Wh Group Ltd Ord

Good evening, analysts and investors. Welcome to WH Group's 2026 First Quarter Results Conference. This is Guo Lijun, Executive Director and Chief Executive Officer of WH Group. Joining today's results call are members of the senior management from WH Group and our subsidiaries, Shuanghui Development, Smithfield Foods, and Morlini Foods in Europe, 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 the Chairman of Shuanghui Development, Mr. Ma Xiangjie, Executive Director of WH Group and President of Shuanghui Development. Shane Smith, President and CEO of Smithfields and Mark, Chief Financial Officer. Louis, CEO of Morlini Foods. Ms. Joanna Yan, Chief Financial Officer of the company and Zhou Xiaoming, Vice President of the company. Today's earning call will be divided into two parts. I will first present the company's first quarter financial and operating performance, and then we'll take your questions. Now I will walk you through the first quarter performance of 2026 of WH Group. In the first quarter, packaged meats sold total volume was 781,000 metric tons, 9.4% higher than last year. Pork sold is 1.037 million metric tons, 5.6% higher than last year. Total revenue, $6.994 billion, 6.7% higher than last year. EBITDA, $869 million, 10.6% higher than last year. Operating profit, $643 million, 7.5% higher than last year. Profit attributable to owners of the company, $396 million, 8.8% higher than last year. Basic earnings per share is 3.09 US cents, also 8.8% higher than last year. So based on the performance of the first quarter, our volume revenue and the profits all achieved year-over-year growth. Now we look at the performance by segment. PackageMate is still the core business of our group, contributing to 51.7% of total revenue and 90% of our profits. Pork business is 39.1% of our revenue and 13.4% of our profits. Other business is 9.2% of revenue and a loss or expense of $21 million. Breakdown by region, North America is 53.1% of revenue. 54% of operating profit. China business is 31% of revenue and 39% of operating profit. European business is 15.8% of the revenue and 7% of the profit. During the first quarter of 2026, China hog market has a total slaughter volume of 200 million heads, 2.8% higher than last year. At the end of first quarter, hog inventory in China was 420 million heads, up 1.5% year over year. China average hog price was remain be 12.35%. per kilogram, 23% lower than last year over a year. So overall, the volume, the total supply increased, inventory increased, and the price has decreased. In the U.S., the number of slaughter hogs decreased by 0.8% to 32 million heads, and the average hog price was 1.44 U.S. dollars per kilogram, 0.6% higher year over year. In Europe, the average hog price was 1.16 euro per kilogram, down 18% year over year. So in the first quarter, in China and in Europe, the hog prices has declined year over year, whereas in U.S., the hog price maintained stable and with a slight increase compared to last year. Now we look at the performance by different regions. In China, the operating profit in the first quarter is $251 million, 16.7% higher than last year. Packaged meats deliver $255 million of profit, 25.6% higher than last year. Pork business has a loss of $2 million year-over-year, decline of $18 million. So packaged meat business has delivered a growth in both volume revenue and operating profits. And the operating profit has achieved double-digit growth. In North America, the operating profit was $347 million, 5.2% higher than last year. Package meets $278 million of operating profit, 4.5% higher than last year. Pork business, 98 million of urban profit, 98 million, 5.4% higher than last year. So in North America, our business have maintained growth in both revenue as well as profitability. In Europe, the operating profits declined by 15% to $45 million. Packaged meat business delivered $45 million of operating profits, increased by 40% compared to last year. Whereas for pork, there's a loss of $10 million, $32 million lower than last year. So in China and in Europe, we have growth in both package meets, but in the upstream business, because of the market dynamics, we have declined profitability in both China and Europe. Going forward, WH Group will continue to consolidate its global resources, leverage synergies, adhere to the business philosophy of improved mix, adjust price and control costs, and a strategy of industrialization, diversification, globalization, digitalization to enhance our leading position in the global meat industry and lay a solid foundation for long-term sustainable development. In terms of priorities, we'll continue to focus on our core package meat business to achieve steady growth in volume and profitability. In China, we'll respond to involving consumer markets and promote product and channel transformation to achieve a breakthrough in sales volume. In the U.S., we need to mitigate the pressure of increasing costs, optimize product mix, maintain high profitability. In Europe, we'll continue to expand our business scale through organic growth and acquisitions, reduce costs, and improve efficiency to increase profitability. In the pork business, we will continue to increase the harvest capacity, absorb fees to cost, and strengthen competitiveness and profitability. In hog production, we'll achieve a competitive cost structure by improving the biosecurity and KPIs. We will also accelerate development of poultry business and enhance operational performance to further advance our meat diversification strategy and achieve synergistic development through complementary business. We will also implement management and process innovations as well as automation upgrades for all segments while accelerating the research and application of artificial intelligence to reduce costs, increase efficiency, and enhance overall competitiveness. So that's all for the first quarter performance. Now we'll open the line for questions.

第一个问题请莫文斯丹利·黎连楼。 黎连楼。

Hello, thank you for this opportunity. Can you hear me? Yes, I can hear you. Okay, thank you. First of all, congratulations to China for the very good results in the first quarter. As Mr. Guo said, the amount and the profit are double. If we compare the amount of meat products in the first quarter last year, there is a lot of pressure. Some of them may be because of the low numbers. In terms of the price drop after the Spring Festival, the price is still relatively favorable. However, in the second quarter and in the future, the price may not be as good as it was in the first quarter. How do we continue to achieve the goal of increasing the price this year? um um Thank you. These are the two questions.

So two questions from Lillian of Morgan Stanley. First question relates to China business. So in the first quarter, as Mr. Guo has explained, China's package-made business has delivered good growth in terms of both volume and profitability. But some of that is probably attributable to the lower base in 2025 first quarter when the package-made business volume was under pressure. And in the first quarter 26, packaged meat business also benefited from a sharply declined hog price after the Chinese New Year. So what's the company's outlook for second quarter and third quarter volumes considering the relatively higher base in 2025? and also how to achieve a sustainable growth in package-made business, and also what's the company's profit per ton outlook. Can the market continue to expect higher than guidance profit per metric tons in package-made? Second question relates to the U.S. business. So based on the current future price, looks like the second quarter hog production business hog price continue to increase year over year, so that could benefit the U.S. hog production. Is it fair to expect good profitability growth in the second quarter upstream business in the U.S.? ?

The first question will be answered by the CEO of Double Development, Mr. Ma.

Mr. Ma, please. I am the CEO of Double Development, Mr. Ma. I will answer your first question. There is a lot of content in this question. I will read it later. You can continue. The first question is related to the increase in the supply chain of the two states. As I mentioned earlier, it is all due to the influence of the number of negative factors. In the first quarter of last year, due to the frequent fluctuation of light and other factors, the number of negative factors exceeded the first quarter of this year and achieved a good increase. But this negative factor is not the main reason for our increase, it is the major reason for the increase. The innovation of the market and the effect of our market management is a support for the growth of the second quarter. I expect that in the second quarter, even in the second half of the year, the trend of growth will maintain, but the growth may be less than the growth of the first quarter, especially in the second quarter. How to maintain the growth of the second quarter? Probably we are From last year, we have done several aspects of work. The first is to strengthen the management of our professionalization. Our team, regardless of the professionalization of the business team, the professionalization of the client team, the professionalization of the powder channel, this is the first one. The second is about the two-stage transformation of the process. This is a change in the global small-scale trend. We are developing new products in two segments. The demand for high-end products is increasing, and the demand for low-end products is also increasing. We have pushed a number of high-end products on behalf of the Smith & Fulda brand, and also pushed some high-performance products to adapt to the low-end market. The effect is still relatively good. The third management is digitalization. In terms of market management, we have increased a lot of good tools for the improvement of various management in the market. The fourth one is about the management of the capital reserve. We are in various regions of the country. The management of the first line of the capital reserve is through a large-scale increase in the middle and end of the network to support the growth of the scale. The last one is about the competitiveness of investment. This competitiveness has actually affected the scale of our investment. We experienced a significant increase in market spending last year, as well as a significant increase in the industry market. But at the same time, we can't ignore this big flood, which is called competition. This is called competition in terms of spending. The efforts of the big companies in several aspects will lead to an increase in sales in the future. This is a matter of hope. Who will be able to take advantage of this? In the past few years, we have maintained a relatively high net profit of about 4,000 yuan. Last year, it was relatively high. Last year, it reached 4,700 yuan. This year, whether it is the quality of the meat or the risk, our strategy is basically to increase the profit and loss. But due to the gradual decline of the capital, the profit is expected to be at a higher level. Thank you very much. Thank you, Mr. Ma. Very comprehensive.

Mr. Luo, I would like to add a few words. I am Mr. Hong Wei. I would like to explain some of our expectations for the second quarter or the second half of the year. In the past, we have made some strategic adjustments in terms of sales mode, channel operation, and product. I will share with you. First, in terms of sales mode, we have recently targeted some domestic fast food models. We are trying out some business models. uh uh Now we are in the Yubei market, including the Liaoning market. . . . . The second is that we are in this section of the channel. This year, it is also using the characteristics of the state to promote internal demand and promote literature. In this regard, some organizational upgrades have been made. We have also specially set up this special communication This is the second major organizational upgrade since the beginning of the year. We set up a special team in the headquarters, and there are corresponding personnel in the Department of Industry and the Greater Region to take on this task. This year, including high-speed rail, high-speed public roads, various tourist destinations, including some tourist resorts, we and Font Resort, including yesterday and Chunqiu Airways, we all signed this strategic cooperation agreement, and also organized the last two Spring Festival and and Qingming Festival organized a large number of outdoor activities. The results were very good. On the one hand, we promoted the brand. On the other hand, we also promoted our related products. In the future, we will also This will continue to look good, and it will also continue to bring some new pure energy, new network points, new business. These are some of the energy parts. We are also more confident in this aspect. Thirdly, in terms of products, we have also launched a strategy called regional products this year. In addition to the core large-scale products, we are also focusing on different flavors and types of products in various places. including Northeast China, South China, and East China, we have some new products for local flavors and local characteristics. Now they are gradually being planned and designed, and they will be released one after another. The subsequent results will also give you a synchronized update. In the future, we hope this can also bring some value, and will not cause a major replacement for current products. These are the three points I would like to share with you.

Thank you. Thank you very much, Mr. Hong. Thank you.

Just to recap the response, first from Mr. Ma, the president of Shuanghui Development. So in terms of the volume growth and profit growth, indeed we benefit from relatively lower base from the first quarter 2025 when the market was undergoing some destockings. But the lower base of 2025, was not the main driver of the year-over-year growth for 2026 first quarter. The growth is primarily driven by various initiatives we have taken in terms of specialized management, in terms of product innovations. And we expect in the second quarter and third quarter we will maintain volume growth, even though the magnitudes of growth may be smaller compared to the first quarter. And how do we maintain sustainable growth in package meats? There are five primary strategies or initiatives. First is the specialized management of our business. We specialize the sales force, the distributors, the channels, and the markets. so that we can more effectively manage the markets. And secondly, we also optimize our product mix by addressing the K-shaped consumption trend where we see strong demand for high-end consumers and also low-end markets. In the high-end market segment, we have developed a lot of Smithfield branded products and in the low-end, we continue to roll out many high value for money products. Thirdly, we also deploy digitalization tools to help us improve efficiency. Number four, we continue to promote the double network or double POS strategy where we significantly increase the number of point of sales or distributions. Number five is to be more precise in terms of marketing expense investment. We have significantly increased our spending in marketing, but we also want to make sure that the investment and allocation of this marketing budget are very, very precise. In terms of profit per ton, in the past, we have maintained relatively high profit per ton at around 4,000 to remain B. And last year, it was very high at 4,700. This year, our business strategy for both packaged meats and fresh pork is to grow our volumes while maintaining stable profits. In the first quarter, we have seen declining hog prices that has helped us achieve relatively high profit per metric ton for packaged meats. And going forward for the remaining part of the year, we expect the profit per ton may decline compared to last year, but it's going to be stable at a high level because there are two offsetting factors. One is our stepping up in the marketing spending, and on the other hand is the favorable hog prices. And some supplementary comments from Chairman of Shuanghui Development, Wang Hongwei, talking about three main strategies we have developed this year in terms of our distribution network management, the channels, and products. First, in terms of the management of the distribution channels, we are also learning the experience from other leading consumer and retail companies in China to enhance the granularity of our management of the channels. We are not just relying on the distributors to manage the market. The company will be playing a more active role in managing the market. We partner with our distributors and leverage data-driven analytical tools to better understand the market. and we work together with our distribution partners to address any issues and challenges they face in the market. We have launched a number of pilot programs in the South Henan region, which has yielded good results, and we are expanding these pilot programs in other regions, such as northern Henan, Henan Province, Shandong Province, and Liaoning Province. So these efforts have given us confidence in its continuous success in higher granularity in the management of the channels. And secondly, in light of the Chinese government's push for improving domestic demand through cultural activities and tourism. We also have set up a special channel team this year. This is another change we have made in our sales team in addition to the KA team we set up earlier. So we have also set up the mobilized resources across our business segments and various sales regions for this special channel team. And we partner with the high-speed rail stations, highway gas stations, some tourist attractions and amusement parks, as well as airlines. to work together to sell our products. And in this year, in the Chinese New Year, as well as in the Qingming Festival, we have organized many marketing activities, and we believe these activities were beneficial to the sales of some of our grilled sausage products as well as the promotion of our brands. And we believe this will continue to yield good growth for us. And thirdly, in terms of products, we are also developing many regional products. This is a new strategy for us where we will, based on the different tastes and the preference of consumers in different regions, to develop products that tailor to each specific consumer regions, such as Northeast, Eastern China, and Northern China. And we will keep you updated on the progress of this regionalized product strategy. And we are confident that this will also generate incremental volume growth for us. Shane, Mark, do you guys want to take the second question related to the U.S. business?

Yeah, so the U.S. hog production, I think the question was – Shane, you need to speak closer to the mic. Can you hear me?

Yes. Yes, we can hear you now.

So the question was really about the U.S. hog production and the implications of the U.S. futures price. And I'll begin by saying in the first quarter of 2026, we continued to see positive growth in profitability with profit of $4 million versus $1 million in the prior year. And that's really, again, showing that seasonality and high production where typically that first and fourth quarter are a little bit weaker than the second and third quarters. We are continuing to progress to a best in class cost structure. So to the I think to the crux of the question. In 2026, I would tell you we're looking for, and the future strip would imply, a similarly strong year to 2025. And that gives us the confidence, as you saw in our press release this morning, to go out and reconfirm the guidance that we had issued for hog production for 2026 of between $150 and $200 million. I think it is important to note that the USDA is estimating about a 1.4% increase in hog production. Typically, that translates into a lower hog price than we would have seen in 2025, but we believe that's still going to be at historically healthy levels. So really, please, where we are in hog production, please don't want the future strip is showing. And while we don't speak specifically to quarter to quarter, over the year, again, we've reconfirmed our guidance from hog production.

In the first quarter, compared to the same period last year, we had a profit increase of $4 million this year, and $1 million in the same period last year. Due to the seasonal problem of the U.S. pearl industry, the performance of the first quarter and the fourth quarter will be weaker in the second and third quarters. On the other hand, we have also made progress in the cost structure of farming in the first quarter. In 2026, we now expect that the performance of our pig farming this year will have a better performance than in 2025. This is why we confirmed again in today's Smithfield performance announcement that the whole year's profit for pig farming The U.S. Department of Agriculture is expecting a 1.4% increase in U.S. pig supply this year. Of course, the increase in pig supply will lead to a decrease in the price of pigs, but we think this is still at a relatively healthy level. Oh,

Thank you very much. The second is about American business. Because now, in the face of Thank you.

So two questions from Luo Chen of BofA Securities. First, on China business. So in China, we have noticed a sharper than expected or anticipated decline in the hog prices this year. And given this trend, what is the company's updated outlook for the hog price for the full year? And also in the first quarter, most of the business segments performed very well in China except the hog production where significant loss has been incurred. So what's the company's full year outlook for the hog production in China? Second question relates to the U.S. business. We understand there is a lot of pressure on the cost side of the business. And in the first quarter, we noticed a slight improvement in profitability for package meets. And given the elevated costs, what is the company's outlook for package meets profit for the full year and what initiatives or strategies the company can adopt to such as adjust the price, improve efficiencies, to mitigate the elevated cost in the U.S.?

Let me answer the first question. I am Ma Xiangjie from Shanghai Development. There are two problems in Luodong City. One is the housing price, and the other is the situation in Yang Zhiyue. We now judge that the price of the price of the price of the price of the price of the price of the price of the price of We are planning to drop a part of it, but it is not very big. The overall trend does not change. This is the first question. The second question is about the basic situation of the Yangzhi. Because our Yangzhi team is not professional enough, the level is not high. Although the indicators of this year have improved compared to last year, But it is still in a state of loss. In the second quarter, this year, except for the large scale, this year, the price of Hengcheng tea is above the bottom of the first quarter. So it is still in a state of loss. But it is a little more than last year. Because we are in Yangzhou, the proportion of the entire company is not high, the proportion is not large. So this is Mr. Ma from the CEO of Shuanghui Development.

In terms of the hog price, we... We think the trend we predicted earlier or forecasted earlier is the same, is largely the same, except that in the second quarter, the lowest, the bottom of the hog price will be lower than we had anticipated. So the average hog price will be lower than we had forecasted at the beginning of the year, but not significantly. And the overall trend will not change. In terms of hog production in China, because our hog production team is not very specialized and they do not have sufficient expertise, so even though we have seen some improvements in the KPIs, we had incurred losses in the first quarter as the volume in hog production decreased. increased, and also the hog price was much lower than anticipated. For the full year, even though we will see some improvements in the KPIs, because of very low hog prices, there's opportunity that the loss in hog production will widen compared to last year. Shane and Mark, you want to take the second one? It relates to the U.S. package mix.

Yeah, we'll talk U.S. package meats. And, Jean-Marie, this could be a little more of a longer answer, so we'll pause in the middle and allow you to translate. So first in package meats, when we look at the first quarter over last year, volume was up about 3.5%. And so what's important to recognize when you're comparing Q1 of this year versus Q1 of last year is the timing of our Easter holidays.

I think we lost you for like 20 seconds.

Okay. All right. Let me start over. So I was saying when you compare the first quarter of 2026 versus the first quarter of 2025, you have to take into account the timing of the Easter holiday. So first quarter versus the first quarter of 2025, volume was up about 3.5%. But if you adjust for that holiday ham, our volume was still up about 1.3%. So we saw good growth in volumes in the first quarter. And that's coupled with about a 2.6% increase in our average selling price. And so when we look at volume across our business, there's really some key points. So when you look at Units sold, for example, dinner sausage was up about 9%, dry sausage up about 10%. Our branded volume share across our 25 categories was up in total about 1.6%. Our packaged lunch meat volume, which is one of those 25 categories, the largest category, our volume in packaged lunch meat was up about 11%. And that's in a category across the industry that was down about 6.5%. And inside of that category, that's where we sell our prime fresh. And prime fresh was actually up about 26%, and we increased our points of distribution in that category by about 18%. And then innovation. So we've really talked a lot about focus on innovation. And when we look at some of the success stories in that, we saw a 12% increase in our armor dry sausage, some of the new products we've launched there, and a 22% increase in Curly's barbecue meats. So we've seen good gains across volume share, across volume, and across profitability across that retail channel. And then food service is another great story. So sales were increased by about 4% in Q1, and volume was up about 1%. And then we launched 12 LTOs during the first quarter of this year. So I'll let you translate that, Xiaoming, and then I'll move how that ties back to the cost question.

First of all, the sales of meat products in the first quarter of this year increased by 3.5% in the same period as last year. But there is a time error factor here. Because this year's Resurrection Day is relatively early, so the sales of the first quarter are beneficial. If we deduct the sales of these holiday ham, We have a lot of products that have achieved a very good growth. If we calculate it according to the number of orders, our dinner sausages have increased by 9%, and our dry sausages have increased by 10%. Among the 25 products that we participated in the competition, our brand's market share has increased by 1.6%. Our sales increased by 11% among the products of packaging, lunch, and ham, and the sales of the entire industry decreased by 6.5%. In this category, we have a flagship product Prime Fresh, our sales increased by 26%, and our sales net point increased by 18%. On the other hand, we also achieved good results in product innovation. For example, the sales of AMER's dried sausage increased by 12%, and the sales of our barbecue meat increased by 22%. This is the performance achieved by our retail channels, retail and convenience store channels. On the other hand, in the catering channel, we also achieved a 4% increase in sales compared to the same period last year. We also launched 12 limited-time promotions this year.

To your question on cost, and so when we look at the cost volatility we're seeing, it's really being impacted by the Iran war, and it's really through energy-driven volatility, and we're primarily seeing that in the short term that's flowing through fuel and freight. In the medium term, it's going to impact things like our resin-based packaging. And then over the longer term, it'll be in grain and other agricultural inputs that we use in the hog production segment. We are seeing higher fuel volatility, which is increasing our transportation costs. But we're continuing to proactively manage that fuel-driven inflation through things that we began back in 2024 and 2025, things like our network optimization, lane consolidation. We're adding intermodal where we can. And then we're taking some hedge positions where we can. We are focused on being at lowest cost to serve across our private fleet and our dedicated fleet and on our over-the-road capacity. And, again, looking at ways to expand intermodal where we can. In 2025 versus 2024, we had taken about a million miles off the road. through network optimization. And we expect to see that same level of decrease in 2026 versus 2025, and that's helping us mitigate some of that higher fuel cost that we're seeing. In the medium term, when we think about things like resins and packaging and those type of things, those are things that will be negotiated as we kind of move through the year, so we expect to see some medium-term impacts on that. And then finally, in the agricultural inputs on the corn side of the business, we have seen an increase of the cost in corn. But we are able to use things like hedging techniques, for example, or other lower feed cost mitigation to help lower those costs as well. So we're managing through the conflicts. We're taking pricing where we need to. But we're also continuing to focus on cost and mix. And that's really helping us maintain and mitigate a lot of the problems the dynamics that we're seeing across the market. Mark, I don't know if you would add anything there.

Yeah, I would just briefly add that, you know, from the consumer standpoint, you know, protein remains a core part of their basket, and we're managing our portfolio well. to offer value across price points. So, you know, demand stays robust. Our brand and marketing investments are targeted, and really they're ROI focused. It's about supporting loyalty and mix and really driving our value-added strategy. So pork continues to be a strong value proposition versus many alternatives in the marketplace. And just back on the cost side, um you know based on prior geopolitical disruptions it's really about the duration and the breadth of any supply chain impacts that that matters more than the short-term spot moves so we're planning for volatility and we're staying agile so you know net the situation adds near near-term input and logistics cost uncertainty but it doesn't change how we run the business and we have multiple levers to mitigate that so We're staying focused on execution, and, you know, we, again, have reaffirmed our guidance in total and at the package segment level as well.

Regarding the cost of meat products in the United States, I believe you may also mention that the current conflict in Iran has caused the rise in oil prices to affect some of our costs. In the short term, this will affect some energy prices. For us, it mainly affects the price of fuel and the cost of transportation. In the medium term, it may affect some packaging materials. In the short term, we do see that the oil price is rising, which also affects the cost of our transportation. But we also have all kinds of means to reduce the cost of our transportation. We have been promoting the optimization of our network since the beginning of 2024. We are trying to merge our transport routes and try to use the way of joint transportation. For example, in 2025, compared to 2024, we will save a line of transport of 1 million miles through an optimization of the network. We expect that in 2026, there will be an optimization of the same range of transportation. In the medium term, the price of oil may also affect some... the cost of packaging materials. In the long term, of course, it will affect the price of corn. We see that the price of corn is already rising, but we will also use other replaceable raw materials to optimize the overall structure of our raw materials. So we will also use price adjustment to optimize the cost structure to resist the impact of the market's cost on us. In addition, the CFO of the company, Mark, also added that for consumers, meat protein is still a very important demand for their consumption. For Smithfield, our product line is very wide, so we can meet the consumer's demand at all prices. We will also invest in market marketing. Thank you. The rising cost of oil will also depend on the duration of the conflict in Iran. But for our business, we are also prepared to face various uncertain challenges. We also have a lot of resources that we can use and take various measures. So we will also focus on our own business. Can you hear me? Yes, we can.

Hello, thank you for the opportunity to ask this question. I am Zhou Yang, a sales analyst at Gao Shan. My question is mainly about European business. We see that in the first quarter, the performance of meat products is actually relatively bright, but there is still a certain pressure on the farming side. I also want to ask if the management can help us to distinguish a look at Europe and the business department. Then the second question may also be that just now the teacher was asking more questions, that is, we think that the next half of the year there may still be some rebound of this trend. Then I would like to ask if there is a rebound or rebound of the price, what kind of response measures do we have here, including an idea like our input storage here?

So two questions from Valerie of Goldman Sachs. First relates to European business. In the first quarter, the package-made business has pretty strong results with very good year-over-year growth. But in hot production business, looks like there's a lot of pressure. So what's the company's outlook for the rest time of the year? Second question relates to China business. So will there be a risk that the hog price will rebound in the second half? And if that happens, what measures can the company take to address this risk, such as the frozen inventories? So, Luis, do you want to take the first question relates to the European business?

Yes, good morning everybody. The hog production during 2025, at the end of 2025, start to have a structural situation of oversupply of hogs. This extend to this first quarter of 2026. This was aggravated by the African swine fever in November in Spain that made more pressure in the internal market with a decrease of price below one euro in the first quarter. After February, the price started to recover until the level that is actually in Europe, that is in the level of breakeven. And we are expecting the price seasonally going up in the second quarter and third quarter of 2026. You can translate this, Xiaomi.

First of all, the price of leeks in Europe began to fall due to the increase in demand in the European market in 2025. This trend has continued until the first quarter of 2026. The main reason is that the outbreak of African leek fever in Spain in November led to a decrease in exports. As a result, there is a greater supply of raw leeks in Europe. However, in the first quarter, the price of pigs began to rebound from February, and it has reached a balance point for pig farming. We also believe that with the regular seasonal rules in the second and third quarters, the price of pig farming will increase. This is also a factor that will be beneficial to us.

We expect with the actual situation in the first quarter some reduction of inventories in some of the European countries and this will generate a better situation in the last quarter of the year for 2027. We expect the total outlook for the year to be below 2025. but still a little below 2025. The actual price is around 10% lower than 2025. And for the outlook for Packers Meet, we see our Packers Meet business with continually outperforming. We have record first quarter results in Packers Meet and we see a strong volume and growth in our Packers Meet profitability during all the year. Our poultry business too is performing very good in the first quarter and we see that our total performance of the company with a strong resource impact as meat and poultry business will compensate this decrease in our fresh pork and hog production business.

And this year, due to the low lease price causing industry losses, the supply of raw materials in the entire industry may have decreased to a degree of excitement. This will be more beneficial for the 27-year market. For the whole of the 26-year market, the profits of raw materials cultivation will still drop by 25 years. Because now the average lease price has also dropped by 10%. But this... Because of the loss of production capacity, it may be beneficial for 2027. Then in terms of meat products, we achieved a historical record in the first quarter. There is a very good profit and growth. Whether it is our own organic business, we also achieved this growth. Then we also have a new purchasing industry. Thank you. Mr. Ma. Mr. Ma, the second question is about the lease price.

Mr. Ma, the second question is about the lease price. Mr. Ma, the second question is about the lease price. Mr. Ma, the second question is about the lease price.

Yes, I understand. The main price of the second half of this year will definitely be higher than the first half, but we don't think it will be much higher. There will be a small rise. This is within a normal range. The cost will not have an obvious impact on us. This is the first judgment. Thank you.

So first of all, we expect the second half hog price will rebound, but the magnitude will not be very significant. And the recover of the hog price is also within a normal range of fluctuations, will not have a material impact to our cost structure. We have also made some reserves when the hog price was at the bottom, which can help us offset any potential increase in the hog price. So that will not have a material impact overall to our cost. 感谢我的问题,就是这样,这些非常清楚。 好,谢谢。 下一个问题是Jeffries的Ann。

Thank you, Mr. Wang. It means that in the future, after 2027, there will be a rebound or something like that. I want to know if it's because of the competition on the oil side or because of the demand, which led to the price of our current housing price going down. Thank you.

So the question from Anne of Jefferies on China business. So as mentioned, there's opportunity that the hog price will increase in the second half. And what's the company's outlook for the hog price in 2027? And also, what's the rationale where the main drivers of the current depressed hog price in China? Is it because of the competition in the upstream, in the supply side, or because of the weakness in the demand side. And the third one, in terms of channels, as I mentioned earlier, there's a good growth in the specialty channels. What's the current percentage of the specialty channels and what's the expectations going forward? And a similar question applies to the food service channels and other channels. What's the outlook for these various demand new channels or non-traditional channels?

我来回答 刚才其实你问的是两个问题 一个是关于竹架的长期盘断和北京原因 第二个是我们新渠道的一些情况 关于这个竹架下半年的翻炭 刚才我讲到的 它是一个幅度不大的翻炭 也是一个正常的波动 The overall fluctuation is in the position of the enemy. This is a basic judgment. It does not mean that from the next half of the year, even from next year and the year after that, the price will go up and go up. I don't think so. I think in the next few years, the price of China will be relatively low overall. The basic logic is also very simple. This year, because our entire Chinese foreign trade has a very high degree of globalization, 大企业占比高 各级的养殖库很少 所以对抗周期的能力比较强 比如说现在足将已经达到了历史底位 基本上4月份最低达到这十多年的最低 也没有看到有养殖业主管上的明显的成能力退出 所以基本的供应能力 It should be in recent years, it will be greater than the consumption. The supply and demand relationship has decided that the price will not be too high in recent years. This is our basic judgment. However, with the change in consumption season, there is a small increase in the market share. This is normal. It cannot maintain a平行线. The price increase is still very obvious. But the overall is a low. This is a This is the basic judgment. The second is about the new channel. The new channel is the main source of our growth in the past two years. Last year, the ratio of these new channels was about 20-23. Last year, there was a high-speed increase. This year, there will be a higher-speed increase. Of course, we have adopted a series of measures. A record increase of more than 50%. We estimate that there will be at least 30% to 35% increase in the whole year. This is a prediction. In this case, the whole year, the same number of years, the same number of years in 2026, we expect to reach about 27%. 我们的目标通过这两到三年的时间要占据到30%以上 这是个基本考虑 这是个基本预判 谢谢

So in terms of the hot price, we believe the rebound, the magnitude of the rebound in the hot price in the second half will not be very substantial. In the overall, the hot price will fluctuate at a relatively low level. The rebound in second half does not suggest that the hot price will continue to increase after 2026. because we believe in the next few years the hog price will remain at a low level. Because in China's hog production industry, it is becoming more industrialized with many large companies versus smaller farms. And these large companies are able to withstand the cycles and the market fluctuations. As demonstrated in the recent markets where even though the hot price was at very low level, we do not see significant exit from the markets. And in the next few years, we believe overall supply will be larger than the consumption demand. So the hog price will maintain at low level, even though there will continue to be small fluctuations due to seasonality, but it's not going to have huge fluctuations. And in terms of the new channels, in 2025, the new channels in total was 23% of our total sales. And in 2025, the growth was very meaningful. In the first quarter this year, the growth from this new channel is 50%. We believe the full year growth from the new channels will be 30% to 35%. And with that kind of growth, we think the full year contribution from the new channels will be around 27%. And we hope that in two to three years, the contributions from the new channels will be more than 30%. Thank you.

No problem. Okay, do you have any other questions? If no further questions, we can conclude today's earning call.

Thank you for participation.