Dear investors, analysts, dear friends, good evening. Thank you very much for your attendance at our conference. We are going to conduct it online with video conferencing. Allow me to introduce to you members of the management, including our chairman and CEO, Mr. Wan Long. Then Mr. Guo Lijun, Executive Director. Mr. Ma Xiangjie for Shuanghui. Mr. Liu Songtao from Shuanghui. From Smithfield, Mr. Shane Smith and CFO, Mr. Glenn Nunziata. We have Mr. Luis Cerdan, representing our Europe operations. We also have Ms. Duan Danzheng, and I am Hongwei Wan. Mr. Guo is going to present Q1 financial results. Later on, we are going to have Q&A.
Good evening, everyone. I will report to you Q1 results for 2022. In Q1, packaged meat sold 828 million tons. Pork sold 1 million tons, up by 2.1%. Revenue has dropped by 0.8% year-on-year. While the volume has grown slightly because of the forces driving down the overall industry, we have a slight drop in revenue. Our EBITDA grew by 26.2%. Operating profit, $642 million, up by 28.1%. Profit attributable to owners of the company, $395 million, up 34.8%. Basic Earnings Per Share, $0.0308, up 54.8%. All of the figures are before biological asset fair value adjustments. The growth in basic Earnings Per Share is driven by the growth in net profit. If you look at our operations, in the first quarter of the year, our prices in China and in the U.S. showed very different paths.
Hog prices in China remained at low levels due to sufficient hog supplies in the U.S. Both hog prices and pork cutout value increased significantly, driven by tight supply, strong demand, and inflationary pressure. The average carcass price in the EU rebounded from low levels as hog producers reduced supplies, given high costs and sluggish exports. In the first quarter, number of slaughtered hogs in China increased by 14.1% to 196 million. Average hog price, RMB 14.02 per kilo, decrease of 56%. Number of slaughtered hogs in the U.S. decreased by 5.7% year-on-year to 31.98 million heads. Average hog price during the first quarter, $1.51 per kilo, an increase of 15.3%. Higher supply in China, lower hog prices, and reversed trends in the U.S.
Profitability of China packaged meats increased further. Fresh pork business gradually returns to normal operations. In Q1, in China, operating profit RMB 303 million, up by 4.1%. Among which packaged meat, RMB 276 million, up 25%. Pork, RMB 21 million, a fall of 58%. U.S. business achieves strong growth with unit profit of packaged meat hitting another record high. Profits of pork business improving significantly. In Q1, operating profit RMB 341 million, up 88.4%. Packaged meat, RMB 302 million, up 55.7%. Pork, RMB 50 million, up 600%. European business records an operating loss due to rising costs and sluggish demand. Q1 operating profit in Europe, RMB -2 million, a drop of RMB 31 million. Packaged meat, RMB 18 million, a drop of 35%.
Pork, loss of $26 million, a drop of $31 million. These are major figures and performance highlights for Q1. Thank you.
Thank you, Mr. Guo. Now you can raise questions. [Foreign language]
好的，谢谢Robert。谢谢管理层。那我就请教两个问题。那第一个的话关于中国这边，我们看到一季度的这个吨均的这个肉制品利润啊，是在一个应该是历史里面相对比较高的一个位置啊。我想请教一下，就是说这个后期因为市场有预期，那猪价到今年的下半年会见底反弹，那我们这个比较高的这个吨均利润可以有一个维持多长的一个时间呢？对今年的一个吨均利润的展望。那到了明年，如果猪价市场的猪价持续往上走的话，那我们对这个吨均利润会有一个怎么样的一个展望？那这是关于中国这边的问题。那关于美国这边的话，也想请教一下这个肉制品的这个吨利润。那我们看到美国也一样，在今年一季度是一个历史的高位。那想请教一下管理层，大家对于这个今年这个美国猪价的一个展望。那在这样的一个展望下的话，我们这个吨均利润啊在美国是会怎么样的一个走势？这两个问题，谢谢。
Thank you. I have two questions. The first one is in relation to the China operations. In Q1, we are looking at a rather high level of per ton profit for packaged meats while we are expecting hog prices to increase towards the end of the year. Can you share some insights in relation to your expectation of per ton profit level for this year? And also what is your expectation for next year? My second question is in relation to the US operations. It is also about the per ton profit level for packaged meats business. We have seen a historical record in Q1 this year. So what about the rest of this year and what is your expectation moving into next year? [Foreign language: 第一条有关中国的问题，请双汇的团队进行回答。]
好，这个我来回答你的第一个问题，关于肉制品的吨利。这个问题分两个阶段，第一个是全年肉制品吨利的一个预期；第二个，后期猪价上涨以后的一个预期和展望。我们一季度肉制品吨利比较高，基本上是这几年应该算是最高的，最高的，达到四千五左右，高于去年四季度的。主要是两个原因，一个是我们一季度，因为有一个春节，产品的结构比较好，对盈利水平比较高的产品，这个销售量大一些。第二个，由于猪价这个大幅下降，成本下降带来了我们的盈利的较大的盈利空间，所以造成了一季度的较高的吨利。全年的展望，我们预计今年二、三、四这三个季度的吨利也不会太低，应该整体都保持在去年四季度的水平。全年的平均吨利，我们预计在四千左右，都维持在较高水平。一季度的四千五百块钱的吨利，应该是全年四个季度中最高的，应该是最高，这是一个问题。第二个是关于后期猪价上涨以后，包括今年下半年以及明年，趋势是一样的。猪价上涨以后的这个对成本的会有影响，对吨利也会有影响。但是有两个原因可以决定这个影响不会太大。一个是在低猪价的时候，比如现在，我们有较好的动物库存原料储备的问题。第二个，这么多年来我们积累的经验和技术，技术手段能对冲掉，能消化掉成本上涨对我们盈利的影响。这么多年，我们积累的技术手段和管理创新，在确保肉制品吨利这方面还是起到了很重要的作用。所以说后期猪价上涨带来的成本上涨，会被我们的技术手段的创新和管理创新对冲掉一部分，但是也会对总的吨利会有一定影响，但影响不会太大。谢谢。
Thank you for your questions. I will answer your questions accordingly. Actually, we have seen a new height in terms of per ton profit of the packaged meats products in Q1. There are several reasons behind this trend. First of all, during Q1, we saw the Chinese Spring Festival and the sales volume was very well supported. We also have very good product structure leading to good sales performance. The second reason was the drop in hog prices, creating greater room for profitability. We expect that in the second, third, and fourth quarters, the profit level would not be too low. Actually, they should be comparable to the level seen in fourth quarter last year. We expect the level for the whole year should be around 4,000 RMB per ton.
Actually the RMB 4,500 level we saw in Q1 this year should be the highest level compared to the rest of the year. Later on, when hog prices increase, the impacts on us will be quite limited because we have already
are stocked up on frozen meat when the hog prices are lower. Over the recent years, we have already accumulated certain technical methods and also innovative management methods so that we can effectively hedge part of the rising hog prices. Finally, the per ton profit will be affected. Again, the level of impact will be limited.
Shane or Glenn can take the question regarding the U.S. packaged meats, please?
Yes, thank you, Robert. In the United States, the packaged meats for the quarter was our second best quarter since 2010, and we saw very strong demand, very strong supply and demand side economics. As we look forward going through this last three quarters of the year, we do expect to see some increase in pressure as we continue to see escalating raw material costs going into the packaged meats business. To the question of where do we expect to end? While we think it's still going to remain extremely strong through the next three quarters of the year, we do expect that pressure will push profitability back down to slightly above our historic levels.
好，回答你刚才第二条关于美国的问题啊，其实呢，我们刚刚这一个季度看到的成绩呢，就是从10年以来最好的一季。所以呢，我们看到市场里面无论是需求是非常的强势，同时我们供应的这一端也做得非常好。展望未来，我们相信会有一些的压力，比方说因为这个原材料的成本上涨，肯定会影响到我们的营运的。但是呢，我们相信剩下的三个季度，我们的操作还是会非常的强劲。同时呢，整体这个平均利润的水平还是会比较以往平均的水平稍高一点。
好，接下来提问的是来自于摩根斯坦利的李典。罗超，罗超，您请。罗超，您在线吗？好，那我们接下来有请来自花旗银行的魏晓波。魏晓波，您请开始提问。
听到吗，Robert？
听到，您请。
好，那第一个我问中国的问题吧，那个我用河南话问吧，那个听听明白点。就是那次那管理层说啊，那个猪价，中国猪价是先高后低，对吧？然后呢，就说会抓住行情，在生鲜这个业务板块呢会有更好的表现，是不是理解为咱上半年的时候呢，实际上是这个猪制品乏力比较多，那等到下半年的时候呢，是咱们生鲜肉部分呢开始发力，那这个逻辑是不是没有变化？这是第一个中国的问题。那美国的问题，我用英文问还是中文问？美国那个。
你用中文，你用中文问。
我们这边可以翻译。好，那就是那个美国那边呢，去年呢，实际上我们看见的那个增长，那个从销售方面的增长就比较快嘛，然后带动了这个OP嘛，OP的增长就也比较好。那我们相信就刚开始的时候是美国重开的时候，有很多的这个正的这个经营杠杆operating leverage。那么去年那个在业绩会的时候呢，管理层美国那边也有讲，说实际上呢，在进入到reopening第二年的时候，实际上也有咱们平台优势啊，更多的一些机会去节省成本呢。请问那个管理层在那个美国部分是不是有这个cost saving和efficiency方面呢？因为猪价的压力刚才也提到了，会加大，那这是不可控的，这市场的因素，那是不是在那个费用方面呢，会对我们来说有一些正向的影响？谢谢。
I have two questions. The first question is in relation to China operations. The management just mentioned that the hog prices this year will show a higher level at the beginning, and then it will gradually be lowered. I believe you also mentioned that there will be better performance for the fresh pork business. Does it mean that the fresh pork business will start to become much stronger in the H2 of the year? My second question is for the U.S. management. We saw very fast growth in terms of your sales figures last year, and that also provided very good operating profit at the end. What is going to be your strategy looking forward?
How are you going to achieve more saving? Or how are you planning to increase efficiency? Because we do know that hog prices will come up very soon, so that is going to add pressure to your operations. How are you going to save more cost?
对不起，刚才我说错，可能我说错是前中国的猪价前低后高啊，是 the H2 will be higher in China hog price。可能 I probably made a mistake。
好的，那请双汇团队先回答这个第一个有关于中国的这个问题。
好，我来回答这个问题。这个问题稍微复杂一点，刚才您判断了一下，说中国的猪价上半年低、下半年高，这是事实。但是你说到这个上半年这个肉制品发力，下半年屠宰发力，基本正确，但是我觉得不全面。不全面我讲讲这个事，这个中间的逻辑。首先说这两个不同的产业，它无论是屠宰业还是肉制品业，它们在不同的猪价行情下均有自己最佳的操作方法。它不意味着说是上半年猪价低、肉制品发力，下半年猪价高、肉制品就没办法。或者上半年屠宰业不行，下半年屠宰业发力了。不是这样说的。我猜想，因为上半年尤其第一季度数据你看到了，肉制品的利润很高，这个吨利可能创我们历史新高了，但是屠宰业的利润并不高，同比增长只有个位增长。这中间是一个需要说明的问题。屠宰业其实两个关联，短期我们一季度的增长经营是很好的，就是我们当地的选品的经理，是比去年一季度增长了十倍还要多，大幅增长的。但是为什么期间出来并不高呢？它其实是两个原因的，一个是国产的冻品，这个在去年，包括国产冻品和进口冻品去年都给了很好的利润贡献，基数很高，今年没有了，这是第一个。第二个稍微复杂点的问题是，去年四季度，成全了一部分高成本的冻品库存，前期的高成本冻品库存去年销售给肉制品产业的时候，在肉制品这个库存里面并没有消化掉，没有用掉，会出现去年四季度该亏损的，在集团层面对冲后，影响到了今年的一季度，消耗对冲掉了当期的经营。在这可能说起来有点绕，但如果没有理解清楚，咱可以继续套路。所以今年的一季度，双汇那个账面上的利润，它内部是有几个结石的，实际当期的生产经营是很好的。这是双汇到后期到下半年猪价高的时候，双汇的选品能力水平会有很多困难，但是冻品会迎刃而解。所以说可以简单地说，分开说，屠宰业上半年选品转现，下半年以冻品为主转现。整体来讲，由于一季度利润超出预期比较多，二、三、四季度会实现较大幅度的增长。这是屠宰业。所以屠宰业是猪，低价猪，低猪价的时候它发力，高猪价的时候它也是发力的，今年就是这样一个概念。
马总，您，马总您，您稍等一下，让他翻译一下好吗？
Our team from Shuanghui will answer your question. Actually, it involves a rather complicated matter. You did point out the fact that the hog prices are lower in the H1 of the year and it goes up in the H2 . That does not represent the whole picture. It is not as simple as simply saying the H1 will focus on packaged meats, and the H2 we will shift our focus to fresh meat. Actually we are talking about two rather different industries with their own ways of operations. We have seen a rather high level of per ton profit, but it does not necessarily mean that the profit level for the slaughtering business will be equally satisfactory.
Actually, we have seen in the slaughtering business very good growth in the first quarter, which is almost 10 x higher compared to the same period last year. In the first quarter of this year, the profit level of slaughtering business actually dropped year-on-year because of several reasons. First of all, last year, locally produced frozen products reserve created very strong contributions, but we do not have the same factor this year. The second reason is for the packaged meats segment, there are some stock involving frozen products, so when we do accounting, everything is consolidated. Some of the losses are actually reflected in Q1 this year. Towards the H2 , we expect hog prices to rise, and we will see a weakening of the profit level for fresh products. Therefore, we expect better performance from frozen products.
We believe we will continue to spare no effort in the slaughtering business, disregarding how high or how low the hog prices are this year.
我接下去答哈。这个关于肉制品的问题，刚才其实第一个问题我都讲了，我可以再强调一下，重复一下啊。肉制品一季度利润比较高，是结构和成本的因素影响，到这个历史最高的吨利润。
二三四这个几个季度的猪价会有所上升，但是因为我们的低成本的原料库存较多，再加上我们这个关于动力提升的这个技术手段和管理创新，会对同样的掉这个成本上升带来利润下降。所以二季度、三季度、四季度的动力啊，依然能维持到四千元左右，也就是去年四季度的水平，但是会可能会低于一季度，但是也不会太低，全年在会保持在四千，四千左右。谢谢。Concerning the issues surrounding packaged meats, we have seen a very high level of profit for Q1, which is because of product structure and also lower cost level.
For the following seasons or quarters, the cost will actually go up and we will rely on our frozen inventory and innovative management to drive up the per ton level for these three following quarters. We will maintain the per ton profit level at around RMB 4,000 and the whole year level will also be around RMB 4,000.
Shane, can you provide a response to the cost saving and operation efficiency question regarding Smithfield?
Yes, thank you, Robert. I'll make a few comments. I will allow for translation, and then Glenn will make a few comments. We did carry a lot of momentum from Q4 into Q1, and we've seen really, really great levels of both top and bottom line growth. I'll attribute that to a few things, and this ties into our strategy going forward. First, I will tell you that we continue to focus on our cost structures. In each of our plants, we have cost savings plans that we're executing against. We've taken a close look at our product mix.
As you know, labor shortages have created some issues for us, but what that has allowed us to do is take a fresh look at where utilizing labor in the most efficient manner to increase our bottom line growth makes the most sense. Third, product mix. We've taken a fresh look again at our product mix of what we're taking to the market, making sure those are the right products to return the most profit to the company. As a part of doing that, we've built in a number of things, including flexibility, standardization across all of our plants, and really the franchising of best practices to allow us to execute against our cost saving initiatives.
We are vertically integrated, and so what we're building is a system here that as markets change, whether that's hog prices, meat prices, we're able to capture that profit somewhere in our chain, in our vertically integrated model. We're very pleased with what we've seen in the last two quarters, and we expect to see that trend continue as we move forward through the year. Robert, I'll allow for translation, and then Glenn will add a few things.
好，现在呢，我就回答第二条问题，稍后呢，同事Glenn会做一个补充。的确，在第...
去年的最后一个季度，还有今年第一个季度，我们看到非常好的表现，我们在上线还有底线都有增长。那么背后呢，其实有多个原因的，我来跟大家解释一下。首先呢，就是我们在不同的工厂都重组了那个成本的结构，我们也会持续这一方面的工作。第二呢，我们就看过一遍，我们在什么地方可以提升我们的效率。第三呢，就是重新地审视了一遍我们现有的产品。现在这样产品的组合是否最理想的，我们推到市场的是否正确，可以回应当地需求的产品，同时那一些的产品是否可以为我们带来很好的利润。然后呢，还有别的因素，包括我们的操作是充满弹性的。同时在不同的工厂，我们会推动标准化的流程。同时呢，我们也会推出这个加盟的方法，让我们可以进一步节省成本。同时大家应该会记得我们这一个垂直整合的流程，这个也是我们其中一个很大的优势。所以呢，过往这两个季度我们看到非常好的成绩，我们是非常地满意，同时也是充满信心，最好的成绩可以延续下去。
What I would add to Shane's comments is, you know, the largest inflationary pressures we're feeling are really on the labor side and then on infrastructure. What I would call utilities, energy, et cetera. From a labor perspective, I would also add to Shane's list. We're working on SKU rationalization. You know, through the pandemic, what we learned is, when supplies are tight, that customers need their most important product for their shelves. We worked with our customers and co-developed what we thought were the optimal SKUs at retail and food service. That rationalization helps us remove complexity in a plant. Complexity in plant requires more labor.
As we remove complexity, we can again reduce our reliance on labor. We continue work on our distribution and logistics network and optimizing that with automation, with geography, with finding the best location to mix our products for our customers. We continue to work on that through 2022. Through the pandemic, given the shortage of supply and a real strong demand, we've been able to really clean and filter out trade programs and marketing programs that were redundant. We continue to work with our customers just as we are on SKUs to find the most appropriate trade programs that they can use with their consumers on site.
A lot of zero-based budgeting going on within marketing and trade to make sure that we're using every dollar wisely. With respect to energy, we continue to find ways to mitigate risk and volatility by using hedging. It's an important tool for us. We've used it for years within our hog production and fresh pork businesses. Now we continue to use that within our energy and utility space as well. We have to get ahead of some of this volatility, and the best way to do that is with hedging. My final comment would be everything that Shane just talked about and I talked about with respect to segment profit can be easily muted if we continue to have large legal and other non-recurring costs.
In Q1, we were able to really reduce and mitigate the amount of noise that occurred below the segment profit line, which again allows for that profit to flow down through net income. That continues to be a main focus for us as we assess our risks and judgments and estimates. We try to capture as much as we can in those moments in those years, like last year, as much as the accounting model will allow us to. We will continue to focus on making sure we can avoid charges that mute and offset some of the great things our team is doing to generate segment profit.
好，我想补充的呢，就是过去这个时间我们感受到来自通胀的压力，主要都是在这个劳工还有基建方面出现的。基建包括什么东西呢？就是一些能源的开支，还有电费等等。那我们怎么去回应这一些的压力呢？基本上有好几个方面。首先呢，我们就理顺了好多的流程，比方说当供应因为疫情受到影响嘛，所有的东西都非常紧张的同时呢，我们就要看看应该推哪一些重点的产品到市场去，就是对于我们消费者来说是最重要不可以缺乏的产品，我们就跟他们去研究，共同去开发这一些在他们心目中最好的产品。那么结果因为疫情，好多的劳工都不可以上班，所以呢，我们最终就减少了对劳工的依赖，我们就是通过自动化的方式去寻找我们最应该针对的客户群，还有市场。同时呢，我们看到疫情期间我们劳动的人手是减少了，但是市场里面对我们产品的需求还是非常的强劲。所以呢，我们就精简了我们各项贸易的计划，部分呢，甚至是取消了，我们就剩下一些最好的贸易的计划，同时呢，也做好这个预算的工作，也就是说每一分钱都要用得其所。另外我们也有这个协同的效益。同时我们多年以来在各分部都使用的一个很好的工具，就是对冲的工具，我们必须走在这个波动之前，把握这个时机。那么同时呢，我们也需要尽量减少法律这一方面的开支，也就是说我们需要减少市场里面不好的噪音，那么才可以拉动我们收入的增长。我们会持续进行风险的评估，同时呢，要注重避免遭受任何一方提出对我们产品或是营运的一些的指控。谢谢。
好的，下面我们继续提问。下一个提问题是来自于华兴资本的Charlie Chen。Charlie，您请开始。
好的，Robert，请问可以听得到我吗？
可以，请开始。
好的，谢谢。那我这边有两个问题，一个是关于中国，一个美国的。那第一个问题关于中国的是，我想请问一下，就是近期的这样一个疫情的一个防控，除了就是有一些市场营销没法这个展开之外，有没有对公司的这样一个日常的运营，包括在生产铺展一些这些生产方面，或者是这个生猪的这样一个采购啊，或者是跨省运输方面，有没有造成这方面的影响，或者说这个物流的一些阻碍有没有造成一些成本上升？这是第一个。那在美国这边呢，我想请问一下，因为我看到美国的肉制品这一块儿利润增长很多，我想就是管理层能从定性或者是定量的方面解释一下，这个利润率的提升主要是来自于这个猪价和这个零售价之间的这个价差持续的扩大呢，还是这个产品的这个组合有所变化？因为以前可能有一些专门卖给这个大的这个超商的，它的这个价格比较低，利润率也比较低。这个方面有没有一些变化是怎么样造成这样一个margin的一个转变？那同时还想问一下，就是margin里这个美国这一块的劳动用工的这样一个shortage现在是有缓解的还是维持？好那我自己就翻译一下。Thanks for—
For the given time to raise questions. I have two questions regarding China and the U.S. On the China side, can you give us more color on the COVID control measures impact on your daily operations, either on manufacturing, slaughtering, transportation, or any cost increase related to this more stringent COVID control in China? For the U.S. side, I would like to understand more on the margin expansion on packaged meats business. Is that mainly from the price spread between hog price and the retail packaged meats price, or it is largely because the product mix changed because of the recovery of consumer activities as well as F&B activities? Do you feel any marginal improvement or deterioration on the labor shortage side? Thank you.
Thank you for your question. I will answer your first question in relation to China. Well, we have presented our figures, which represented the situation while we were facing certain negative control and preventive measures in the pandemic. First of all, we got affected in terms of logistics and transportation because it was impossible for some of the delivery to be completed because we could not enter certain cities, or once we have done the delivery of our products, the vehicles could not return because many drivers had to be quarantined. The second issue that we faced is about difficulty of some of our staff members coming to work in the office because they could not leave their own community, and that created certain impacts on our operations. The third factor is the fact that there is poor liquidity of the flow of people in the community.
As you all know, our products are very much inclined towards leisurely type product and very much consumed during traveling or trips. When people are not moving around, of course, that will drive down our sales performance. Overall speaking, the level of impact on our staffing arrangement was only 4%, so that had very limited impact on the big picture. As for logistical arrangements, the central government has launched a number of supporting policies. At the moment, the impact will go to fundamental consumptions. Finally, the poor liquidity of people in the community is still an ongoing matter, and travel type consumption will still be affected. Shane, can you take the question regarding the U.S. packaged meats business?
Robert, this is Glenn. I'll take it. So yeah, we have experienced a pretty healthy margin expansion within packaged meats in the U.S., that really started in Q4. Again, we had to really challenge our go-to-market strategy with respect to packaging pricing, when we saw the incredible inflationary headwinds, that hit us during Q2 and Q3. We were able to really reap the rewards of managing product mix, optimizing SKUs, working with our customers and consumers on pricing, in Q4 that really carried into Q1. You know, there are Shane mentioned a handful of items that are strategic for 2022 and beyond with respect to margin expansion. That's really what was at play here in Q1. We had really specific savings goals at the plant level.
We track those goals each and every week. We've had to make shifts or pivots and remain flexible with respect to those plans as certain product demands force that. In other words, if we had to pivot from one plant to another for production, we would. You know, I mentioned trade, I mentioned marketing, but also just managing overall G&A. You know, we have been on a mission here at Smithfield in North America to really control G&A. As wage inflation hits us head on this year, and we need to get more and more people into our plants, and I'll cover that labor portion in a minute. It's important that we manage wage inflation as it relates to our office workers and administrative workers as well. We've become very, very diligent.
We've come up with innovative compensation plans that allow for people to feel rewarded in times where people are working more hours than they ever have worked. We are labor constrained. You asked how we're doing compared to the last quarter. We're slightly better than Q4, but we're still in a pretty tough position out in the plants and in our farms. We are working with HR and our human resource partners, outside partners to find temporary labor, to find innovative ways to improve retention. Bluntly, wage inflation has been something we've had to deal with.
Whether it's unionized or non-union plants, we continue to be responsive to employees and find ways to assist our plant leadership teams to get people into those plants so that we can continue to ramp up volume. Volume has been an issue mainly because of labor. Although it's still in pretty tough position with respect to shortfall in our direct workforce, we are a little bit better than we were at the end of Q4.
好，我来回答刚才你第二条关于美国的问题吧。事实上呢，肉制品这个板块，我们看到这个很强势的势头呢，是在去年第四季度开展的。然后呢，到了今年，我们相信第二、第三季度呢，这个通胀会挺厉害的，肯定会造成一定的压力。我们的打算呢，就是持续地做好定价，同时做好这个产品的组合。从今年开始，我们会持续地扩大我们的市场，同时在每一家的工厂，我们每一个星期都有一些数据的追踪的工作，就是要达成我们节省的目标的。同时市场的推广啊等等的计划我们也会做好。因为在北美洲呢，我们相信今年这个通胀会非常的厉害。同时呢，我们需要拉更多的人来到工厂里面工作吧。所以同时呢，也要好好地管理这个薪水的通胀的问题。我们就会使用一些创新的补偿计划来保留我们的员工，因为他们呢，在这个工厂工作的环境底下需要感到被重视。所以呢，劳工短缺这个问题现在已经舒缓了，也就是说情况相比去年第四季度已经有所改善。同时我们会持续地跟人力资源部门去合作，看看有没有一些别的方法可以增加这个人手。比方说我们可以在市场里面找一些的临时工，同时也可以检讨一下我们这个退休金的安排，尽量吸引多一些的劳工来到我们这个公司里面工作。总之呢，我们在这个情况底下，必须跟不同的领导团队去合作，照顾好我们雇员的需求，那么最终他们工作得满意，就可以把我们生产的这个量拉上来。
好，下面我们继续提问。下一个问题是来自于摩根斯坦利银行的娄超。Lillian，您请。
Robert，你能听得到我声音吗现在？
听得到。
不好意思，刚才可能有一些技术上的问题。那我也是两个跟进的问题。第一个呢，是中国业务。那么，刚才有提到就是下半年咱们的冻品这个业务会对这个整个的这个肉——这个 fresh pork，就是我们猪肉业务会有比较大的利润贡献，这个也实现比较好的增长。那想澄清一下，就是咱们这个对比的基数跟去年下半年对比的话，是包括了去年下半年的那个一次性的拨备吗？还是去除掉拨备之后，我们去年下半年的那个利润水平来对比，做的这个比较好的一个增长的这个预判。那么中国业务另外一个跟进呢，就是，刚才也有提到，现在整个疫情对咱们业务的影响，那么基本上后续的话影响不大会影响大局。那可能想问得稍微细一点，就是说现在因为这种各种的物流控制以及防疫的控制，特别是这个油价，那么咱们有没有看到运输成本，如果咱们的运输成本有一个比较明显的提升，或者说咱们二、三、四季度之后，咱们整个的这个运输费用是什么样的一个趋势？就是包含了可能防疫必要的一些费用吧，都包含进去。这是第一个关于中国的问题。那么第二个关于美国业务呢，是想问一下同样的猪肉业务，就 fresh pork 业务。那么上半年看到就说整个的利润水平吧，整体利润水平$5,000万，和去年四季度可能水平差不多。那如果看整个市场的一个变化，我的判断是上半年如果分拆这个养殖和屠宰的话，应该是养殖是亏钱，屠宰是利润不错这样的一个趋势。那么如果看进入到二季度，就是四月份以来，咱们这个美国市场的猪价肉价的这个 dynamic 呢，实际上是出现了一个慢慢的一个反转，也就是说屠宰的利润开始变差，然后这个养殖的利润开始变好。那么在这种 dynamic 下面，我们怎么看整体后面这个猪肉业务的这个利润水平，如果跟一季度整体的比的话，一正一负的话，是不是整个趋势是整体是转好的？那我就这两个问题，谢谢。
I have two questions. The first part of my question is in relation to the China business. In the H2 , we are expecting better profit for the frozen products compared to the fresh pork business. How are you comparing this? Are you drawing a comparison based on, the H2 performance of last year before or after your one-off provision? Because you told us that the overall trend this year will be a positive one. What about the impacts coming from the pandemic? You did mention that they will be quite limited and they will not affect the big picture. Now we are seeing certain impacts or factors coming from logistics, pandemic prevention and also rising oil prices. Are you telling us that you expect the trend to be a rising cost trend for transportation overall? What will happen in the next three quarters?
Can you provide some insights? My second question is in relation to the fresh pork business in the United States. You mentioned that the profit level for H1 is about $50 million, which is quite similar to the level last year. We are seeing some changes or new trends in the market. For example, for raising pigs, the profit level seems to be dropping. For the slaughtering business, it is showing positive trends. Should I expect a reversed dynamic in the H2 , meaning that the profit level for slaughtering business will come down and the profit level will improve for the farming side? Can you provide some insights and share your views concerning the overall trend in the H2 ?
Sorry, a bit of correction in the translation in terms of the fresh pork profit. What I meant was 50 million USD profit in first Q from the result release, which is similar level as fourth quarter last year, which is about above 40 million U.S. dollars. Just want to try to get some sense, given the reverse trend between fresh pork and the slaughtering business entering into April, what kind of a profit level we can benchmark with just from a broader kind of concept basis. Thank you.
Yeah, we have it. Thank you. We'll answer that when it's our turn.
先请商贸团队回答中国的这个问题。
好，这个问题应该是两个，实际是两个问题，一个冻品的下半年的盈利的问题，一个是运输费用的问题。冻品的盈利这么一个概念，首先随着下半年的猪价的上涨，我们库存低成本冻品的陆续出库，短期冻品的盈利水平会比较高，这是第一个概念。第二个是同比去年，咱一季度、四季度，这个同比去年剪枝提取前的冻品利润也会增加很多。当然第三要对比去年保标利润，就是提取剪枝后的，那就高得更多。这三句话，三个概念，这是第一个问题。第二个关于运输费用。今年疫情爆发以来，我们的运输受到了很大的影响。譬如说外部加工作业的加价，然后是我们的空车返回，然后司机紧张，有运输不接等等一系列费用。但这个费用是短期的，金额比较小的。到目前为止，经过一个多月的协调和国家政策的扶持，基本恢复正常，对我们的盈利谈到每吨产品上小几十块这样的问题，所以这个对肉制品整体的影响是很小的，是可以忽略不计的。谢谢。
Thank you for your first question, which is actually two questions in one. The first is in relation to the profitability in the H2 for the frozen products. The second part is actually about transportation cost. In the H2 of the year, hog prices will come back up and the lower priced frozen products will have good sales situation. At that time, the profit level will be driven up.
The profit level for frozen products compared to the same period last year will show a rising trend. Actually, compared to the reported profit level last year overall, it's going to show a very good increase. As for the second part of your question, which concerns transportation expenses, previously, because of obstacles for logistical arrangements, now things are returning gradually back to normal because of supporting policies being issued by the government. Basically, we are talking about a few dozen RMB per ton as the increased level for transportation. If we consider the profit foundation for our packaged meats segment, this amount is actually very small.
Okay, Glenn, over to you.
Okay. From our Fresh Pork business, as you know, our pork segment is our Fresh Pork and our Hog Production operations. We do expect to see seasonality, the naturally occurring seasonality that exists in that business with Fresh Pork strongest in the first and fourth quarters and Hog Production strongest in the second and third quarters. Our big initiative, our strategic direction for that part of our business is really surrounding consistency. As I said earlier, one of our strategies is to keep profit within the company. One of the things that we have seen and will continue to see is the huge increase in grain costs that will pressure the raising cost side of our business. You know, grain costs right now are up 27% on a per head basis.
I think to your question, as we continue to find ways to make this part of our business more consistent, and that's what we're seeing now as we move through Q2 and Q3, we'll continue to see increasing profitability coming out of the pork segment.
That consistency, just to add on to what Shane just said, that consistency really comes from what we can control. With respect to the rising grain costs that Shane mentioned, we have financial derivative instruments that we can use to help mitigate some of the price volatility in our inputs on hog production. We have genetics and biosecurity programs in place to help manage and reduce the overall cost to grow. Those are multi-year initiatives. However, the biology of animal husbandry is such that it takes time. We've talked to you all about that in the prior year, but we continue to execute against our genetic and health initiatives to again, along with price mitigating tools around grain, that we can lower our overall cost to raise.
Finally, the consistency really comes from selling meat. What products do we sell? What products do we turn from a commodity into a value-added Fresh Pork item that yield better pricing and better profitability at the customer and consumer level. Those are the types of initiatives we're talking about specifically. Push all the inflation aside. There are certain operating efficiencies and techniques that we can put in place here to optimize what we sell, and accordingly, that would come with better profitability. Again, our initiative with North American pork is to find profitability throughout the year, regardless of seasonality. Where that comes from, whether it's Hog Production or Fresh Pork, it's yet to be seen and is subject to a lot of market forces outside of our control.
Our control is total profitability for the company. How do we optimize that?
另外我们需要注重的呢，就是我们到底应该销售怎么样的产品到我们的市场去。同时在我们的产品当中不断地增加它们的价值。加上这一些所有的举措呢，我们才可以推倒这个通胀带来的压力。我们也要做好这个优化销售产品组合的工作，尽量做到全年不看什么季度都可以做到很好的利润水平。
好，我们接下来是今天晚上的最后一条提问，是来自于Jefferies银行的Chris Chen。Chris，您请提问。
Robert，你可以听到吗？
可以。
谢谢Robert。那我也是两个问题，第一个问题是关于中国这一块，那刚刚前面也讲到说其实我们在中国这一块有受到一些疫情的影响，那虽然是短期的影响，那可以跟我们讲一下，如果在销量方面，我们看三月份和四月份的话呢，疫情对我们的销量的影响大概是怎样的？那么从猪价角度来说的话，我们预期今年这个猪价在下半年的话呢，可以增长到一个怎样的价位？然后下一个问题是关于美国这一块，那么因为美国的生鲜肉的销量方面，今年是把这个墨西哥业务给并进来了，那如果去除墨西哥业务的影响的话，我们在一季度的这个生鲜肉的销量organic的一个增长大概是多少？那么同时的话呢，因为看到我们其实在美国这一块，生鲜肉和猪肉这个价格同比有一个比较高的涨幅，那可以跟大家讲一下，我们在涨价方面其实做了一个多大的一个增长，那这样的涨价对我们的销量方面会不会有一些影响？
Thank you for taking my questions. The first question is in relation to the China business. You talked about short term impacts on the sales of packaged meats due to the pandemic. Can you tell us how are the sales volumes impacted upon in the months of March and April? What about the hog prices in the H2 ? How far do you think the increase of the hog prices will go during this period? For the second question, it is about the U.S. business. If you put aside your Mexican business and tell us what is the actual level of growth and also, the increase of your sales volume involving the fresh pork business, if we don't consider Mexico and, year-on-year, we are looking at some price increases for packaged meats products. Do you think that will in the longer run affect our sales performance?
Oh, sorry, I need to clarify the part for the U.S. question. I mean in the first quarter, we see there are some ASP increase for the pork and the hog price. How much increase we do on the price hike for the pork and the hog price? And do we think there will be any impact on the consumption volume if we raise the price of those hog and pork products? Thanks.
先请双汇团队回答第一个关于中国的问题。
这个关于中国双汇的问题可能是两块，第一个就关于疫情对肉制品销量的影响，第二个猪价的一个展望预测。从三月份开始，中国这个疫情对双汇的市场影响还是比较明显的。两个特点，一个对疫情爆发的城市，譬如深圳、上海、长春、吉林、太原等城市，由于这个城市管控，那个消费者囤备的原因，导致当地的市场需求量暴增，增幅都达到几十的增长。但这样的城市毕竟是少数，在疫情不是很严重或者说没有疫情的城市，由于当地政府担心疫情的蔓延，会制定了一系列的防控措施，受防控措施的影响，我们的销量有增有降，整体销售影响是负面的。主要体现在两个方面，一个运输不畅，第二个人员流动性差，所以消费量小。但是后期，随着这个人员外出流动的增加，疫情的缓和，我们觉得，从目前来看，市场处于较好的恢复期，对后期增长是充满信心的。疫情短期对我们的销量受疫情影响大概是个小个位数，这是一个关于疫情对销量的影响。第二个关于猪价，今年的猪价两个特点，第一个全年的平均猪价会明显低于去年。第二个特点，下半年的猪价平均会明显高于上半年的猪价，预计会有每公斤大概有三块钱左右的价差。谢谢。
Thank you for your questions. The first part is in relation to the impacts brought on the packaged meats sales volume by the pandemic. Beginning from March, we have been seeing rather substantial impacts on Shuanghui's business because of the pandemic in mainland China, especially those cities where there were outbreaks, including Shenzhen, Shanghai, Changchun, Taiyuan, Jilin, et cetera. We have seen sudden surges in the level of demand. As for cities without serious outbreaks, because those governments were worried about the spread of the pandemic or the spread of the outbreaks to their cities, they immediately took certain preventive and control measures. We have seen rises and also decreases in relation to our sales figures. The overall impact is a negative one, mainly because of the impacts on logistical arrangements and also because of the poor liquidity of people in certain communities.
Overall speaking, the pandemic at the moment is creating a small single-digit level impact on our sales volume. We believe that the confidence level will rebound very soon after the pandemic eases. As for our expectation for the hog prices in the H2 of this year, I can tell you the average for this year will be obviously lower compared to the overall average last year, and then the level in the H2 will be obviously higher compared to the H1 . I'm talking about a difference of about RMB 3 per kilo.
Shane and Glenn, can you take the question for the U.S.?
Sure. Sure, Robert. I heard the clarification earlier. I just wanna remind you that with respect to the pork business in the U.S., the pork industry in the U.S. is a little unique globally in that it's subject to 100% price discovery. Every day, the cost of grains and the cost of hogs are printed. Every day, twice a day, the USDA meat carcass and key primals or components of that carcass are printed. There, with respect to ASP, it's a fair question, but it's almost a number you can get by looking at the Internet. The hog price moved 16% year-over-year, Q1 to Q1, and it moved 15% Q4 to Q1.
The ASP increase in hogs is gonna be somewhere in that 15% mark. With respect to the fresh pork meat prices or the cutout, the USDA cutout, that moved 11% year-over-year. From Q4 to Q1, it moved 8%. Obviously hogs, hog prices moved more than fresh pork meat prices. Typically, that means a condensed meat spread within our fresh pork business, which would put some pressure on our profitability. However, the key to fresh pork, and this is really the response to your question, is what can we do to that commodity fresh pork, that USDA meat price? What can we do to that piece of meat to yield better pricing and ultimately better profitability?
Our Fresh Pork management team has very detailed analyses and margin optimization tools, whereby it determines each and every day what piece of meat would be optimal to that plant, what would produce the most amount of profitability for Smithfield Foods, and it would be that product that we make. It might be selling a bone-in ham to Mexico, or it might be converting that bit, that ham, taking the bone out, trimming it, and turning it into a packaged meats. Every day, every week, every season, that answer is different. The outcome or the result of that exercise is finding a price and obtaining a price in the marketplace that's higher than the USDA printed meat price, the commodity price. That's the strategy. That's what Shane was talking about earlier.
That's what I reiterated after I spoke as well is the key to fresh pork is finding value add, value-added components, value-added processes that ultimately yield a better price at market, which should result in a higher profitability. Overall, our fresh pork ASP was up greater than USDA, and that's the key. We want our Smithfield meat spread to be higher than the market spread, 'cause that means we're doing the right things to that component of the meat, and that means we're obtaining better pricing at market. We will continue to do that. You asked about sensitivity. There is absolutely sensitivity. At some point, pork will become too expensive and a consumer might look for an alternative protein. The one factor that's in play right now in North America is that the competitive meat set is all very, very high.
Chicken and turkey are both very high right now, and beef is extremely high. Pork, as it sits in the meat case today, is an affordable alternative for meat protein, and that has been one of the factors that has bolstered demand here in 2022.
比方说，刚才那个猪价年比，是有一个16%的改变。如果比较去年第四季度跟今年第一季度，那个差别是15%。然后如果是说已经切出来的不同部位的猪肉，年比那个变动是11%，去年第四季度跟今年第一季度的变动是8%。其实重点不是这一些的数字，因为反正这一些东西都已经是公开的一些信息。我们整体来说需要思考的就是在这样的背景底下，我们可以做什么来进行加工，或是不同的处理的手法，然后最终我们把这个产品推到市场去的时候，可以为我们公司带来最好的利润。其实我们有一个专业的团队，他们有一些非常先进的分析的工具，每一天在追着这一些不同的数据，还有售价来做研究。比方说某一个季度，可能最好的做法就是把带骨的一些部分卖到墨西哥，可能下一个季度更好的做法就是没有骨头部位的一些肉切片来出售是更好的一个做法。反正每一个季度，有时候每天、每一周这一些情况都是在改变当中。所以，我们需要看不同增值的元素或是加工的程序，为我们整体的利润带来一个正面的推动。最终的结果，就是我们Smithfield推出的产品，我们可以带来更好的增值的同时，我们也有一个价格的差别，就是我们的表现会比较市场别的更加出色。我们也需要记住，如果有一天猪肉变得非常昂贵，那么我们消费者，他们就会寻找其他的一些肉类来替代了。所以暂时来说，我们看到为什么猪肉的需求还是非常巨大的，就是因为当下鸡肉还有牛肉，相比来说还是比较昂贵。
好的，今天的我们的问答环节到此结束，感谢各位分析师的提问。2020、2022年一季度万洲国际年度业绩发布会，会议到此结束，谢谢各位的参与。Our investor briefing is over now. Shane and Glenn, thank you for your participation and your very good input. See you next time.
Thank you very much.
Thank you, Robert.
Thank you everybody.