. In the second and third quarters, the price has gone up directly. In the fourth quarter, the price has gone up significantly or more than the average. So next year, our expectation is This will maintain the trend of the four seasons, to realize our small amount of this kind of growth. So this main work, in fact, I just introduced that our work is basically sustainable. In the future, we will focus on these works of ours. We want to turn it into a professional art next year, and then add it to the market. and continue to expand our new channels, as well as our two-stage products, as well as our market innovation and digital performance. So these jobs are a job that we have been doing for a long time and have brought a good effect in the past few years, and we will maintain it next year. Okay, I will answer this question.

So as you noticed in the first quarter, our volume has decreased significantly compared to last year. But in second and third quarter, it has remained. We have stabilized the profit. The package missed volumes and it started to grow. And we expect more obvious growth in the fourth quarter because of the following reasons. First, for the first quarter, Given the latest consumption environment, we expect to step up our investment in the marketing. In the first nine months, our spending in marketing is more moderate. It has been more cautious. And given our strategy for Package Meets Now is to stabilize the profit while growing our volumes, we will step up our investment in marketing to support our distributors, to support the business in new channels. And secondly, we have, as we mentioned earlier, we have launched a specialization of our Salesforce and distribution network efforts this year. And the facts and the benefits of this specialization is significant. the benefits are being realized gradually. So based on what we have seen, the effects of the specialization has achieve the more better results in the second quarter and the third quarter compared to the first quarter so we believe these efforts will continue to achieve more effects and certainly the new channel has achieved very good growth this year in the first quarter the year-over-year growth was nine percent second quarter it's more than thirty percent and the third quarter was around 35%, and we expect the new channel to grow faster in the fourth quarter. And number four relates to the value for money products because we have noticed the divergence of the consumption demand in China where there are good growths in both the premium products as well as the value for money products. So our sales of these value for money products will also gradually increase. stepping up the volume will gradually increase during the course of the year. Fifthly, we have also done a lot of work in innovation and digitalization empowerment. All these efforts started in the beginning of the year and they will yield results in the fourth quarter. In terms of the outlook for next year, As you see, we have very good momentum in 2025. After a challenging first quarter, we have stabilized our volumes in the second and third quarter, and we'll be growing our volumes in the fourth quarter. We expect to keep this good momentum into 2026 and achieve mid-single-digit growth in volumes. And a lot of our... strategies implemented this year were really sustainable. They will, we in the future will continue to execute on these strategies to achieve more, to achieve a sustainable growth of package meats.

第二个问题是欧洲四季度的行情以及我们 The second question relates to European business.

We invite our CEO in Europe, Louis, to answer, to take this question.

Good afternoon, everybody. Related to the performance of our hope production in the third quarter, The lower performance is mainly derived from the decrease of the peak price in euro during the third quarter and year today. 2024 was a record year, and during this year we saw a decrease of prices of 10% in the European market. We keep focus in controlling our costs. Our business has some of the most competitive costs in hog production in Europe. And the only driver really is the big price. Related to the forecast for the last quarter of the year in the different segments of the business, Peak price carry on going down, and we are having plans to reduce our costs, and we have some favorable conditions with the grain price that can adjust the margins in the whole production segment. We are working in a vertical integration. We expect that the decrease of the peak price is going to be favorable. for our vertical integration, and we expect better results in our fresh business and in our package business. In our country business, for the last quarter of the year, we see a strong market in Europe. Thank you.

In the third quarter of Europe, the pig farming industry is under pressure, mainly due to the decline in the price of pigs. In fact, the price of pigs in Europe has been declining since the beginning of this year. Because 2024 is a historical high, and it is also a good year for our pig farming. So compared to last year, the price of pigs has dropped by 10%. For us, our main focus is to further control and optimize our own cost. Our pig farming industry is the most competitive in Europe. It is a very competitive cost structure. In terms of the four-season outlook, the price of raw materials is still falling. So for us, we have to control our costs further. Of course, we will also use some opportunities to purchase stocks that have dropped in price to help us control our costs. Thank you very much.

The next question is from Feng Dandan from Huachi.

Please go ahead. Hello, Mr. Guan. Thank you for the opportunity to ask this question. I have two small questions that I want to confirm. The first question is that if we calculate the growth of EBITDA in the third quarter, it is far higher than the growth of our operating profits. So behind this should be the sale and sale section. uh uh Thank you.

So two questions from Tiffany of Citi. The first one is third quarter EBITDA of WH Group has increased more than the EBIT, which suggests that depreciation and amortization has increased year over year. What's the reason behind that? And what's the outlook for the guidance or outlook for this for the fourth quarter and 2026? And second question relates to China fresh pork business profit per metric ton. So can we interpret the management's view as that if the tariff situation remains as of today's status quo, will next year's profit per metric ton for fresh pork will remain consistent with the third quarter of 25? Thank you.

I want to answer the first question.

Okay, let me answer your first question. In fact, from this year's 1st to 9th, the whole group of disaster relief and coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired coal-fired Thank you.

So the first question, the DNA for the first nine months of this year is largely consistent with last year. They're both around $460 million. The reason there's some disconnection in terms of the growth between EBITDA and EBIT is because in the operating profit items, we also has some benefit from some of the one-off expenses or one-off items in the third quarter. For example, there is a gain from an insurance claim, which is around $70 million, and also a reversal of some litigation provisions of around $9 million.

The second question, please, Mr. Ma.

I will answer this question. Due to the impact of tariffs, the need for competition and the need for expansion, we have maintained a relatively low profit margin this year. This is also our strategy. In 2026, we will continue to implement the principle of the profit and loss ratio. The profit and loss ratio refers to the profit and loss ratio, not the profit and loss ratio. In other words, the profit and loss ratio of the power sector and the profit and loss ratio in the next year will achieve a significant increase, but the profit and loss ratio will maintain the profit and loss ratio.

So in the current tariff situation, as well as the competitive dynamics, as well as our strategy to grow the business, we have adopted a strategy to maintain a relatively low profit per head in fresh pork to grow our volumes. In 2026, we expect to follow the strategy of stabilized profit while growing our volumes, but to Clarify here, when we talk about stabilizing profit, what we're talking about is profit per ton. So we will stabilize our profit per ton, but not our overall profit, the total profit, because as volume grows, our total profit will grow. And in terms of profit per ton for 26, we believe it should be similar to 25 average.

Do we expect the fourth quarter to grow?

Don't you think it would be?

So the follow-up question was, do we expect the fourth quarter profit perhaps to improve compared to the third quarter, and what's the reason? So the answer is that for the fourth quarter, we expect the volume to achieve double-digit growth, and the profit will also improve. Because in third quarter, the profit was impacted by certain rise-downs of frozen inventories.

Okay, thank you, Director Guan. Thank you.

好,由于时间关系,我们接受最后一个提问,提问是来自中金的吴雨欣,请提问。

我们对于这个新兴渠道的增长目标大概是怎么样的,然后以及传统渠道这边的话,想了解一下今年像这个上半年到或者是三季度这个压力的话大概会有多少? And can the pressure from the traditional channel be improved in the future? The second question is about the U.S. meat products industry. I would like to know how the price of U.S. meat products has been translated from the end of the second quarter to the end of the third quarter this year, and what is the range and scope of pricing? And for next year, if the cost of the U.S. is still relatively high, how much interest can this product give? Thank you, Director Guan.

So two questions from Wu Yuxing of CICC. The first on China package meets and second on U.S. package meets. On China package meets, so what's the company's gross target of the new channels in 2026? Yes. And the company has, in the traditional channels, how much pressure does the company face? And do we see any signs of easing or improvements in the traditional channels? And on U.S. packaged meat business, so what's the magnitude of the price increase given the increase in the raw material prices between second quarter and third quarter this year? And if we expect the hot price to remain at elevated level next year, what will be the profit per metric ton guidance for U.S. packaged meats?

Okay. Okay, the first question is for the management of this conference.

Okay, let me start with this. The current government in this quarter is about 40% in the first quarter, more than 20% in the second quarter, more than 30% in the third quarter, and more than 40% in the fourth quarter. The year-on-year average should be nearly 35% of the government. The goal for next year is to reach an average of 30% for the whole year. This is the new channel. The current channel is declining this year. This has also led to an increase in the size of our channel this year. Therefore, in the second half of this year, we have taken a series of measures. The goal for next year is to achieve growth and not be too particular. By doing so, the sales of meat and vegetables for the whole year will be a comprehensive concept of growth. Thank you.

So for the new channels, the year-over-year growth across the four quarters is as follows. 10% growth in the first quarter, 20-plus percent growth in the second quarter, and more than 30% in the third quarter. And in the fourth quarter, it is looking like 40% growth in the fourth quarter. And we believe the average growth will be 35% this year. And the next year target will be 30% growth. For the traditional channel, it is declining year over year, and it is also tracking the overall packaged meat volume performance. So we have taken a lot of measures to hopefully achieve growth, positive growth next year to stop the declines. So if we are successful in that and combine it with the growth in new channels, we expect the packaged meats in China to achieve meat performance. single-digit growth next year.

And then the next question on the U.S.

package meets to the U.S. team.

Yeah, so this is Mark. I'll take that. So, you know, through the first nine months of the year, revenues for package meets on a per-unit basis are up about 6%. Well, primary revenues while material inputs are up closer to 16. So we've been able to mitigate that margin compression with operational excellence within the plant center supply chain and within SG&A, because what we've been faced with is an environment where where bellies have increased upwards of 26%, trimmings are up between 20% and 40%, and hams are up 10%. We understand that across retail, consumer dollars are stretched, and, you know, The grocery and food service industry are seeing people spend less and trade down to less expensive items. So we've been able to maintain steady volume in this environment without resorting to aggressive short-term price promotion. So we're losing innovation, improved mix, and brand building. So the good news is that protein is winning and pork is a great value relative to chicken and beef. And we believe that we're better positioned than most companies due to our broad portfolio, which includes both branded and private labels. So we're able to better meet consumers at points all across that value chain. And if that consumer shifts to private label, that's really a competitive advantage for us because about 40% of our mix at retail is in private labels. So, you know, in terms of profitability per metric ton in the 2026 period, We don't provide guidance, but we do expect that we will continue to see, or in 2026, we expect a modest improvement in the raw material outlook based on increased supply.

Regarding U.S. meat products, the net profit of meat products in the past nine months has increased by 6%, and the price of raw materials has increased by 16%. So in terms of the price increase of raw materials, in addition to the price, we have also improved the operation, including in the factory, in the supply chain, and in terms of our sales management fees. This year, the price of raw materials has increased significantly. The price of pork belly has increased by 26%, the price of lean meat has increased by 20% to 40%, and the price of lean meat has increased by 10%. At the end of the year, we also saw that consumers were more cautious in their consumption. There are limited consumption capabilities, and there are also some cases of consumption decline. So for us, we have maintained a stable sales volume, and we have maintained such a stable sales volume without taking a large-scale price discount. And we believe that we have a lot of advantages compared to competitors. On the one hand, pork is a more competitive protein in terms of cost, compared to chicken and beef. And we at Smithfield have a very diversified product range. We have brand products as well as label products. Label products account for about 40% of our revenue. It can also cover the needs of consumers of all levels of consumption. Regarding next year's exhibition, we will not provide a guide for the year of 2026, but what we see now is that the price of raw materials will improve to a certain extent, because we have seen an increase in supply.

Okay, thank you very much for your answer, Mr. Guan.

Thank you. Okay, so today our three-week investment meeting has been completed. I think we have discussed it quite well.

And now we can conclude today's earning release, and we think we have a comprehensive discussion in the earning call. We thank everyone for your participation.