Pork Stock Performance | WH Group: China Meat Product Sales Volume Expected to Turn Positive This Year, Middle East War Impact Minimal, Full Year Biological Fair Value Adjustment Pre-Net Profit Up 8.2%, Final Dividend 0.41 Yuan Per Share

WH Group International (00288) Announces annual results. Before fair value adjustments, the company’s attributable profit was $1.59 billion, up 8.2% year-on-year. After fair value adjustments, net profit fell 2.8% to $1.57 billion. Basic earnings per share were 12.4 cents, with a final dividend of HKD 0.41, up 2.5%.

During the period, WH Group’s revenue increased 8% year-on-year to $28.03 billion, driven by higher pork sales and average selling prices of meat products. Operating profit also rose 8.7% to $2.61 billion, due to a significant increase in profit margins from pork operations. Meat product sales declined 1.5%, while pork sales increased 8.6%.

The group’s meat product sales fell 1.5% to 3.054 million tons. In China, sales declined 3.8% due to weak demand and ongoing market changes. North American sales remained relatively stable. In Europe, sales increased 2.8% due to higher contributions from Argal.

Revenue from meat products increased 3.8% to $14.18 billion, with China’s revenue decreasing 4.8%, mainly due to lower sales volume. North American revenue rose 5.3%, and European revenue increased 12.9%. Operating profit was $2.14 billion, down 4.1%, with a decline of 3.6% in China, 6.6% in North America, but a 14% increase in Europe.

Expected to turn positive in China’s meat product sales this year, with a focus on launching high-value products and exploring emerging channels

Regarding demand in the Chinese market, Guo Lijun expects meat product sales to turn positive this year. Currently, China is experiencing K-shaped consumption, with high-end and low-end segments both large. The group will strengthen its focus on mid-to-high-end products while also launching low-end or high-cost-performance products to cover all market segments. Additionally, the group plans to develop targeted new products, such as “hit” products.

Furthermore, the group will explore new channels, such as membership supermarkets and chain convenience stores, which have a relatively small base and are expected to see significant growth this year. The group is also reforming traditional channels by directly connecting the company headquarters with large supermarkets, bypassing intermediaries to better adapt to different markets.

Guo indicated that these measures have already shown initial results, and the first quarter performance is expected to be good. He anticipates overall operating profit in mainland China to recover, along with sales, but the growth in meat product sales will be larger than profit, as more low-margin, high-value products are introduced and market investments are increased to stimulate consumption.

Regarding the cost of meat products in the U.S., management stated that last year, the prices of pork and beef in the region increased significantly, leading to higher raw material costs and some pressure on profit margins. However, the group has adjusted product structures, pricing strategies, and strictly controlled costs to offset most of the adverse effects of raw material price increases. For example, some U.S. products have shifted from low-margin large-packaged items to higher-margin small-packaged products.

The total slaughter volume of live pigs was 48.942 million, an increase of 7.9%. In China, North America, and Europe, volumes increased by 27.7%, 1.5%, and 5.5%, respectively.

Expected lower hog prices in China this year, stable in the U.S., and a rebound in Europe

In terms of prices, Guo Lijun expects China’s live pig prices to decline year-on-year. Before the Spring Festival, prices ranged around 12 to 13 yuan, dropping to about 10 to 11 yuan after the festival, which is relatively low. The group forecasts that pig prices will remain low in the first half of the year and will rebound in the second half, but the increase will not be large.

As for Europe and the U.S., he noted that U.S. feed grain prices are stable, and pig slaughter numbers are expected to remain steady this year, so pig prices in the U.S. are expected to stay stable. Last year, European pig prices were low, but they are expected to increase compared to last year.

Rising shipping costs due to Middle East war, partially offset by price adjustments

WH Group stated that by 2025, despite numerous challenges and uncertainties, the company achieved both revenue and profit growth. Looking ahead, this year will still be uncertain, but the group believes its operations will remain stable. It will continue to focus on core meat product businesses, transforming products and channels in China to adapt to evolving consumer markets; alleviating cost pressures in the U.S. to maintain high profitability; and expanding in Europe to increase profit contribution.

The company will also improve key performance indicators in live pig farming, enhance pork processing efficiency, and increase the added value of pork products to further strengthen its pork business. Additionally, it will explore growth opportunities through technology and acquisitions. The company aims to leverage its vertical industry chain to achieve steady growth.

Regarding the Middle East war, management indicated that rising oil prices will inevitably impact shipping costs, but this accounts for a small portion of overall costs. The group has offset this impact through price adjustments, so the overall effect is limited. On the other hand, grain prices have not changed significantly, so pig farming costs for raw materials are expected to remain low throughout the year. Guo also mentioned that China’s price adjustments are modest so far, and the U.S. market’s pricing strategies remain to be seen.

Source: WH Group Announcement