WH Group (288) Q3 2018 earnings summary

Executive summary

• 9M production and sales volumes and revenue increased YoY, while EBITDA and operating profit declined amid global trade friction, lower hog prices and ASF impacts in China.

Financial highlights

• 9M revenue was $16.585B, up 1.8% YoY; EBITDA was $1.583B, down 9.6%, and operating profit was $1.208B, down 12.4%.

• Profit attributable to owners was $756M, down 3% YoY; basic EPS was $0.0515, down 9.6%, with the decline attributed to changes in biological asset fair value.

• 9M output: 15M hogs produced, up 0.8%; 40.969M hogs processed, up 4.3%; packaged meat sold was 2.43M tons, up 2.4%.

Outlook and guidance

• U.S. fresh meat and live production were expected to perform slightly better in Q4 than Q3, though live production was still expected to record losses; hedges improved results by ~$4–$5 per head versus market prices.

• U.S. packaged meat was expected to finish 2018 strong, supported by bacon, smoked sausage and dry sausage mix; 2019 live production was forecast to be considerably better than 2018, but still at a marginal loss of a few dollars per head.

• China ASF impacts were expected to remain similar in Q4 to Q3; 2019 hog prices were expected to exceed 2018 levels, with greater regional price differences.

• China packaged meat operating margin was expected to improve in 2019 through product mix and pricing; packaged meat profit was expected to offset lower slaughtering profit per head, keeping combined profit broadly flat.