WH Group Ltd. (HK) Stock

Okay. Good evening, friends from the -- welcome to WH Group's conference call for the announcement of our results for the first half of 2026. This is Guo Lijun, Executive Director and Chief Executive of WH Group.

Joining today's results announcement are members of the management team from WH Group and from our subsidiary, Shuanghui Development, Smithfield Foods and Morliny Foods in Europe, namely Mr. Wan Long, Chairman of the Board and Executive Director of WH Group; Mr. Wan Hongwei, Vice Chairman of the Board of WH Group and Chairman of Shuanghui Development; Mr. Ma Xiangjie, Executive Director of WH Group and President of Shuanghui Development; Mr. [ Luzon Tao ], Executive Vice President and Chief Financial Officer of Shuanghui Development; Shane, President and Chief Executive -- Luis, Chief Executive Officer of Morliny Foods; Ms. Kamjin Yan, Chief Financial Officer of the company; and Zhou Xiaoming, Vice President of the company.

Today's announcement is divided into 2 parts. We will first present the company's financial and operating performance for the first half of the year, and we'll then take your questions. For the first half 2026, package mid sold is 1.522 million metric tons. Pork sold 2.079 million metric tons year-over-year growth of 6.1%. Revenue USD 13.827 billion, 3.3% higher than last year. EBITDA, $1.681 billion, 6.1% higher than last year. Operating profit $1.231 billion, 2.2% decline compared to last year. Profit before tax, $1.221 billion, 6.2% higher than last year. Profit for the period, $947 million, 10.5% higher than last year. Profit attributable to the owners of the company, $773 million. 6% higher than last year. Basic earnings per share USD 6. 02.

The Board has also declared an interest dividend per share of HKD 0.2. Total amount would be roughly USD [ 330 ] million. Despite a challenging operating environment, we have achieved robust performance with growth in both revenue and volumes. Looking at the business segments. Package made is still our core business contributing to 51.3% of our revenue and 89.4% of our operating profit.

Pork business is also our major business contributing to 39.1% of our revenue and 14.3% of our operating profit. Other business and contribute to 9.6% of revenue and a loss of $45 million. From a region perspective, North America contributes to more than 50% of our revenue, which is 52.9% in the first half. China business was 30.5% and contributed to 36.8% of the operating profit. European business contributed to 16.6% of revenue and 9.7% of the operating profit.

In the first half, the global economic growth moderated geopolitical conflicts elevated trade tensions continued and policy environment remain uncertain. China saw heart continue to reduce, while productivity improved. Abundant supply caused the hard price to decline sharply year-over-year. U.S. pork supply increased price dropped year-over-year. Feed cost was favorable due to lower grain prices. Hog production remained profitable. However, Fresh Pork faced the challenges from narrowing market spread. In Europe, animal disease export restrictions resulted in pork oversupply inside European Union. Hog price dropped significantly pressuring upstream pork operations.

WH Group leveraged our global platform and the value chain, promoted efficiency improvement cost savings, optimize the business structure, continued with pricing mix and control strategy, achieving the growth in volume, while the operating profit decreased slightly. Packaged meat as the core business saw growth in both volume and profits.

In the first half, the number of slaughter hogs in China increased by 1.7% to 372.46 million hogs. The number of slaughter hogs in the U.S. decreased by 0.5% to 63.08 million hogs. From a pricing perspective, the prices dropped in all the regions. In China, the average hog price was RMB 11.2 per kilogram, down 27.5% year-over-year. U.S. average hog price was USD 1.48, down 1.5% year-over-year. European average hog price was per kilogram, down 20% year-over-year.

In the U.S. in the first half, the average pork carat value was USD 2.13 per kilogram, a decrease of 2.2% year-over-year. The market spread narrowed due to port price decreased more than high price. So the spread has narrowed. In China, the operating profit was $454 million, 4.4% higher than last year. Packaged meats $458 million, 11.4% higher than last year. Pork business is a loss of $7 million and year-over-year decline by $35 million.

In China, we captured market opportunities, achieved growth both in volume and profit mid-and packaged meat products external sales volume reached a record high. In packaged meats, we continue to deepen professional reformation stepped up investment in the market improve the customer service quality, continue the price mix optimization and cost control strategy adapted to changes in the consumption trends, volume increased while unit profit remained at a high level.

In Pork business, it captured market opportunities, expanded customer base, harvest volume achieved a significant growth Fresh pork profit under pressure due to severe competition, hog production faced challenges driven by weak car price. In poultry, it continued to expand its scale poultry production, KPI improved while raising costs reduced. Fresh poultry optimize the product mix, expand the network and enhance the competitiveness, total poultry operations improved significantly.

In terms of digitalization, we continue to deepen digitalization deployed extensively in production, sales, animal production and internal management, empowering the company to achieve high-quality development. In North America, first half operating profit was $658 million, 2.5% lower than last year. Packaged meats, $545 million, 4.2% lower than last year. Pork, $182 million, 11.7% higher than last year. In the North America, we leverage integrated business model focused on cost efficiency. Operating profit was stable, while net income achieved a record high.

In U.S. packaged meat, we leveraged breadth of product portfolio and a channel volume remains stable. We continued the pricing mix optimization and cost control strategy making raw material cost inflation, profitability maintained at high level. in U.S. pork, the hog production benefit from favorable markets and effective hedging strategy. Results improved significantly year-over-year. fresh pork profit dropped due to narrower market spread.

Total U.S. pork profit maintained growth. In Mexico, how price dropped, while volume the volume increased profit achieved growth year-over-year. In Europe, in the first half, operating profit was $119 million, 20.1% lower than last year. Packaged meat, $97 million, 44.8% higher than last year. Pork profit, $1 million year-over-year decline by $63 million. In Europe, amid unfavorable market conditions, we continue to integrate synergistic M&As, maintain volume growth, packaged meat and poultry performance continued to improve. New M&A contribute to volume growth.

Operating profit increased significantly year-over-year due to lower raw material costs and pricing discipline. Hog price dropped sharply due to animal disease as well as export restrictions, Pork business faced the challenges and the performance was under pressure. Broiler price dropped poultry business grew both in scale and profit. In terms of M&As, we further expanded the business footprint and increase the product offerings.

We completed acquisition of Wolf Group, a leading German producer of premium sausages, convenient and ready meals. In terms of business strategies, WH Group will continue to consolidate global resources, leverage synergies adhere to the business philosophy of improved mix, adjust price and control costs and the strategy of industrialization, diversification, globalization and digitalization to enhance our leading position in the global meat industry. In terms of business priorities, we will focus on the following to lay a solid foundation for the long-term sustainable development.

Number one, first, enhance the port business, optimized cost structure, improve had production performance, grow fresh pork and strengthen competitiveness. For packaged meats, further optimize the product portfolio, expand the customer network and maintain steady growth in scale and profit. Number three, continuously optimize the pork value chain steadily promote meat diversification, enhanced global footprint and strengthen overall competitiveness. Number four, promote automation and artificial intelligence across the organization, drive digitalization upgrades to improve quality, cost and efficiency.

So that's all from the business review. And now we'll move on to the Q&A.

[Foreign Language].

[Foreign Language].

[Interpreted] So the question from Min Bao. The first one relates to the impact of the Middle East conflict on the cost structure of the company. Has that impact on the company's cost structure? And what will be the impact in the second half? And the second question relates to the trade tensions between China and U.S., China and Europe? What has been the impact of these 3 tensions on the company's performance in the first half and what are the expected impact on the performance in the second half and what mitigation measures can the company take to address these trade tensions?

[Foreign Language].

[Interpreted] In terms of the first question, since the conflict but broke in end of February and early March, the crude oil prices has increased sharply and has remained at relatively high levels. So that has indeed caused.

[Foreign Language].

[Foreign Language].

So the answer was from Guo Lijun, the CEO of WH Group. And the elevated crude oil prices if continues will impact the company's transportation costs, fuel costs and the packaging material cost. But overall, the impact is not material considering the scale of the company's operations. And the company also will also take a lot of measures to try to mitigate the increased input costs in relation to the fuels.

[Foreign Language].

[Interpreted] In recent years, indeed, because of the trade tensions, there has been tariffs against many products, including pork in China, the tariff against the book import from Europe and U.S. has increased significantly compared to a few years ago. And on the other hand, the hog prices and pork prices in China are very low. It has caused challenges for importing U.S. pork into China. And in light of the elevated China -- the tariff against the U.S. imports imported pork into China. We are taking a few measures number one, because the tariff against U.S. pork is 47%. So we are focusing importing more of products. from U.S. And for these offer products, we also try to improve the quality and so that we can expand its exports. And secondly, we are also exploring more channels for U.S. pork export into other countries such as Mexico, Japan, Korea, And number three, in China, we are also exploring more importing channels to try to obtain high-quality products at competitive pricing, new channels, including Europe as well as in South America.

[Foreign Language].

[Interpreted] So that concludes Gordon's question -- answers.

[Foreign Language].

[Foreign Language].

The question relates to the forecast for the second half. In the second half, we will continue to face challenges due to weak consumer demand, inflation pressures, commodity market volatility competition in the market as well as the uncertainties of the policy environment, as we described with respect to the tariffs. So from the company's perspective, we are focusing on optimizing our product mix focusing our core strengths and leverage the advantage of our vertically integrated business model and try to deliver stable and good results to create long-term shareholder values.

[Foreign Language].

[Interpreted] And further elaboration on product mix optimization. So by product mix optimization, we try to adapt to the consumer demand and consumption trends. For example, in China's K-shaped economy, we try to develop both high-end and premium products as well as mid- to low-end value-for-money products to better serve our customers and to also achieve higher volume as well as maintain a good profit.

[Foreign Language].

[Interpreted] In terms of payout ratios, our policy -- dividend policy is no less than 50% of net profit attributable to the owners of the company. And for the first half, the Board has declared a dividend of HKD 0.20, which is flat, same as last year.

[Foreign Language].

[Interpreted] First, to review the performance of the global pork business in the first half, the operating profits of port business in China declined year-over-year in Europe also declined year-over-year. But in U.S., actually increased compared to last year. in the first half across the world, the hog prices has decreased. The pork prices also decreased. In China, the hog prices on average has decreased by 28% compared to last year. In European Union, price decreased by 20% compared to last year. The substantial drop in the European hog price is really driven by weak consumer demand as well as the export restrictions as well as a result of the outbreak of animal diseases. Do you call it industries.

[Foreign Language].

[Interpreted] And the performance of China pork business as well as the China market competitive dynamics. In terms of market competitive dynamics, there has been changes in the dynamics in China in the last few years. In the past, the fresh pork industry are primarily dominated by some smaller fragmented slaughtering houses. But in the last few years, because a lot of the large-scale hog production companies are entering into the slaughtering business, these large industrialized players are more aggressive in expanding market shares. So the market becomes more competitive.

In the past, we're primarily competing against the small players, but now we have many more large-scale competitors. So that has resulted in industry level compression of gross margins. And for our China business, it has also been impacted -- negatively impacted by the reduced volume and profit from import imported meat as a result of the trade tensions.

[Foreign Language].

[Interpreted] And in the future, we expect this trend will continue and the industry consolidation will continue. In the past, there are a lot of large there are a lot of smaller companies. But in the future, there will be fewer but larger companies. So in light of this evolution, we will focusing on expanding our scale while maintaining stable profits. We'll also try to expand our market shares to participate in the market competition.

[Foreign Language].

[Interpreted] And for market share expansion for pork business, it is our major business. We'll continue to optimize the port business and also to expand its market share across the globe. For packaged meat business is our core business, and we will optimize the product mix, optimize the pricing of our products and also to control cost to achieve expansion of market shares.

[Foreign Language].

[Interpreted] And in China, in terms of product pricing in China, we do not expect any material changes in pricing, particularly in the second half as the hog prices and other raw material costs are not expected to have a significant movement. In U.S. and Europe, we obviously will adjust our pricing according to competition, according to raw material costs, but we also will maintain our pricing discipline to try to reduce the volatility in our prices and try to capture more profits. .

[Foreign Language].

[Interpreted] And we will also adapting to the market demand to optimize our product mix. to by -- through product mix improvement to gradually enhance our pricing.

[Foreign Language].

[Interpreted] And as there's no additional questions, we can conclude today's media presentation. Thank you all.Okay. Good evening, friends from the -- welcome to WH Group's conference call for the announcement of our results for the first half of 2026. This is Guo Lijun, Executive Director and Chief Executive of WH Group.

Joining today's results announcement are members of the management team from WH Group and from our subsidiary, Shuanghui Development, Smithfield Foods and Morliny Foods in Europe, namely Mr. Wan Long, Chairman of the Board and Executive Director of WH Group; Mr. Wan Hongwei, Vice Chairman of the Board of WH Group and Chairman of Shuanghui Development; Mr. Ma Xiangjie, Executive Director of WH Group and President of Shuanghui Development; Mr. [ Luzon Tao ], Executive Vice President and Chief Financial Officer of Shuanghui Development; Shane, President and Chief Executive -- Luis, Chief Executive Officer of Morliny Foods; Ms. Kamjin Yan, Chief Financial Officer of the company; and Zhou Xiaoming, Vice President of the company.

Today's announcement is divided into 2 parts. We will first present the company's financial and operating performance for the first half of the year, and we'll then take your questions. For the first half 2026, package mid sold is 1.522 million metric tons. Pork sold 2.079 million metric tons year-over-year growth of 6.1%. Revenue USD 13.827 billion, 3.3% higher than last year. EBITDA, $1.681 billion, 6.1% higher than last year. Operating profit $1.231 billion, 2.2% decline compared to last year. Profit before tax, $1.221 billion, 6.2% higher than last year. Profit for the period, $947 million, 10.5% higher than last year. Profit attributable to the owners of the company, $773 million. 6% higher than last year. Basic earnings per share USD 6. 02.

The Board has also declared an interest dividend per share of HKD 0.2. Total amount would be roughly USD [ 330 ] million. Despite a challenging operating environment, we have achieved robust performance with growth in both revenue and volumes. Looking at the business segments. Package made is still our core business contributing to 51.3% of our revenue and 89.4% of our operating profit.

Pork business is also our major business contributing to 39.1% of our revenue and 14.3% of our operating profit. Other business and contribute to 9.6% of revenue and a loss of $45 million. From a region perspective, North America contributes to more than 50% of our revenue, which is 52.9% in the first half. China business was 30.5% and contributed to 36.8% of the operating profit. European business contributed to 16.6% of revenue and 9.7% of the operating profit.

In the first half, the global economic growth moderated geopolitical conflicts elevated trade tensions continued and policy environment remain uncertain. China saw heart continue to reduce, while productivity improved. Abundant supply caused the hard price to decline sharply year-over-year. U.S. pork supply increased price dropped year-over-year. Feed cost was favorable due to lower grain prices. Hog production remained profitable. However, Fresh Pork faced the challenges from narrowing market spread. In Europe, animal disease export restrictions resulted in pork oversupply inside European Union. Hog price dropped significantly pressuring upstream pork operations.

WH Group leveraged our global platform and the value chain, promoted efficiency improvement cost savings, optimize the business structure, continued with pricing mix and control strategy, achieving the growth in volume, while the operating profit decreased slightly. Packaged meat as the core business saw growth in both volume and profits.

In the first half, the number of slaughter hogs in China increased by 1.7% to 372.46 million hogs. The number of slaughter hogs in the U.S. decreased by 0.5% to 63.08 million hogs. From a pricing perspective, the prices dropped in all the regions. In China, the average hog price was RMB 11.2 per kilogram, down 27.5% year-over-year. U.S. average hog price was USD 1.48, down 1.5% year-over-year. European average hog price was per kilogram, down 20% year-over-year.

In the U.S. in the first half, the average pork carat value was USD 2.13 per kilogram, a decrease of 2.2% year-over-year. The market spread narrowed due to port price decreased more than high price. So the spread has narrowed. In China, the operating profit was $454 million, 4.4% higher than last year. Packaged meats $458 million, 11.4% higher than last year. Pork business is a loss of $7 million and year-over-year decline by $35 million.

In China, we captured market opportunities, achieved growth both in volume and profit mid-and packaged meat products external sales volume reached a record high. In packaged meats, we continue to deepen professional reformation stepped up investment in the market improve the customer service quality, continue the price mix optimization and cost control strategy adapted to changes in the consumption trends, volume increased while unit profit remained at a high level.

In Pork business, it captured market opportunities, expanded customer base, harvest volume achieved a significant growth Fresh pork profit under pressure due to severe competition, hog production faced challenges driven by weak car price. In poultry, it continued to expand its scale poultry production, KPI improved while raising costs reduced. Fresh poultry optimize the product mix, expand the network and enhance the competitiveness, total poultry operations improved significantly.

In terms of digitalization, we continue to deepen digitalization deployed extensively in production, sales, animal production and internal management, empowering the company to achieve high-quality development. In North America, first half operating profit was $658 million, 2.5% lower than last year. Packaged meats, $545 million, 4.2% lower than last year. Pork, $182 million, 11.7% higher than last year. In the North America, we leverage integrated business model focused on cost efficiency. Operating profit was stable, while net income achieved a record high.

In U.S. packaged meat, we leveraged breadth of product portfolio and a channel volume remains stable. We continued the pricing mix optimization and cost control strategy making raw material cost inflation, profitability maintained at high level. in U.S. pork, the hog production benefit from favorable markets and effective hedging strategy. Results improved significantly year-over-year. fresh pork profit dropped due to narrower market spread.

Total U.S. pork profit maintained growth. In Mexico, how price dropped, while volume the volume increased profit achieved growth year-over-year. In Europe, in the first half, operating profit was $119 million, 20.1% lower than last year. Packaged meat, $97 million, 44.8% higher than last year. Pork profit, $1 million year-over-year decline by $63 million. In Europe, amid unfavorable market conditions, we continue to integrate synergistic M&As, maintain volume growth, packaged meat and poultry performance continued to improve. New M&A contribute to volume growth.

Operating profit increased significantly year-over-year due to lower raw material costs and pricing discipline. Hog price dropped sharply due to animal disease as well as export restrictions, Pork business faced the challenges and the performance was under pressure. Broiler price dropped poultry business grew both in scale and profit. In terms of M&As, we further expanded the business footprint and increase the product offerings.

We completed acquisition of Wolf Group, a leading German producer of premium sausages, convenient and ready meals. In terms of business strategies, WH Group will continue to consolidate global resources, leverage synergies adhere to the business philosophy of improved mix, adjust price and control costs and the strategy of industrialization, diversification, globalization and digitalization to enhance our leading position in the global meat industry. In terms of business priorities, we will focus on the following to lay a solid foundation for the long-term sustainable development.

Number one, first, enhance the port business, optimized cost structure, improve had production performance, grow fresh pork and strengthen competitiveness. For packaged meats, further optimize the product portfolio, expand the customer network and maintain steady growth in scale and profit. Number three, continuously optimize the pork value chain steadily promote meat diversification, enhanced global footprint and strengthen overall competitiveness. Number four, promote automation and artificial intelligence across the organization, drive digitalization upgrades to improve quality, cost and efficiency.

So that's all from the business review. And now we'll move on to the Q&A.

[Foreign Language].

[Interpreted] So 2 questions from Lao Chen from BofA Securities. First one relates to China packaged meat business. The second quarter profit per ton in packaged meat business has dropped significantly compared to last year. And based on his calculation, it's roughly RMB 4,000 per metric tons. But on the other hand, the volume growth was not very high. So what's the reasons behind the sharp drop in profit per ton, but relatively moderate growth in volumes? And what's the outlook of volume and profit per ton in the second half. Second question relates to dividends. Historically, Shanghai has a track record of paying interim dividend. But for this half, Change has not declared interim dividend, what's the reasons? And what are the reasons? And what's the outlook for the full year dividend from Shuanghui. And given the challenges in the operations, is it possible to still achieve a flat dividend payout compared to last year for Shuanghui? And for WH Group, we are pleased to see that tables continue to declare an interim dividend. But what would be the outlook given double cash flows are largely from the -- the dividends of the subsidiaries. And will WH Group be able to maintain the dividend per share in -- for the full year?

[Foreign Language].

[Interpreted] The first question from Mr. Mark, CEO of Shuanghui Development. The second quarter per ton for packaged meats dropped by CNY 500 per tonne. For the first half, the decrease was RMB 150 per tonne. So there are a few reasons behind the drop in profit per ton. Number one is the -- we have taken various initiatives we have adopted various initiatives to reform our mid business, including more professionalized sales force and increase. We also increased the headcount in the professional teams. So -- and number two, we also stepped up investments or expenses in certain key growing channels. So these are really the initiatives we took to support our strategy of expanding our scale at stable profit. So that has caused a temporary short-term decrease in profit per ton.

And as the impact of these investments gradually ease -- in the third quarter, we expect the profit per ton will gradually recover. And for the full year, we -- our outlook is still around RMB 4,500 per metric ton which is just slightly below last year's level. So this consistent with the strategy that we formulated at the beginning of the year, which is to grow our volume at stable profitability.

[Foreign Language].

[Interpreted] And the second question relates to the dividend. So first of all, the company's operations are all normal. In the first half of this year, because the hog price in China was very low, which was a decade low. So we have took advantage of this market opportunity to build some inventories including some frozen meat for the packaged meat raw materials. So we believe these inventories would benefit the company's long-term operations. But on the other hand, these inventories will tie up some of the company's cash flows and working capital. So in light of the cash flows as a result of the inventory buildup, the company has decided, the Board after considering all the factors decided not to pay an interim dividend this time. But because this inventory building is a relatively short-term activity. We believe that in the future, we will continue our strategy of shareholder return through cash dividends and maintain a relatively high dividend payout ratio.

[Foreign Language].

[Interpreted] The question is that with the lower investment expense in the market in the second half, will that impact the company's packaged meats volume growth. And the response is that, number one, because a lot of the investment in the marketing and the sales force is really on the personnel cost -- and as the volume grows, these investments will be amortized. And also last year, fourth quarter, we had a relatively lower base. So we are very confident that we can achieve the volume growth in the second half.

[Foreign Language].

[Interpreted] And a clarification on the question on WH dividends, when talking about whether WH can maintain the dividend per share versus 2025. The 2025 number has it should exclude all the special dividends. Just the base should be just ongoing dividend interim and the final dividend in 2025, it was HKD 0.61.

[Foreign Language].

[Interpreted] And a Response from Joanna, the company's CFO. First, we -- our dividend policy has not changed. The dividend policy is no less than 50% of payout ratio is no less than 50% of the net profit attributable to the owners of the company. And number two, we have a strategy or business philosophy of delivering stable returns to our shareholders. For the interim dividend, after considering the company's balance sheet, cash flows we have decided to pay HKD 0.20 per share interim dividend, which was same as last year.

[Foreign Language].

[Interpreted] The question from Tiffany of Citi. Firstly, a follow-up question relates to dividends. So per Mr. Ma's comments earlier, is will we -- will Shuanghui pay dividends to fill the gap that has -- for the interim dividend in the next few months? Or will use the higher final dividend to fill the gap of the interim dividend. And for WH Group, what is the source of the cash flows for the interim dividend?

And secondly, what's Shuanghui's outlook of hog price in the second half as well as for next year. In the interim report, there is roughly RMB 300 million of inventory write-down because of low had pork prices. Is it possible that this write-down will be reversed in the second half? And number three, what is the latest progress of the investigation of the antibiotic incidents. And if there is a potential penalty -- a monetary penalty, what would be the estimated size?

[Foreign Language].

[Interpreted] The first question, the decision of not paying interim dividend is really driven by the strategy to build some low-cost inventories. And for the final dividend, we will -- the Board will evaluate based on the cash flows at that time. And -- but for Shuanghui, the philosophy or the policy of paying a relatively high payout ratio has not changed.

[Foreign Language].

[Interpreted] And for the hog price outlook for the second half, we expect moderate increase in hog price in China compared to the first half. So it's a modern -- so which means that it will be higher than the first half, but will not be significantly higher.

[Foreign Language].

[Interpreted] For 2026, we also expect the hog price will be moderately higher than 2026. And in 2027, will be moderately higher than 2026. And the trend will be similar to this year. The first half is relatively lower compared to the second half.

[Foreign Language].

[Interpreted] With respect to the inventory write-downs, it is -- we strictly adhere to the accounting standard and policies and whether there would be reversals, it will depend on the performance -- depend on the movement of a price.

[Foreign Language].

[Interpreted] And with respect to the investigation, please follow the future announcement.

[Foreign Language].

[Interpreted] With respect to the cash flow for double dividends. So ultimately, the cash flows are all as you mentioned, are from the dividend from our subsidiaries in China, in the U.S. and in Europe. But from a timing perspective, the cash flows historically and also in the future does not necessarily always match one by one, match exactly from a timing perspective. But as explained earlier, we have -- there's no change in our dividend policy, and there is no change in our dividend philosophy.

[Foreign Language].

[Foreign Language].

[Interpreted] So 2 questions from Veronica of UBS. First relates to China packaged meat business. as Mr. Ma commented earlier, we have stepped up investment in some key growing channels. What are the effects of -- or the returns of this investment any changes in terms of the growth, in terms of market shares or in terms of business mix change? And second relates to the U.S. packaged meats. We noticed a relatively soft volume and profit per tonne in the second quarter. What are the latest consumer trends in the U.S. And are we having -- making some changes in our product mix to adapting to these consumer trends? And what would be the outlook for the second half of U.S. packaged meats.

[Foreign Language].

[Interpreted] On first question response from Mr. Chao, the President of packaged meat in China. We indeed stepped up investment in the market in the first half. In the past, the traditional channel contributes to most of our business. So we also step up investments in the traditional channels. In the last few years, we have seen declines in the volumes in traditional channels. But this year, we have stopped the decline and achieved a small year-over-year growth. The traditional channels include some supermarkets, small grocery stores and also wholesale markets. For the new channels, it is indeed growing much faster, and we invested in these growing emerging channels. In the first half, the growth from the new channels or emerging channels was 43.8%. This is on the back of a few years -- of last year's very strong growth in the new channels already. So with our investment in the market, we have achieved a 9.1% volume growth for the first half.

[Foreign Language].

[Interpreted] Shane, Mark, do you want to take the second question relates to the U.S. packaged meats?

Yes. Mark, maybe I'll start and you add anything I missed. And [ Jan Main ] would you like me to stop along the way to translate or just go all the way to the end of [indiscernible].

Yes, you can finish your response.

Okay. Thanks, Veronica. When I look at the second quarter, one thing I would point out when you're looking at profit per ton or volume, it's important just on the second quarter. It's important to keep in mind that the Easter holiday here in the U.S. was actually in the first quarter of this year. as opposed to being in the second quarter last year. So there's a little bit of a timing shift on some of our higher volume holiday ham business.

But in general, when I think about packaged meats and I look at the quarter, I feel really good about how the business performed. And that's especially considering the environment that we're operating in. Here in the U.S., consumers are still being very cautious and volumes across a lot of the packaged meats portfolio have remained under pressure, and we're all dealing with higher operating costs. But even with that backdrop, we held our volume share. We've continued to improve our mix and we saw operating margins for the quarter at 13.1%. So we're pleased with that.

What we're also pleased with pleased with is that we're seeing some momentum from areas that we've been investing in for really several years now. So when you look at the quarter, our points of distribution were up about 6.2% and -- and we sold multiple brands in our portfolio, gaming shelf space. We're seeing a lot of strong results from some of the innovative products like Prime Fresh or Nathan's Grassfed hogdogs, our Eckrich Smoked Sausage, So the innovation piece of our portfolio is really playing an important role, and that accounts for about 20% of our year-to-date volume coming from products that have been introduced through that innovation pipeline. And some of the investments we've also made in the first half that we saw benefit from but are also setting us up for a really confident second half is some of the strong returns we're seeing from the investments we're making behind our brands.

So our marketing support was up, but e-commerce volume grew by about 21.7%. We saw our Gen Z dollars increase by about 15.2%. So we're continuing to bring a lot of younger consumers into the brand. So as we think about the second half and the confidence we have there, our focus really hasn't changed. We like the balance of the portfolio right now. We're going to continue to build our business innovation through distribution gains, through stronger marketing support and then continuing to move our mix to that mix of higher-margin value-added products. And I think there's still a lot of opportunity ahead of us there.

So all of these things that we've done in the first half of the year are really setting us up nicely with a lot of momentum as we go into the second half of the year. So really confident in our packaged mix business and how they performed in the first half considering the environment and how it's placed us for what we believe is going to be a strong second half in the packaged meats business.

[Foreign Language].

[Interpreted] Two questions from Leon of Morgan Stanley. First relates to China's packaged meat business. So in terms of the channels, what is the contribution of the new channels in the sales volumes. And second half, what's the how confident are the company on the positive growth in the traditional channels in the second half?

And second question relates to U.S. U.S. business in the August 11 earnings release Smithfield has revised down the guidance for all the 3 operating segments. For the upstream business, including hog production and fresh pork, the operating margin guidance are lower than last year. So in addition to the cautious consumers, does this guidance revision also reflects changes in the hog price, feed cost and meat prices in the U.S. So what are the drivers of the decision to revise down the guidance for hog production and fresh pork?

[Foreign Language].

[Interpreted] For China's new channels, since the second half of last year, we have achieved a double-digit -- we have been achieving double-digit growth in volumes. First half growth was 43% from the new channels. And the first half contribution in terms of volume was 24%. In the second half, we're confident that it will maintain very high growth, and we expect the full year contribution will be 25% in terms of volume. And we also expect the new channel growth will continue in the next 2 to 3 years and will exceed 30% in the next 2 to 3 years.

This is Mark. I'll take the guidance question. So our team and the business model have really proven resilient in delivering record first half results. But as you indicated, we are tempering our 2026 outlook. And it really primarily reflects lower hog prices and hog production and packaged meats and fresh pork continue to be challenged by a cautious consumer with lower demand and higher input costs. And I'd say our guidance really reflects the commodity markets as we see them today. So we're incorporating in the current hog future strip our expectations for spreads in fresh pork and continued consumer softness. We're also seeing higher freight, diesel and resin costs, but we believe that the assumptions are appropriately prudent given the external environment.

And from here, I think the largest potential upside drivers would be better than expected fresh pork spreads stronger package meets volume from the distribution gains and innovation that Shane had mentioned, I think we could also see a tightening of hog supplies that improves the market pricing later in the year. So the largest risk for us really remains the commodity prices and consumer demands. But as Shane mentioned, we're seeing a lot of strength in the packaged meats business. Distribution points increased by 6.2% in the second quarter. He mentioned Prime Fresh is up 18% and really getting some traction with the Nathan's grassfed business. And additionally, we continue to grow our e-commerce share that was up by almost 22%. So I think that, coupled with the investments that we're making in marketing and advertising, the second half, certainly for the packaged meats business looks to be very strong.

[Foreign Language].

[Foreign Language].

[Interpreted] Two questions from Valerie of Goldman. First, related to China's packaged meat business. What's the latest observations in the market in July and August in terms of the packaged meat performance. And last year, the third quarter profit per ton was relatively high due to the holidays. So this year, given the higher contribution from new channels, what is the outlook for the profit per ton will last year's high base create some difficulties to achieve growth. And secondly, as mentioned earlier, the company has taken a lot of low-cost inventories to support future packaged meat business. So how -- so what's the scale of these inventories? How many months of operations could this low-cost inventory support? And what would be the contribution to the profit?

[Foreign Language].

[Interpreted] In terms of packaged meat profit per ton in the first quarter, our profit per ton was very high. In the second quarter, it was much lower because of the low season also because of our stepped-up investment in marketing. So the low profit per ton in the second quarter has resulted in a small decline in the first half profit per ton. In the third quarter, as we enter into the peak season and also as we rationalize our marketing investment we believe -- we expect a significant -- meaningful improvement in profit per ton. So as explained earlier, the full year guidance is the profit per ton is generally flat compared to last year or a very small decline compared to last year.

[Foreign Language].

[Interpreted] It is very difficult to quantify the impact of the inventory built up because it's a very dynamic process. We increased our inventories when the hog prices are low. -- and reduced inventories when the hog prices are high. And once the raw materials are putting into the warehouses, they will amortize the overall cost base. It's a very, very dynamic process and infeasible to quantify.

[Foreign Language].

[Interpreted] 2 questions from Weixin of CICC. First, on China business. In the first half, the expense in relation to advertising and promotions increased to 30% year-over-year? And what's the outlook for the second half? And secondly, relates to the U.S. business, as there has been a lot of speculation about the impact of all Nino effect on the global climate, which may result in higher corn prices. And so investors are concerned about the negative impact from higher corn prices. How will that impact our business in the U.S.? And how -- and can we take some measures to hedge against this risk?

[Foreign Language].

[Interpreted] In the first half, particularly in the second quarter, we have indeed significantly increased spending in marketing, and that has impacted our results for the second quarter. In the second half, we plan to significantly rationalize our spending in marketing. But the exact magnitude will depend on the market environment. Shane, Mark, do you want to take the second one?

Yes, I'll take the second one. So we also pay a lot of attention to the owning of weather patterns, but in the context of overall global weather patterns and their impact on corn and soybeans. We do have a very robust hedging program. And so we do take advantage of that where we see opportunities. The good thing about per longer-term liquidity in the futures markets, which kind of allow us to take longer-term positions in corn. While we don't give our hedging positions away, I would just say that, that is a key part of our overall strategy.

But outside of corn, it really comes -- we also have to play in all the just structural improvements that we've made in the business. from the way we buy form so through investments we've made in grain elevators through the country and how we've converted some of our corn usage into bakery byproducts to offset some of the volume requirements we have in corn to maintain that carbohydrate level. So we have a very robust feeding program, and we have a very robust hedging program, and we use both to the benefit of the company.

[Foreign Language].

[Foreign Language].

[Interpreted] If there are no more questions, we conclude today's earnings call. Thank you.

[Interpreted] 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 Morliny 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 Smithfield; and Mark, Chief Financial Officer; Luis, CEO of Morliny Foods; Ms. Joanna Yan, Chief Financial Officer of the company; and Zhou Xiaoming, Vice President of the company.

Today's earnings call will be divided into two parts. I will first present the company's first quarter financial and operating performance and then we will 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, USD 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 $0.0309, also 8.8% higher than last year.

So based on the performance of the first quarter, our volume revenue and the profit all achieved year-over-year growth.

Now we look at the performance by segments. Packaged meats 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 revenue and 7% of the profit.

During the first quarter 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 RMB 12.35 per kilogram, 23% lower than last year over year. So overall, the total supply 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 per kilogram, 0.6% higher year-over-year. In Europe, the average hog price was EUR 1.16 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 was $251 million, 16.7% higher than last year. Packaged meats delivered $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 meats business has growth in both volume revenue and operating profit, 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 meats, $278 million of operating profit, 4.5% higher than last year. Pork business, $98 million of operating profit, 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 profit declined by 15% to $45 million. Packaged meats business delivered $45 million of operating profit, 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 packaged meats. 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 improve mix, adjust price and control cost and the 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 packaged meats business to achieve steady growth in volume and profitability.

In China, we'll respond to evolving 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 fixed 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 the 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, 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.

Morgan Stanley, Lillian Lou.

[Foreign Language]

[Interpreted] 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 packaged meats 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 packaged meats business volume was under pressure. And in the first quarter '26, packaged meat business also benefited from sharply declined hog price after the Chinese New Year.

So what's the company's outlook for second quarter and the third quarter volumes considering the relatively higher base in 2025? And also how to achieve a sustainable growth in the packaged meat 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 packaged meats?

Second question relates to the U.S. business. So based on the current future price, it 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.?

[Foreign Language]

[Foreign Language]

[Interpreted] 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 a relatively lower base from the first quarter 2025 when the market was ongoing some destocking. 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 the third quarter, we will maintain volume growth even though the magnitude of growth may be smaller compared to the first quarter.

And how do we maintain sustainable growth in packaged 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 market. 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.

And 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 increased the number of point of sales or distributions. Number five is to be more precise in terms of marketing expense investments. We have significantly increased our spending in marketing, but we also want to make sure that the investment and allocation of these marketing budgets are very, very precise.

In terms of profit per ton, in the past, we have maintained relatively high profit per ton at around RMB 4,000. And last year, it was very high at RMB 4,700. This year, our business strategy for both packaged meats and fresh pork is to grow our volumes while maintaining stable profit. 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 favorable hog prices.

And some supplementary comments from Chairman of Shuanghui Development, Wan Hongwei, talking about 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. We are -- 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 the challenges they face in the market.

We have launched a number of pilot programs in South Henan region, which has yielded good results, and we are expanding these pilot programs in other regions such as Northern Henan province, Shandong province and Liaoning province. So these efforts have given us confidence in its continuous success in more -- in higher granularity in the management of the channels.

And secondly is 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, there, 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 taste 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 relates to the U.S. business?

Yes. So the U.S. hog...

Shane, you need to speak closer to the mic.

Can you hear me?

Yes. Yes, we can hear you now.

Okay. 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 continue 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 in hog production, where typically that first and fourth quarter or a little bit weaker in the second and third quarters.

We are continuing to progress to a best-in-class cost structure. So 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 million 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 historically healthy levels. So really pleased where we are in hog production, pleased on what 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 for hog production.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Interpreted] So two questions from Luo Chen of BofA Securities. First, on China business. So in China, given we have noticed the very 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 packaged meats. And given the elevated cost, what is the company's outlook for packaged meats profit for the full year? And what initiatives or strategies the company can adopt such as adjust the price, improve efficiencies to mitigate the elevated cost in the U.S.?

[Foreign Language]

[Interpreted] So this is Mr. Ma from Shuanghui, the CEO of Shuanghui Development. In terms of the hog price, we think the trend we predicted earlier or forecasted earlier is largely the same except that in the second quarter, 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 of 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 continue to -- we had incurred losses in the first quarter as the volume in hog production 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, Mark, do you want to take the second one relates to the U.S. package meats?

Yes. U.S. package meats. And Xiaoming, 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 in 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 holiday.

[Foreign Language]

Still up by 20%.

[Technical Difficulty]

Shane, 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 first quarter, our 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 1 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 Armour 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 Services 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.

[Foreign Language]

And 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 moving through fuel and freight. In the medium term, it's impacting us or is going to impact things like our resin-based packaging. And then over the longer term, it will 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 cost.

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 the lowest cost to serve across our product fleet, 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 1 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 dynamics that we're seeing across the market.

Mark, I don't know if you would add anything there.

Yes, I would just briefly add that from the consumer standpoint, protein remains a core part of their basket, and we're managing our portfolio to offer value across price points. So 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. Based on prior geopolitical disruptions, it's really about the duration and the breadth of any supply chain impacts that matters more than the short-term spot move. So we're planning for volatility and we're staying agile. So net-net, the situation adds near-term input and logistics cost uncertainty, but it doesn't change how we run the business, and we had multiple levers to mitigate that. So we're staying focused on execution, and we again have reaffirmed our guidance in total and at the packaged meats segment level as well.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Interpreted] So two questions from Valerie of Goldman Sachs. First relates to European business. In the first quarter, the packaged meats business has pretty strong results with very good year-over-year growth. But in hog production business, it 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. The hog production during 2025, at the end of 2025 started a shift to a situation of oversupply of hogs. This extends to this first quarter of 2026. This was aggravated by the African swine fever in November in Spain that make more pressure in the internal market with a decrease of price below EUR 1 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, Xiaoming.

[Foreign Language]

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 and for 2027. I m"e" antigen-negative that we expect the total outlook for the year to be below 2025 but still a little below 2025, like the actual price is around 10% lower than 2025.

And for the outlook for packaged meats, we see our packaged meats business, we see continually outperforming. We have record first quarter results in packaged meats, and we see a strong volume and growth in our packaged meats 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 in packaged meat and poultry business will compensate the decrease in our fresh pork and hog production business.

[Foreign Language]

[Foreign Language]

[Interpreted] So first of all, we expect the second half hog price will rebound but the magnitude will not be very significant. And the recovery of the hog price is also within the 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.

[Foreign Language]

[Foreign Language]

[Interpreted] So the question is 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 or the main drivers of the current depressed the 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 good growth in 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 new channels or nontraditional channels?

[Foreign Language]

[Interpreted] So in terms of the hog price, we believe the magnitude of the rebound in the hog price in the second half will not be very substantial. And the overall, the hog price will fluctuate at a relatively low level. The rebound in the second half does not suggest that the hog 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 in the recent market where even though the hog price was at very low level, we do not see significant exits 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 a low level even though there are -- there will continue to be small fluctuations due to seasonality, but it's not going to have a 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 half -- 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 2 to 3 years, the contributions from the new channels will be more than 30%.

[Interpreted] If you want to ask a question, please raise the hand in the -- press the Raise Hand button in the Zoom.

[Foreign Language]

[Interpreted] If no further questions, we can conclude today's earnings call. Thank you for participation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Dear analysts and investors, good evening. Welcome to our annual results announcement by WH Group. Today, we have with us Mr. Wan Long, Chairman and Executive Director; and he is seated on the stage with us. Next to him, we also have Mr. Guo Lijun, our Executive Director and CEO; our CFO and Vice President, Madam Joanna Yan. I'm Zhou Xiaoming, VP.

We also have online with us our leaders Mr. Wan Hongwei, Vice Chairman of the Group; Mr. Ma Xiangjie, 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 tonnes, a drop of 1.5%; pork sold 4.089 million tonnes, an increase of 8.6%. Revenue realized USD 28.026 billion, 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%. Basic earnings per share, USD 0.124.

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 of HKD 0.41 together with interim dividend HKD 0.2, for the full year HKD 0.61, total payout, HKD 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% of revenue and 82% of our profit. Pork contribution, 40% to revenue and 22% 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 -- we proposed level for the full year, $0.61, so that will exceed USD 1 billion 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 hog 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 U.S. decreased by 0.8% to 127 million heads. Average hog price per kilo, USD 1.57 in the United States and EUR 1.46 per kilo in Europe, down by 8.5%. So hog prices in China and U.S., both -- China and Europe both went down.

If you look at the spread in the market, average par value in the U.S. was USD 2.27 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, USD 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, continue 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 remained 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 volume of chicken produced and processed, adjusted product mix and expanded sales network for poultry business. We accelerated digital transformation to drive upgrades and management across operations, sales, hog production, administration and R&D.

For North America operating profit, USD 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 e