WH Group (288) Q3 2020 earnings summary

Executive summary

• 9M sales volumes fell amid African swine fever and COVID-19, while higher Chinese pork prices, product-mix optimization and cross-border synergies supported growth in revenue, operating profit and attributable profit.

• Performance improved in China and Europe; U.S. operations recovered in Q3 but remained pressured by lower food-service demand, production constraints and pandemic-related costs.

Financial highlights

• 9M revenue was $18.767bn, up 9.2% YoY; EBITDA was $1.953bn, up 12.8%; operating profit was $1.467bn, up 14%.

• Profit attributable to owners was $890m, up 8.5% YoY; EPS was $0.0604.

• Hogs produced totaled 15.324m, down 4.1%; hogs processed were 33.165m, down 19.1%; packaged meat sold was 2.383m tonnes, down 2.3%.

Outlook and guidance

• China packaged-meat sales are expected to achieve medium- to high-single-digit growth next year; per-ton profit is expected to grow steadily, though exceeding CNY 4,000 per ton remains uncertain.

• Lower hog prices next year are expected to reduce costs and support China sales momentum; plans include new products, channel expansion and continued market investment.

• U.S. headwinds are expected to continue for the next six months; demand is expected to rebound in 2021, with performance improving after Q1 toward the strong Q1 2020 level.

• In the U.S. and Europe, priorities include adjusting product mix, improving fresh-meat and hog-production fundamentals, and integrating newly acquired capacity in Europe.