Wh Group Ltd Ord

Dear analysts and investors, good evening. Welcome to our annual resource announcement by WH Group. Today we have with us Mr. Wen Long, Chairman and Executive Director. And he is seated on the stage with us. Next to him, we also have Mr. Woli Jun, our executive director and CEO, our CFO and vice president, Madam Chen Jian. I'm Zhou Xiaoming, the VP. We also have online with us our leaders, Mr. Wan Hongwei, Vice Chairman of the group, Mr. Ma, Mr. James Smith and Louis and Mark. We will first listen to the introduction of our performance in 2025 and then we will proceed to Q&A session. First of all, Mr. Guo, please take us through the financial situation and business review good evening everyone I'm going to take you through the financial summary business review of 2025 packaged meat sold 3.054 million tons a drop of 1.5 percent pork sold 4.089 million tons, an increase of 8.6%. Revenue realized, 28.026 billion U.S. dollars, up 8%. EBITDA, 3.377 billion, up 9.7%. Operating profit, 2.612 billion, up 8.7%. Profit before tax, 2.5 billion, up 13.2%. profit attributable to owners of the company 1.591 billion up 8.2 percent basic earnings per share 12.4 US cents based on our operating performance and cash flow for the year to better make returns to our shareholders we have decided that we are going to propose a final dividend 0.41 Hong Kong dollars together with interim dividend 0.2 for the full year 0.61 Hong Kong dollars total payout 1 billion and they will be distributed after the shareholders meeting if you look at our segment performance packaged meat is still our core contributing 50.6 percent of revenue and 82 percent of our profit POC contribution 40 percent to revenue and 22 percent to our profit others 8.8 and 4.1% respectively and North America contribution 54.3% to our revenue 53% to our profit China business contribution 30% to our revenue and 35% to our profit Europe contribution 15.4% and 10.9% respectively over the year of 2025 we maintained cash operating cash flow at 2.526 billion with a declining capex at 611 million down by 13.6%. Shareholder return 320 the proposed level for the full year 0.61 so that will exceed 1 billion US dollar payout. We have also maintained a conservative leverage level and debt level towards the end of the year. 3.633 billion as our total borrowing and total debt to equity ratio 0.28. The global economy demonstrated resilience and escalating trade tensions and policy uncertainties with divergent trends across different regions. Chinese hog market was characterized by strong supply and weak demand, leading to lower pork prices. Effective demand for consumer goods was insufficient. Hog prices in North America rebounded and market spreads narrowed. Profit of hog production improved, while the fresh meat and packaged meat business faced cost pressures. In the European market, hog prices declined due to animal diseases, war and export restrictions. We leveraged our global platform and vertically integrated business model, optimized our business structure, promoted efficiency improvement and cost control leading to improvement in all key operating metrics and record high profits. The number of slaughtered hogs in China increased by 2.4% to 720 million heads. By the end of the year, hog inventory in China was 430 million heads, up 0.5% over the end of 2024. So the volume came up with the prices coming down. Number of slaughtered hogs in the US decreased by 0.8% to 127 million heads. Average hog price per kilo 1.57 US dollars in the United States and 1.46 euro per kilo in Europe, down by 8.5%. So hot prices in China and Europe both went down. If you look at the spread in the market, average cut-out value in the US was 2.27 US dollars per kilo, an increase of 7.4%. Meat prices went up by 7.4%, and industry market spread narrowed as hog prices increased more than pork values. Operating profit, US$934 million in China, down by 1%. Packaged meat $191 million down by 3.6%, pork $44 million down by 20%. We implemented various innovative measures, continued to enhance performance of underperforming segments, expanded sales network and optimized product mix amid a challenging market environment. Our total meat sales volume reached a record high while profit remained stable. We have innovative marketing strategies and accelerated channel transformation driving rapid sales growth in emerging channels. Profit per ton remains strong. We adhere to the strategy of stabilizing profit and expanding volume for pork business. We expand customer base and sales channels resulting in increase in sales volume. We continue to increase the volume of chicken produced and processed, adjusted product mix and expanded sales network for poultry business. We accelerate digital transformation to drive upgrades in management across operations, sales, hog production, administration and R&D. For North America operating profit, US$1.393 billion up 17.4%. Packaged meat, $1.097 billion, down by 6.6%. Pork, $444 million, up 161.2%. We capitalized on favorable market opportunities, leveraged vertically integrated business model, optimized operational management and implemented cost-saving and efficiency-enhancing measures, resulting in high record earnings. For packaged meats, total sales volume remains stable, supported by diversified product portfolio and channel mix, while high-margin products continue to deliver growth. We continue to improve mix, adjust price and control costs to absorb the pressure of rising raw material costs. For pork business, profit improved significantly, driven by the hog production segment that capitalized on favorable market conditions, improved performance indicators and lowered hog raising costs. Fresh meat business enhanced operational efficiency, reduced expenses and optimized product and channel mix. We continue to improve KPIs of hog production, reduce cost, increase efficiency and strive to achieve a competitive cost structure. Europe business operating profit 285 million up 4%, packaged meat 155 million up 14%, pork business 90 million down by 31.3%. We leveraged the strength of our business model to counter market fluctuations, focused on the development of packaged meat business, pursued synergistic M&A leading to sustained growth in volume and profit. We expanded the scale product offering and geographic footprint of packaged meat by integrating newly acquired operations. We adhered to the strategy of improving mix, adjusting price and controlling cost. For pork business, we leveraged the vertically integrated business model. Profits of the segment improved significantly, mitigating the impact of declined hog prices. The poultry business achieved growth in both volume and profit by improving management and expanding sales network, seizing market opportunities and controlling cost. We focused on the packaged meat segment, expanded our supporting business and strengthened business footprint and successfully acquired Pupil Foods from Poland and Wolf Group from Germany. WH Group will continue to consolidate our global resources, leverage synergies, adhere to the business philosophy of improving mix, adjusting price, and controlling cost, and the strategy of industrialization, diversification, internationalization, and digitalization to enhance our leading position. We will continue to focus on our core packaged meat business to achieve steady growth in volume and profit. We respond to evolving consumer market and promote product and channel transformation in China to achieve breakthrough in sales volume. We mitigate the measures of increasing cost and drive growth in high margin products to maintain high profit in the US. We continue to expand our business scale in Europe through organic growth and acquisitions, reducing our cost and improving our efficiency to increase profit. We will explore opportunities to optimize and increase the processing capacity of pork business through M&A, new construction and facility upgrade, optimize product mix and sales channels to enhance profit. We will achieve a competitive cost structure for hog production by improving the KPIs and effectively preventing and controlling diseases. We will accelerate the development of our poultry business and enhance operational performance to further advance our meat diversification strategy and achieve synergistic development through complementary businesses. That's the end of my report. Thank you very much. Thank you, Mr. Guo. Now let's enter the Q&A session. If you would like to ask questions, please raise your hand and tell us who you are and who you represent. Let's invite the first question from the floor. Thank you very much for the opportunity. I'm from Morgan Stanley. I'm Lee Lian Lo. I have two questions. First of all, Mr. Guo, you talked about 2026 for packaged meat business. Mr. Wang has been paying very close attention to that and you have been making adjustments. So for this segment in China, If you look at hog prices declining continuously, so in 2026 with a rather high level of profit per ton last year, do you think you can achieve new heights this year? And concerning packaged meat business, in terms of sales volume, it's been suppressed by demand, so it hasn't been very strong. What about this year? What is your thinking? And then about the US side, packaged meat business, as you mentioned, you would like to expand high unit price products and high profit margin products. So what is the overall thinking about 2026? And then taking one step back, Mr. Wan, the entire group is in a stabilization stage. What about the next three to five years? What would be the focal point? In terms of return to shareholders, what is your plan?

So the question came from Lydian of Morgan Stanley. The first part relates to the packaged meats. As Mr. Guo mentioned, that packaged meats is a strategic priority for WH Group. With respect to China, Given the relatively low raw material cost, in light of the strong profit per metric ton performance in 2025, is there an opportunity to achieve even higher profit per metric ton in China for 2026? And also, the volume of China packaged meat has been under pressure due to the demand in the market, and how should investors look at the demand for the volume for 2026. And with respect to the U.S. package mix, Shane, Mark, I will defer to you to answer this part. As we mentioned, we will promote more high unit cost, high margin products. And what's the outlook for U.S. package mix, I guess, in terms of volume and profitability going forward? And the second question for Chairman Wang, what will be the company's strategic priority in the next three to five years and what will be the shareholder return look like in the future.

So leaders, can you talk about the package to meet business? Can we connect them? Good evening. I'm from . I'm joining online concerning the first question about packaged meat. In 2026, the hog prices have been dropping. So concerning our strategies,

It's a ma.

I think you are too far from the mic. You are being cut off. You better start from scratch again. How about now? It's better. I will answer the first question concerning about packaged meat business.

The recovery of domestic market is not obvious. The market competition is still fierce. So the overall strategy of the meat business in 2026, which we set earlier this year, is to have two stocks and two pigs. In this fierce competition, we still have to This is our main goal. Therefore, under this strategy, we will increase the investment in the market and deeply expand the market innovation. As a result, we expect that the sales will increase significantly. The stock price will maintain a higher level. The stock price will drop slightly compared to 2025. Response from Mr. Ma, CEO of Shuanghui on China packaged meats.

Based on our latest observation in the market, the recovery of the demand is not very obvious and the competition remains very strong. So in 2026, our strategy for China package mix is to balance volume and profitability with a focus on – slight focus on volumes. So consistent with this strategy, our priority will be to expand market shares, to step up our investment in marketing innovations, which means that we expect our volume will grow but profit per metric ton may have a slight decline compared to 2025, but will remain at a very high level, probably the second highest in the context of the historical profit per tons. So the second part relates to U.S. package meets. I will defer to Shane and Mark. Shane and Mark, can you hear us?

We can hear you. Can you hear us?

You will be better if you can get closer to the mic.

Okay. Can you hear us now?

Yes, yes.

Okay. All right. Thank you, Lydia, and thank you, Zhao Ming. So, Lydia, PackageMeets continues to be the earnings driver of the North American business, and this 2025 was the fourth consecutive year where we had achieved over a billion dollars a segment of profit. From a volume standpoint, We were up in six of the $10 billion-plus categories that we operate in. We saw in our food service channel, we saw sales increase by 10% in fiscal 2025, but we also saw volume increases in that channel as well, which was up by about 2%. Jami, I'll let you translate that, and then I'll continue.

In terms of meat products in the U.S., the U.S. meat products have always been an important driving factor in our Smith-Fair profit. In 2025, the distribution and operation profits of our meat products in the fourth consecutive year will exceed $1 billion. Out of the 10 products that we operate, there are six products that have sales. Again, in six out of ten of those billion-dollar categories.

But more importantly, that includes the higher margin categories like deli meat, packaged lunch meat, and dry sausage. So we grew dollar and unit share in 2025. and we also grow points of distribution. You know, we have 25 key categories, and we saw points of distribution up about 5% for the full year, and that was really led by performance in our prime fresh. So our package meets we feel really strong about going into 2026. We will be exercising more along the lines of advertising and promotion to promote brand growth But we are aware in North America, we still were operating with a very cautious consumer, a very cautious spending environment. But we think we have the right strategies in place to see both volume and profitability growth in 2026.

然后在我们有市场份额增长的这些六个品类当中, 包括了一些高利润率的熟食产品的增长, 蔬食店产品的增长, 包装午餐火腿产品的增长和干香肠的品类。 And then we are also in this, we have the 25 categories that we have experienced. Our retail point coverage, the coverage of the market has increased. Our retail point has increased by 5 percentage points. One of the important driving factors is our Prime Fresh product. So our future development of meat products in 2026 will also increase the investment in advertising and promotion and promotion. Continue to invest in our brand. Thank you, gentlemen. Thank you, Shane. Thank you, Shane.

Thank you, Shane.

Thank you, Shane.

Thank you, Shane. Thank you, Shane. and the situation of Wanzhou, we have developed a personalization policy. This personalization policy is industrialization, diversification, internationalization, and digitalization. This personalization policy has been developed. The reason why we want to develop this policy is that we consider the nature of our business. The industrialization is to complete our future industrial chain. From the top to the bottom, from top to bottom, to the top to the bottom, to the top to the bottom, to the top to the bottom, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the top, to the top to the This is the first, our industrialization. The second is diversification. But our diversification does not leave us alone. Our diversification around meat processing expands our pork industry, increases the meat and beef industry, and increases the strength of our company. Third is internationalization. We are a cross-border company. We don't have to do a lot of domestic business between countries. We can do international development, processing, and trade. We can achieve the same effect and increase our company's profitability. The fourth is digitalization. In other words, we hope to introduce new technologies, such as technology to strengthen our corporate management, such as artificial intelligence to replace some of the content of corporate management. In addition, such as robots to replace artificial intelligence to achieve the effect of downgrade. We need to do three things. One is to do the current oil. pork, chicken, and meat, these three main industries, continue to expand its quantity. This year, the quantity of meat in China and the United States is declining. We will continue to work hard to increase the quantity of meat, and continue to improve its operating capacity. Secondly, we need to speed up the introduction of new technologies to improve our field of work and contribute to our technological progress to achieve the improvement of quality and efficiency. Thirdly, based on the current situation of our enterprises, we need to choose the right time to continue the acquisition of pork, chicken, and beef industries to expand our enterprises and expand our enterprises.

So in response to your second question related to the company's strategies, we have the four prone strategies with four themes, industrialization, diversification, globalization, and digitalization. Specifically for industrialization, it means we realize the full benefits from a vertically integrated business model to achieve the synergies from the upstream, downstream, between the upstream, midstream and downstream. In hog production in U.S., we are reducing our capacities. In China and in Europe, there is a slight increase. And for fresh pork and packaged meats, we'll maintain their steady growth. We want to achieve the optimal balance between the different businesses to maximize the synergies. And secondly, diversification, it means we will, while we continue to focus the meat processing business, we will continue to diversify, while we continue to grow the pork business, we'll also diversify into poultry and beef. as opportunities arise. And thirdly, in terms of globalization, because we are a multinational company, we have a lot of synergies between different parts of our business. So through various trading opportunities, we want to achieve synergies between our business subsidiaries. In terms of digitization, we aim to use new technologies to improve our business management, to use artificial intelligence, robots, to replace some existing processes to improve efficiency, improve productivity, and use these new technologies to transform our traditional meat processing industry. And to execute on this strategy, we will have three priorities. First priority is that for our existing pork, poultry, and packaged meat business will focus on the core existing business, expand their volumes. In the last couple of years, we have some pressures and declines in the volume of our business, and we will focus on recover the volume growth in China and the U.S. And secondly, in terms of technology, we will introduce more technologies to improve the process efficiency to reduce costs and expenses. And thirdly, in terms of acquisitions, we will selectively identify and execute acquisitions in pork, poultry and beef to further strengthen, expand our scale and strengthen our business portfolio.

This is a reward for the shareholders. We have a principle that we can distribute profits every year. It will not be less than 50%. In the future, we will continue to adhere to this policy. In addition, with our internal structure adjustment in recent years, including our For Europe and the U.S., you can see that the operation of these two companies is relatively good. So the next step, the management results of Wanzhou will gradually improve. In 2026, Wanzhou's sales, business income, and business profits In terms of shareholder return, as you know, our dividend policy is that no less than 50% of the profit attributable to owners of the company

And we obviously will continue to adhere to our shareholder dividend policies. And as you have seen, in the last couple of years we have made some reorganizations including the IPO of Smithfield and the separation of Morlini Foods from Smithfield. And after this restructuring, all these subsidiaries performed very well and we're also confident about the outlook. For 2026, we have very good plans for volume, for revenue, as well as the profits. And we are confident in our ability to deliver shareholder returns in 2026 and going forward. So that's all from Chairman. Next question, please.

Hello, Mr. Wan and everyone in the management. I am Luo Chen from the Chinese Consumption Research Institute. I have two questions related to the U.S. The first is about the pig farming in the U.S. I don't know if my answer is right. It seems that the profits of our single-head army have reached $18. This should be the highest level in the past few years. I remember that the Smithfield management The benefit of deep farming is 1.25 to 1.5 billion U.S. dollars. But in fact, in 2025, it should be almost 200 million U.S. dollars. That's far more than the original value. Now, in the face of the complex and complex situation in the Middle East, the cost of raw materials in various kinds of big countries is rising. Does our management have any general judgment on the cost of raw pig farming in the U.S. in 2026, the price of raw pig and the profit from the investment? Especially because our investment profits also include a lot of hedge funds. Based on our current hedging policy, how strong is our investment profits this year? Are we confident that we can maintain a level similar to last year? Or because last year's technology was too high, there will be a relatively obvious decline? Family Grocery and Farmer Relief Act foreign investment on the stock market in the US, as well as the separation of cattle and cattle. The latter has little to do with Smithfield, but the previous one will have some impact. I would like to ask the management level whether the relevant bill is likely to pass, and how long it will take in the process of legislation. So Shane, Mark, two questions from BofA Research, Luo Chen, and they're all related to the U.S.

business. The first is on U.S. hog production. It looks like the 2025 hog production profit per head was $18, which is one of the highest in the recent history. And in your previous guidance, you have guided hog production profits of $125 to $150 million, but in the final results, it was $200, which has far exceeded the guidance. And in light of the recent conflicts in Middle East and the rising of crude oil and other commodities, commodity prices, how will these higher raw material price impact the hog production business in the US in 2026, such as the feed, the hogs, and how will that impact our profit per head in hog production? And given our hedging strategies, and how much visibility we have for 2026 hog production. And secondly, related to the recent Senate bill on the meat business, and the part obviously talked about the separation of different animal proteins but also talk about the foreign investments in the U.S. meat industry. What's the possibility that the bill will be passed by the U.S. Congress and how long it will take for this to become a law and what will be the impact of this bill and what measures is the company taking to address this potential risk?

To the first question, U.S. hog production had a fantastic 2025, and I think you quoted a number that was 200 million. It was actually 176 million is where we finished the year. And that's really a reflection of both improved operations and market conditions. You know, inherently in that, If you look at our raising cost, raising cost year-over-year was down 4.8%. And that was really driven by an improvement in our weaned pig cost, which if you go back and reflect upon the things we've talked about from our genetic strategy to improve our weaned pig cost, we're really seeing that come through. So that was down about 8.1%. And feed cost was down about 5%. So those things combined totally drove that 4.8% decrease in raising cost. coupled with a really good hog market throughout 2025, allowed us to print earnings that were the best we've had since 2014. So, Xiaoming, I'll let you translate that.

In 2025, the share profit of the pig farming industry is $1.76 billion. Its performance is indeed good. The main reason is that our farming costs have dropped significantly. The decrease in the cost of milk production includes the decrease in the cost of milk production, which is 8.1%, as well as the decrease in the cost of feed production, which is 5%. The main reason for the decrease in the cost of milk production is also because of the various reform measures that we have taken in the past, including genetic improvement. So these factors combined led to a 4.8% decrease in our production cost. In addition, we also encountered a good price of raw pig. So in total, the raw pig farming industry in 2025 is the best profit in history since 2014.

For 2026, we are seeing some impacts from some of the things that you pointed out. So crude oil is up, which is having an impact on corn. So we've seen corn go up 20 to 30 cent a bushel over just the past few weeks, which will have an impact on our raising costs. We've seen diesel prices increase from $3.50 back in January to close to $5 now. So that's having an impact. But what we're focused on is making sure we're efficient. So continuing to execute the strategies that we've laid out on previous calls from the genetic side, from the feed efficiency, livability, health, all of those things that will play in. But we also use a number of hedging techniques. where we are able to buy corn and soybean meal contracts and sell hogs on the futures markets to help us lock in some margin where we see opportunities. So we'll use a number of hedging techniques to help us make sure we're managing the business well. Right now, Marks, as you saw in the press release, we did lay out our guidance for next year. We think that guidance with what we know today is fully inclusive of any implications that we see on the horizon.

Thank you. You just mentioned that the recent increase in energy prices has indeed affected some of our raw materials and cost structures. The price of corn has increased by 20 to 30 per cent in the last few weeks. The price of oil has also increased from $3.5 per gallon to about $5 per gallon. So these factors will affect our cost structure. But for us, the most important thing is to control our own production cost, from our genes, from our feed conversion rate, from our survival rate, these important performance indicators to control our own production cost. And then from this, uh, uh, you just mentioned this hedge fund and what we predict in the future, uh, uh, profit, uh, predictability, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh,

To the second question, there are a number of bills that are making their way through Congress, and we're following all of those very closely. I think what's important for people to know is that when WH Group bought Smithfield, this was a CFIUS-approved transaction. Smithfield has been here for 90 years. Coming back to the U.S. stock market back in January provides a an additional level of transparency to all stakeholders to let us, to let them know who we are and how we operate. So we don't, while we're following those closely, we're concerned from a standpoint of seeing where this goes. I think the merits of Smithfield, how we operate in our relationship with WH Group, We'll stand up to any scrutiny we get. I'll let you translate that, and I'll talk about a couple of other things.

The U.S. Senate bill, first of all, the acquisition of Smith & Field in Wanzhou was approved by the U.S. Foreign Investment Commission. Smith & Field is a company that has a history of 90 years in the U.S. In January of 2025, we went back to the U.S. and we added more transparency to the disclosure so that the outside world can know about our equity structure, our company's information in all aspects, including our relationship with Wanzhou. We also believe that the relationship between us and Wanzhou can withstand the external review.

You know, Smithfield is subject to the same laws and regulations that all American businesses are. But I think what's important, again, for people to understand is, as a company, we partner with thousands of independent American dog farmers from our facilities across 39 U.S. communities and across 18 states. We pay, on average, about $2.2 billion in wages to over 32,000 U.S. employees. We've made hundreds of millions of dollars of philanthropic contribution to all of the local communities that we operate in. We've recently announced an investment in Sioux Falls, South Dakota, that will be one of the largest investments in American agriculture ever. So we are invested in the U.S., and I think as that fact pattern becomes more talked about and more recognized, it really positions Smithfield well as really contributing to the U.S. agricultural economy.

Smithfield cooperates with thousands of farmers in the United States. Our business covers 18 states in the United States. We pay $2.2 billion a year. We have 32,000 employees working in the United States. In the past 10 years, we have donated hundreds of millions of dollars to charity. Recently, we announced that we will build a new meat processing plant in South Dakota. We are also investing in the United States. Thank you, Jeremy. Next question, please. This is Veronica from UBS.

Thank you very much for your sharing. I am Veronica Song from UBS. There are two questions for me. One is about China and the other is about Europe. I would like to ask the management of China about the outlook on the lease in 2026. Because recently, the price of pigs has fallen beyond everyone's expectations. There are also some rumors in the market that the industry will close down and the price of pigs will drop. I would like to hear the management's opinion on the price of pigs throughout the year. The second question is about Europe. As mentioned before, the recent global situation is uncertain. The price of energy and agricultural products has brought a big wave. I would like to ask, what do we think of the European business?

So two questions from the UBS. The first one on China's hawk price. What will be the outlook of hog price for 2026. Given the recent unexpected sharp decline, there is some speculation that some more capacity will exit industry, which will force the price to bottom out. So what's the outlook from Zhonghui? And secondly, on Europe, as mentioned, there are a lot of uncertainties in the economy in the commodity prices as a result of the recent events. So how will that impact the cost structure for the European business? So Louis maybe will defer to you after Shuanghui has answered the first part.

Can you turn on the cable? Mr. Ma or Mr. Liu? Mr. Zhou? Mr. Ma, you can hear me now.

We are listening to you for a while. Is it because of the price of pigs?

Yes, he is asking about the price of pigs. Because he said that the recent rapid decline will lead to the emergence of industrial production, which leads to the rebound of the price of pigs.

Oh, I understand. First of all, we have a prediction for the next 26 years. Second, we have a prediction for the next 26 years. According to the current situation of the different ethnic groups in China, we expect that the last 26 years will be lower than the last 25 years. The drop should be around 4%. This is the current price. Compared to the first half of the year and the second half of the year, the first half of the year will be relatively low, and the second half of the year will be slightly higher. The current price is low. This is the judgment of the current price this year. Regarding the recent rapid drop, the impact on the second half of the year will not be very obvious. Thank you.

So this is Shuanghui CEO Mr. Ma. With respect to the outlook of hog price in China, based on the information we have, we believe, we are of the view that the average price in 2026 will be lower than 2025, approximately 10% lower. And we believe the price in the first half will be lower and there will be some recovery in the second half. And we do not believe the recent sharp decline in hog prices will force a lot of capacity to exit the market because currently there are a lot of large industrialized hog producers in China. So the short-term fluctuations in hog prices will not impact their overall capacity strategies. So we do not believe the hog price recover will be very steep. Luis, maybe you want to take the second question relates to Europe cost of structure.

Thanks, Namin. Related to the impact of the iron work in our business in Europe, we already see the increase in prices in fuel, gas, and electricity. We have some coverage for the year, but the impact in our costs will depend on the duration of the actual situation in the Middle East. We can see in the medium term some increase in grain costs, but we have some positions in the grain costs. And like we were doing in the past with the energy crisis and inflation crisis after the Ukrainian war started, we have measurements to mitigate this potential inflation situation with commercial action, mixed optimization. productivity programs and efficiency programs that we were investing during the last years to try to optimize the energy use in all our manufacturing plants. Thank you.

As for the recent situation in the Middle East, we have seen an increase in the price of raw materials, including fuel, gas and electricity. But we also have certain restrictions In the end, our influence depends on the current situation and its duration. As for the price of the stock, it may have a certain impact in the medium term, but we also have a certain lock on some of the prices and costs. We have also responded to the conflict with Ukraine, which caused an increase in the price of energy and food at that time. So we also have experience and measures to resist the market. OK, next question. The woman in the middle is from Gao Shun.

Thank you for the opportunity. I am Zhou Yang, a consumer analyst at Gaoshan. I would like to ask two questions about China's business. The first question is that we see that in 2025, the upper oil, agriculture, and land are still under pressure. If we assume that in 2026 and in the future, the price of pearl will continue to be under pressure, how do we see the profit situation of these two parts? This is the first question. Secondly, in terms of meat-based products, we see that in the fourth quarter, the whole tonality has actually decreased a little bit, but our sales performance is relatively mild. Just now, the manager mentioned that we hope to see a faster growth in sales throughout the year. I would like to ask, at present, we include products, including channels, So two questions both related to China business.

First is given the assumption that the hog prices will continue to be depressed in 2026, how will that impact the hog production and the fresh pork business in China in 2026? The package meets profit per ton has a small decline in the fourth quarter, 25, whereas the volume has been flat. And the company has a good outlook for package meets volume in 26. And what's the latest progress in terms of the various measures have taken in terms of products and channels? Mr. Ma, this question may be answered by you.

All right. I would like to talk about the disaster relief. There are more than 5,000 disaster relief companies in China at present. Some of them are at a disadvantage. The largest companies, such as us and several other companies, are less than 40% of the total number of companies in the country. So the future is an experience of increasing the speed of the disaster relief. So our strategy, the strategy of the future is to help the disaster relief companies to quickly expand our market strategy of disaster relief. In this war, we will not pursue too high land. We will increase the total profit by increasing the amount of money. This is a disaster. We are still doing relatively poorly. In 2025, we will still be in a state of loss. In 2026, our cost will drop tomorrow. But at the same time as our cost drops, the housing price also drops. So we are still losing money all year round, but the loss is significantly reduced. In the future, we will continue to expand this sheep farm, but we will not realize this probability through too much capital investment. We rely on some other local sheep farm companies to cooperate with us. The purpose is to realize the overall interest in our industrialization, to guide the next industrial market competition.

With respect to hog production and fresh pork, for fresh pork, currently the China market is still very fragmented. There are more than 5,000 players. And for the top players, the market share, the combined market share is less than 10%. So in the next few years, there will be consolidation of... fresh pork in China. So we want to take advantage of lower hog prices to expand our market shares. So with this idea in mind, we will not be too fixed on the profit per head and we will try to expand our scale while maintaining a moderate level of profitability. For hog production, it's still a relatively underperforming business of Shuanghui. In 2025, it was loss-making. In 2026, we expect the raising cost will decline, but the hog price will also decline. So we will continue to – it likely will continue to incur loss, but the loss will narrow. And in the future, we may also opportunistically expand the scale of hog production, but not in a capital-intensive way. We'll partner with other hog producers to lock in the hog supplies to support our fresh pork and package business to enhance the competitiveness of our overall business platform.

Mr. Ma, his second question is about the sale of meat products.

Let me talk about this.

I am the vice president of the General Assembly of the General Assembly of the General Assembly of the General Assembly of the General Assembly of the General Assembly of the General Assembly of the General Assembly of the General Assembly of There is a small growth in the fourth quarter. We have been looking forward to a significant growth in the 26th year. I think the focus of this matter is on several aspects. The first is that since last year, our performance has been constantly changing. It is a gradual trend. Last year, we launched a . . . . . . Since last year, in order to welcome happy consumption, the consumption is still relatively obvious. So we are focusing on promoting the promotion of cross-sectional products, especially high-performance products. After consumption has dropped, high-performance products are also becoming more and more legal. The growth is also relatively obvious. This is our third issue. The fourth issue, we also opened a deal last year. This is a digitalization of a creative form. In doing this market digitalization. So last year is just a start. We have been through digitalization for a few years. Can make our business. In the process of market opening. All kinds of actions. Business actions are more precise. More effective. This is the fourth thing. The fifth. Since last year, we have been strengthening the market. This creative work. Including the development of our field of vision, which is also getting better and better. The effect is getting better and better. And our support for the market is also making some changes. It is more precise and the ratio will be bigger and bigger. So it is also based on this situation. In the next six years, we will obviously achieve a lot. So we are full of confidence. It is expected that we may So the response on the package meets from Shuanghui Vice President Mr. Chao responsible for package meet business.

Last year, if we look at the package meets volume by quarter, the first quarter was weak. The second quarter and third quarter stabilized. and in fourth quarter we recorded moderate or small growth. In 2026, our outlook is that the growth will be more meaningful for the following five reasons. Number one, we have seen sequential improvement quarter by quarter in 2025 because we have made a lot of reforms, for example, in professionalize or specialize our sales force and the effect of these reforms are taking effect, are being realized gradually over time. And secondly, we are encouraged by the strong growth in the new channels, which has achieved more than 30% year-over-year growth in 2025, with 25% share of our overall mix. and its performance was also improving quarter over quarter in 2025. And thirdly, in light of the K-shaped consumption pattern in the market, we have launched high value for money products, which has exhibited strong growth momentum in 2025. And number four, we're also increasing our efforts in digitalizing our marketing, which will help us to have more precise marketing strategy executions and to have a better effect in the overall marketing. And thirdly, we have also a lot of innovations in our channels. We have launched some pilot programs which have achieved encouraging results, and we will continue to have a very accurate and enforceable support of different markets based on their local conditions. And with all these factors considered, we are confident in the meaningful growth in packaged mixed volumes in 2026. and we hope that will also be reflected in the quarterly results that will be announced in a couple of weeks.

Hello, everyone. I'm Chen Wenbo, an analyst from Zhongjin. I have two questions about the U.S. The first one is that we see that the number of U.S. pig farming businesses has indeed dropped significantly compared to the last four years. I'd like to ask about the development of our previous strategy, which is to limit upstream. How far have we progressed now? What is the overall volume of U.S. pig farming businesses in the future? What is the plan? Secondly, I would like to talk about the future of meat products in the U.S. Due to the increase in the price of pork in the past 25 years, there has been a decline in the price of meat products. What is the future of the price of meat products in the U.S. in 2026? And what is the level of sales? Thank you.

Shane, Mark, two questions from CICC on the U.S. business. First relates to the U.S. hog production. We have noticed a significant decline of volumes compared to 2024, which was consistent with our hog production capacity rationalization. And what's the latest progress in the capacity rationalization, and what's the kind of targets or plans going forward for hog production capacity? And secondly, relates to the U.S. package mids. We noticed the decline in profit per metric tons in 25, primarily driven by the high raw material cost. And what's the latest outlook for package mids in 26, both profit and volume?

Okay, Xiaoming, I'll take the first one, and then Mark can take the second one. So as it relates to hog production, in 2025, you know, we produce 11.1 million hogs internally. that's down from about 17.6 million at the high of 2019 and down from the 14.6 million that we produced in 2024. And that all was part of our overall rationalization process. We do expect, as we look at 2026, that we'll be up slightly above that 11.1, really due to two things. One is productivity increases. You know, as we've invested in genetics and health, we're seeing some productivity growth. And then second, keep in mind, there's for us in our fiscal year, there's a 53rd week in 2026. But I would tell you over the medium term, you know, we're still targeting a reduction in our overall hog production capacity to 10 million hogs, you know, roughly 10 million hogs. And that would be about 30% of what fresh pork needs. And again, we think that this is the optimal balance to keep that assured supply coming into the plants, but also balancing that with the overall cost risk commodity management or commodity side risk management. So we'll continue over the medium term to work toward that 10 million and 30%. But again, as we look at, as we sit today looking at 2026, we do expect it to be up slightly, again, due to those productivity increases that are, Coming from our current internal production and from that 53rd week that we'll see in 2026.

I'll let you translate and then I'll hand it to Mark to talk to the package meats question. There are two main reasons for the small increase in the yield in the year of 2026. The first is because of the increase in the production efficiency of the pearl. The improvement of the performance index will naturally lead to more yield. The second is because of the increase in Smith-Feld's fiscal year in the year of 2026, which is 53 weeks. Because of the way he calculated the end of the fiscal year. But our mid-term goal in the U.S. is about $10 million. Because this is about 30% of what we have in our land. We believe this is the best vertical integration ratio. On the one hand, it ensures that we have sufficient supply. On the other hand, it can effectively manage the risk of general goods.

On the package meets questions, You're correct. We did experience significantly higher raw material markets in 2025 to the tune of about $525 million, which we were able to successfully offset a portion of through price and mix improvements, but certainly had an impact in terms of pressuring our margins per metric ton. We do anticipate some relief in the raw material markets as we move into 2026, but we're still faced with a very cautious consumer with high rates of inflation in the U.S. And so what we saw in 2025 is expected to continue as we start 2026 with that cautious consumer trading down. across the branded portfolio and, in some cases, into private label. But, again, that really speaks to the strength of Smithfield's brands with brands that meet that consumer where they are within their pricing constraints. And then we do have about 40% of our business in retail and private label. So if they are trading out of branded and into private label, they're likely picking up a product that is produced by Smithfield. You know, we'll continue to focus on improving our mix and moving away from that more commoditized offering. So think of the seasonal ham business and into everyday use occasions of our package meats business at a higher margin. I'd say the long-term algorithm is still intact today. for the package meets business, which includes continuing to improve that mix and improving the profitability in total and on a per metric ton basis. It's just really attributed to that cautious consumer right now.

The price of raw materials in the U.S. has been affected by the rise in the price of raw materials in 2025. The cost has risen by $5.25 billion. Of course, we have effectively eliminated some of the rise in the price by adjusting the price and adjusting the product structure. But in the end, it still affects our profit rate and profit margin. In 2026, we expect the price of raw materials to be reduced, but on the other hand, we are also facing consumers In the case of high food prices, consumer behavior is more cautious. There are more consumers who choose to reduce consumption. We also reduce the consumption of oil brand products, or turn oil brands into stickers. Even in stickers, there is a situation of consumption decline. But this also represents the advantage of our Smith & Field brand combination, because we have a very diversified brand combination that can serve our customers in all kinds of price ranges. At the retail end, we have 40% of products that are stickers. So if consumers start from brand products It is also very likely that they will eventually choose a product produced by Smith & Field. Then from the long-term strategy, meat products will still try to optimize our product combination. From these low-power products with large-scale products to some products with higher profits, to optimize our product combination and thus increase our profit. Okay, next question.

The man in the middle. Thank you, Mr. Guan. I am Wu Yibo, an analyst at Mugen Datong. I have only one question about European business. The company has acquired some European local brands in the past five years. It is in the process of forming, but it may not yet form, a strong platform like China Double, the US Smithfield. I would like to ask Mr. Guan, how has the growth of European business in the past five years been? So the question from JP Morgan on the European business.

So in the last couple of years, European business, where Morlini has made a couple of acquisitions to expand the footprints and are trying to build a platform as scalable as Shuanghui or Smithfield, but obviously still relatively small. But apart from these acquisitions, what's the organic growth in Morlini and what's the constraints for the organic growth in European markets? And also, what's the group's overall strategy going forward for Europe? Luis, you may want to take a first step.

Thank you for the question. The organic growth in the last year, we were growing 5% in our fresh water business and 7% in our food business. in volume yeah and in our package business we have a small decline of volumes and the inorganic growth was giving us a total growth of three percent i mean that still we are growing like chairman was mentioning our strategy in our poultry business in our package business we are growing to organically through investing in some of the categories that we believe are future categories for us, like ready meals, convenience food. And through M&As in the future, and I was mentioning the last calls, our main strategy is still is pack-as-meat business in Europe, poultry business, and some areas like pet food that we have some acquisitions that still we have some possibilities to grow in the European market.

Thank you. including the growth of meat products. At the same time, we have also increased our scale through some purchasing investments. In the past, we have also acquired some meat products companies, and we will continue to pay attention to the opportunity to invest in meat products, family businesses, and pet food.

Okay, next question.

Thank you.