WH Group (288) H1 2019 earnings summary

Executive summary

• H1 operations faced ASF, trade disputes and higher U.S. meat supply; Q2 improved over Q1, but reported profit and operating results declined YoY.

• Packaged meat remained the core profit contributor; strategy centered on pricing, product mix, cost control, export diversification and risk management.

Financial highlights

• Revenue $11.127B, down 0.4% YoY; EBITDA $1.032B, down 7.1%; operating profit $765M, down 11.8%.

• Profit before tax $685M, down 18.1%; profit $565M, down 14.5%; attributable profit $463M, down 16.9%; EPS $0.0315, down 17.1%.

• Hogs produced 10.58M, up 4.5%; hogs processed 2.8M, up 1.4%; packaged meat sold 161,000 tonnes, up 0.4%.

Outlook and guidance

• China strategy: implement ASF controls, raise selling prices, optimize product mix, develop products, improve cost efficiency and expand sales reach.

• Management expects Chinese hog prices to remain high into next year; three packaged-meat price increases had been made, with full impact expected by year-end.

• U.S. hog production was expected to be profitable for FY 2019; hedges were placed to protect H2 returns.

• U.S. export volumes were expected to rise H2 YoY against a weak H2 2018 comparison; management hoped backfilling opportunities would expand.

• European facility integration, fresh-pork plant modernization, automation and export-market development targeted higher efficiency and profitability.