HONG KONG, Aug. 14, 2017 /PRNewswire/ -- WH Group Limited ("WH Group" or the "Company"; HKEX stock code: 00288), the world's largest pork company, today announced the unaudited interim results of the Company and its subsidiaries (the "Group") for the six months ended June 30, 2017 ("the period under review").
Highlights
Business Review
The Group's business scale and earnings have maintained growth in the first half of 2017 on the strength of its global footprint. For the China business, the cost pressure of packaged meats was eased due to gradually reduced raw materials prices. The proportion of new products steadily increased. The development of new markets and new channels yielded outstanding results. The sales channels were enriched and expanded. For the U.S. and Europe business, the operational efficiencies improved and the synergies continued to strengthen. At the beginning of 2017, the Group completed its acquisition of Clougherty Packing LLC ("Clougherty"), California's largest pork processor, and its two brands - "Farmer John" and "Saag's Specialty Meats", strengthening the U.S. West Coast market's sales network with an enriched product mix. The Group recently announced the acquisition of meat processing plants and a hog slaughterhouse in Poland, which helped strengthen the vertically-integrated supply chain in the European market. In the first half of 2017, the brand under WH Group launched a new antibiotic-free pork production line in the U.S. market, bringing high-quality and healthy food to the customers, marking a breakthrough in terms of the Group's R&D and innovation. In the capital market, the Group has completed the issue of senior unsecured notes with an aggregate principal amount of US$1.4 billion, which will further optimize the Group's debt structure and lower its borrowing costs. The Company also announced its first Sustainability Report this year, illustrating the Group's achievements in five areas — environment, food safety and product liability, employee, community and animal welfare. This demonstrates the Group's corporate social responsibility as the global industry leader and its commitment to sustainable development.
Business Segments Discussion
Packaged Meat Products
During the period of under review, the sales volume of the Group's core business – packaged meats slightly increased to 1.56 million metric tons. The turnover of packaged meats was US$5,522 million, representing a year-on-year increase of 3.4% and the operating profit of the segment was US$686 million.
The China business has gradually improved, proved by the significant quarter-over-quarter increase of the second quarter results. The operating profit of packaged meats increased by 26.2% quarter-over-quarter to US$178 million in the second quarter and achieved US$319 million in the first half of 2017.
For the U.S. business, the volume of packaged meats grew by 3.3% and the turnover grew by 7.6% year-over-year, which was attributed to the inclusion of Farmer John in the product portfolio as a result of the acquisition of Clougherty. In addition, the sales of existing products such as cooked meats and dry sausage also expanded in the period under review. Dragged down by the rise of hog prices and raw material costs, the operating profit of the U.S. business slightly decreased by 4.3% to US$356 million.
Fresh pork
With a wealth of industry experience and sharp market insights, WH Group proactively responded to shifts in demand and supply, regulated levels of slaughtering activities and adjusted meat prices in respective markets. The total number of hogs processed in the first half of 2017 increased 7.2% year-over-year to 25.93 million heads. External sales volume of fresh pork during the year was 2.2 million metric tons, representing a year-on-year increase of 8.2%. The volume increased in both China and the U.S., at 5.2% and 11.1%, respectively. Fresh pork turnover grew 1.2% to US$4,640 million and the operating profit grew significantly 28.3% to US$245 million.
During the period under review, the operating profit of the China business recorded satisfactory growth, increasing 18.4% year-on-year to US$45 million due to better capacity utilization and contribution from the sales of imported pork. In the second quarter, the operating profit of the China business increased 25% quarter-on-quarter to US$25 million. Driven by expanded export, both hog processing volume and sales volume in the U.S. recorded growth, supporting the turnover increase. With the implementation of plant improvement plans, the operating profit in the U.S. fresh pork segment increased 25.9% to US$199 million during the period under review.
Hog production
The vast majority of our hog production business are in the U.S. and Europe markets. In the period under review, hog production volume increased to 10.0 million heads as compared with the same period in 2016. The business turned around and recorded US$49 million operating profit during the period under review. Benefiting from the increase in hog prices in the U.S. and Europe markets, the operating loss in the U.S. significantly narrowed down while the operating profit of Europe segment grew by 7 times to US$56 million.
Outlook
Mr. Wan Long, the Chairman and Chief Executive Officer of WH Group said: "Looking ahead in the second half of 2017, we will cope with all sorts of uncertainties that would happen in the business and achieve more vigorous growth out of fierce competition. In China, we will deepen the optimization of our product portfolio, develop our sales channels and invest in marketing efforts so as to expand our business scale. We will launch new products to the market consistently, with an emphasis on low temperature and mid-end to premium products. In the U.S., we will focus on the realization of the full value of vertical integration. We will build stronger consumer brands and increase market share in key products. We expect margins to keep enhancing through improvement in management and uplift in efficiency. As a consumer goods company, branded packaged meat products will continue to be our core business. Coupled with our stringent quality control and food safety systems, we will assure customers with high quality products. We will also strive to capture opportunities brought by industry consolidation."
About WH Group Limited (HKEX stock code: 288)
WH Group Limited is the largest pork company in the world with the top market share in China, the U.S. and some markets in Europe. It owns many well-recognized and trusted brands and stands above the rest with global market leadership in all key segments of the pork value chain, including packaged meats, fresh pork and hog production. The Group conducts its operations through Henan Shuanghui Investment & Development Co., Ltd., the largest animal protein company in Asia, and Smithfield Foods, the largest pork company in the U.S. For more information, visit www.wh-group.com.
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| Hill+Knowlton Strategies Sophie Liu +852 2894 6318 |
WH Group Christine Wang +852 2922 0770 |