Earnings Call: H2 2020

Mar 30, 2021

Investors and analysts, welcome to our 2020 WH Group annual results announcement. We are over the telephone and also through online streaming. I would like to introduce to you members of the management from WH Group, Smithfield and Shuanghui. They include Mr. Wan Long, Chairman, Executive Director and CEO for WH Group, Mr. Guo Lijun, Executive Director and CFO, Vice Chair. Our President and CEO for Smithfield, Mr. Dennis Organ, and also CFO and Executive VP, Mr. Glenn Nunziata. President of Shuanghui, Mr. Ma Xiangjie. Executive VP of Shuanghui, Mr. Liu Songtao. Board Secretary for Shuanghui, Mr. Zhang Liwen. Company CFO, Madam Qian Jinyan. I am Robert. I invite Mr. Guo to report to you the operations and business review for 2020, and we will proceed to the Q&A session. Mr. Guo, please. Investors, good evening. I am going to take you through the financial summary and business review for the group. 2020 consolidated financials overview. Packaged meat sold, 3.276 million tons. Pork sold 3.946 million tons, a drop of 6.6%. Revenue, $25.589 billion, up 6.2%. EBITDA realized $2.278 billion, a drop of 14.7%. Operating profit, $1.729 billion, a drop of 14.9%. Profit before tax, $1.5 billion, a drop of 22.9%. Profit attributable to owners of the company before biological asset fair value adjustment, $973 million, a drop of 29.4%. Basic earnings per share, a drop of 43.5% at $828 million. For 2020, net profit attributable to owners of the company, $828 million. The board proposed that final dividend per share should be 0.125 Hong Kong dollars, plus the already allocated interim dividend per share 0.05 Hong Kong dollars in October. For the whole year, per share, it should be 0.175 Hong Kong dollars, which takes up attributable net profit after fair value adjustment, 14.2%. According to this proposal, which will be submitted to the board, once approved, final dividend payout will be $238 million. It will be issued around July 7 this year. As a leading consumer product company, the packaged meat segment is our core business. For 2020, contribution from packaged meat, 47.5% in terms of revenue. Pork business, 48.1% contribution to revenue and 19.7% contribution to profit. China segment, 42.3% revenue contribution and 16.6% contribution to profit. U.S. segment, 48% and 24% respectively. Europe business, 9.4% contribution to revenue and 10% to profit. We have faced challenges from COVID-19 and African swine fever. Our U.S. business involved a lot of new expenditure, leading to a drop of profit level. But we maintain a sound financial position with ample cash flow. In 2020, operating cash flow, $2.357 billion, up 61%. Our CapEx, $572 million, a drop of 18.6%. If you look at the payout of $3.33 billion, it is about 40.2% of earnings during the year. Interest-bearing liabilities dropped to $2.682 billion. Leverage ratio dropped to 0.24 times. In 2020, WH Group faced the challenges brought by COVID-19 pandemic and African swine fever. COVID-19 pandemic ravaged the world, severely impacting business operations. In China, as the epidemic was brought under control quickly, Shuanghui immediately resumed operations, with both revenue and profit reaching record highs. U.S. operations were heavily affected by the ongoing COVID-19 pandemic, which resulted in market disruptions, lower production volume, high expenses, and significant drop in profits. Continuous ASF caused a supply shortage in China. Pork prices reached record highs and meat imports set new records. Although European operations faced the overlapping effects of COVID-19 and ASF, its operating performance was again the best in history due to effective prevention and control measures. The management team of WH Group took extensive measures to prevent the pandemic, ensure safety, control costs, promote operations, mitigated the risks, and responded effectively to challenges. As a result, we maintained sound fundamentals and laid a foundation for recovery of our production and operations. According to the National Bureau of Statistics of China and USDA, in China, number of slaughtered hogs in China fell 3.2% year-on-year to 527 million heads. By the end of the year, hog inventory in China reached 407 million, increase of 31%. Hog price in China continued to hit historical high. Average hog price was RMB 33.91 per kilo, a significant increase of 60%. According to USDA and Chicago Mercantile Exchange in the U.S., 2020, number of hogs slaughtered increased by 2.5% to 132 million heads. Average hog price, $1 per kilo, decrease of 10.7%. Because of ASF impact, lower slaughtering rates, hog prices continued to climb to historical high. For the U.S., because of high level of slaughtering, the COVID pandemic affected the consumption level, so hog prices dropped by 10% year-on-year. We responded to market changes in China, integrated global resources, adjusted our product mix and prices while controlling costs. Revenue and profits both hit record highs. We have remarkable results seen from new product launches and product mix optimization for packaged meat business, with profitability seeing significant increase. We deepened synergies by increasing meat imports and value-added processing to lower costs. Formation of food services division drove the takeoff of new businesses. We completed fundraising with an aim to improve vertically integrated pork value chain, expand poultry business, and enhance comprehensive competitiveness. In 2020, our China's business realized operating profit of $1.14 billion, up 19%. For packaged meat, $836 million, realized up 24%. For pork segment, $271 million realized, up 8.8%. Our U.S. operations recorded high costs and charges with sharp decline in profit due to COVID-19. We ensure the health of our employees and stable operations, recording approximately $820 million in costs and charges related to COVID. We proactively expanded retail channels to compensate for the decreased demand for food services. We leveraged synergies to expand exports, effectively supporting pork's business performance. We adopted effective hedging strategies to ease the impact of COVID-19. In 2020, U.S. operations recorded operating profit of $415 million, down by 55%. Packaged meat business, $571 million, a drop of 32%. Pork, a loss of $33 million, a drop of $266 million. European operations prevented epidemic effectively, and we leveraged the vertically integrated value chain, achieving record operating results. We increased our investment and accelerated integration to expand business scale. We expanded sales volume and increased prices for packaged meat by leveraging market and channel advantages. Segment profit increased significantly. We expanded the scale of pork business and increased profits considerably with the integration of newly acquired capacity. Our export business for European business were restricted due to animal pandemic. In 2020, operations in Europe, operating profit reached $174 million, up by 22%. Packaged meat segment, $92 million, up by 70%. Pork, $103 million, up 17%. Looking into 2021, COVID and African swine fever continued, and there are still many uncertainties ahead which may impact the development of the group, such as global economic trends, geopolitical relations, and trade tensions. Considering the challenges in 2021 and opportunities, the first challenge is the ongoing pandemic in the United States, it will take a long time for the economy to fully recover. Animal pandemics in Europe have not eased, affecting exports and operations. Loose monetary policy is pushing up asset prices and commodity prices globally, raising inflation expectations, which will result in higher business operating costs. In terms of opportunities, first of all, if the vaccine rollout goes well, global economic activity will pick up sharply, and consumption demand will recover. Secondly, Chinese economy is expected to continue strong growth momentum with continued improvement in consumption. Thirdly, the rapid growth in hog production capacity in China will lead to increased supply and lower hog prices, which is favorable for the pork business. The price difference between U.S. and China hogs remain large, creating favorable conditions for achieving higher synergies and expanding international trade business. WH Group will fully utilize its vertically integrated business model and global platform to cover various risks, seize opportunities, enhance scale of operations, maintain leading position in the industry, and ensure the sustainable development of the Group. In China, we are committed to a strategy of launching new products, optimizing product portfolios, expanding market network, and promoting marketing innovation to achieve volume growth. We will maximize synergies by expanding meat imports and value-added processing. We actively develop food service channels and household consumption, cultivate new business, and expand into new streams. We will further enhance integrated business model by developing hog production business and expanding poultry business to enhance overall competitiveness. As for U.S. and Europe, we will leverage the advantages of our integrated business model to achieve greater economies of scale. We will improve management practices and tap into internal potential. We will reduce costs and improve hog production efficiency through science-based feeding and improved management. We will accelerate transformation of pork business, optimize product mix and channels, improve output ratio, and increase variety and scale of exports. We will further increase the volume and profit of packaged meats by giving full play to market advantages, utilizing potential production capacity, and optimizing product mix. We will continue our effort in epidemic prevention and control, reduce losses, and ensure stable development of the Group. European business will continue to effectively prevent animal diseases. We will focus on local markets and increase sales volume of packaged meat. That is the end of my report. Thank you. Should you like to raise a question, please press star one on your telephone keypad. Ladies and gentlemen, star one to key for questioning. Ladies and gentlemen, star one to key for questions. Ladies and gentlemen, star one to key for questions. Ladies and gentlemen, star one to key for questions. Thank you very much. I would like to ask a question about the China business. Recently, we have heard that ASF is really ravaging the world, and we have heard news about some illegal vaccines in the market being circulated. What is your preventive measure on this front this year? Do you think that the hog production volume will be affected, leading to a drop? What about the whole year hog price prediction? What about the trend for the level of prices of packaged meat per ton? Last year, it was around 3,600-3,700 per ton. Can you share some guidance in terms of the indicator for this year? 我来回答这个问题。这个问题内容还是比较多的，我给你一个问题顺序来回答。第一个是你关注到的中国非洲猪瘟反弹的一个情况。我们也看到，从去年四季度，尤其下半年，陆陆续续在全国部分养殖企业由于不成熟的，或者有人叫它非法的疫苗使用，导致非洲猪瘟疫情的反弹。南方北方都会有反弹的形状出现，不是大面积出现。这导致中国的存栏量恢复的进度受到了较大的影响，也造成去年下半年，尤其是四季度猪价超出我们的预期。这是一个非洲猪瘟判断的情况。对于今年的防控形势，会不会出现像去年、前年那样的爆发？我的答案是不会的。中国在内的非洲猪瘟的反弹是因为局部养殖企业非法疫苗的使用导致的，它不会大面积出现。而且现在的生猪的存栏量的恢复主要以规模化企业为主，对疫苗的出现不好的结果，他们及时制止。现在用疫苗的企业，据我们了解已经没有了，所以它不会引发非洲猪瘟的全国大面积爆发。但是局部反弹还是有的。可以翻译一下吧，这个内容比较多。 [Foreign language] Allow me to address your first question on ASF first. We have seen some signs of rebound of the pandemic. Since the fourth quarter from last year, we can see that this rebound was caused by the use of certain unsophisticated or illegal vaccines at some of the pig farms. This is not a widespread issue. It is just that the level of stock may be affected in the shorter term. The Q4 hog prices also went beyond the level of our expectations. We do not believe that there will be an outbreak this year, because the rebound of the situation was simply caused by such illegal use of vaccines. It is not on a large scale level. Currently, most pig farming business is led by major or large scale enterprises. Once the vaccines are available, there will be certain measures taken to address the issue and also to stop any widespread outbreak. Can you start? 关于今年猪价，我继续讲今年猪价的预期。今年的猪价整体受非洲猪瘟局部反弹的影响会有所抬高，但是全年均价比去年下降的这个状况不会改变，而且下半年低于上半年的预判也不会改变。所以今年整体的猪价会整体下行，下半年低于上半年，全年比去年全年均价预计在28元人民币左右徘徊。这是一个全年猪价的基本判断。可以翻译一下吧。 Talk about the projections of hog prices in Mainland China. This year, the overall hog prices will be affected in a limited way by the ASF situation. But the average price for the entire year should not be changed. It will still be lower compared to last year's level. The overall declining trend for hog prices is that the second half hog price will be lower compared to the first half. The whole year average price projection should be around 28 RMB per kilo. 好，第三个问题，关于2021年的肉制品盈利的预期。在回答这个问题之前，我先讲去年四季度的盈利。刚才你也提到，我们去年前三个季度盈利是较高的，四季度明显下降是有特殊原因的，大概有这三个方面的原因。第一个是由于局部区域非洲猪瘟的反弹，猪价与原料成本高于前期，高于同期，导致我们盈利增加。成本高的原因。第二个原因是春节的错位。我们前年的春节靠前，2019年四季度有春节突围。但是去年春节滞后，没有突围，导致去年四季度的规模小，费用高，影响了盈利。第三个原因是去年四季度我们计提了管理层的这个奖金，也影响了盈利。但这几个原因都是特殊的原因，而今年我们盈利会恢复到正常的水平。但是会不会创新高，受两个方面影响。一个，今年整体成本下降会增加压力。但是今年我们计划会在市场上加大投入，提高产品的品质，提高员工的薪酬。这三个方面会减少盈利。在两个方面对冲之后，预计全年的盈利水平可以保持到正常的水平，稳定增长。 As for your last question, in relation to some projections of per ton profit concerning packaged meat in 2020. The previous three quarters, we saw a rather high level of per ton profits, and there was a drop in the fourth quarter for the following reasons. Number one, we have seen some rebound of the ASF pandemic in certain regions and areas, and the hog prices was driven to a higher level compared to our expectation. Our cost also went up. Secondly, the misplacement of the Spring Festival. The Spring Festival was actually rather late for 2020, and there was a lack of preparation on our suppliers' side, leading to higher promotional expenses. The third reason is in relation to a provision for management bonus, which is a growth-related reward. For this year, the overall cost is going to decline, and we will at the same time increase the level of market investment, and we will enhance overall quality and offer more attractive salary packages, and different factors will offset one another so that the per ton profit level should remain stable. [Foreign language] The next question is on WH Group. For this result, we see now of a breakdown between the U.S. fresh pork and hog production business. Can management from WH Group give us an indication as to the unit profitability of hog production business in U.S. last year, or say, how much loss did we incur on a per head basis last year? We also observed pretty good rally of hog prices and hog future price in the U.S. most recently. Based on the current price trend, what's our projection for the unit profitability for U.S. hog production in 2021? Can we actually expect to see the level to return to the 2019 level? Thank you. 下一个问题就是给美国的WH Group的领导的。你们的这个介绍的资料当中，针对美国这个猪栏的业务没有什么细分的数字跟我们分享，所以就想问问，基于去年的这一个猪栏的数字或是趋势，今年会有什么样的预测？比方说我们看到这个猪价，还有期货的价格都是向好，那么这个趋势可以延续到2021年吗？你们针对这个猪栏在2021年的情况，有什么样的一个推测？可以返回2019年的水平吗？ Dennis and Glenn, can I take the question, please? Yeah. This is Dennis, I will take it. The comments I would make about our fresh pork operation is that maybe I will answer the second question first, is that we are paying close attention to the rise in the hog markets, and feel like that gives us some good opportunities for the back half of this year. But as far as head profitability, there are still impacts to our raising costs caused by COVID-19. We are still dealing with some hog backups because of the reduced slaughter last year because of COVID-19 shutdowns at plants. And we are also working through increased input costs because of obviously some of the imports from China and some things going on in South America. So we are looking for pressured input costs on the farms, but favorability in the back half of this year. 好，先来回答你刚才第二条的问题。其实我们一直以来都非常关注这个猪市场的走势的。今年我们期待会有一些挺好的机会出现。但是整体来说，我们还是受到了这个疫情的影响。比方说去年因为这个疫情，我们部分的设施要关闭一段时间，结果这个猪肉就好像有一点的滞后或是积累了。同时我们也有一些的成本影响是来自中国跟南美进口的猪肉的。同时我们也有其他各方面的可能成本上升的一点的压力。 Dennis, do you have anything to add? Are you finished? I am finished. 已经说完了。那我们接着下面继续提问。好的，谢谢。我们下一个提问是来自高盛的林肯峰，请开始您的提问。 [Foreign language] I have two questions. Actually, the first question I want to ask about the U.S. business, especially for the packaged meat business. Well, first of all, I think we commented the COVID-19 related expenses in 2020 was around $800 million. How are we thinking the cost provision for 2021? Will we see a significant decrease, and what will be the magnitude of that? In terms of the packaged meat, so far, are we seeing the downstream, the food service demand recovery? To what point, under your best estimate, should we expect a more normalized demand backdrop for the packaged meat business? Is it more in the second half of the year or we should start to see more actually starting from first quarter of the year? 首先一个问题关于美国的业务，就是肉制品这一方面，我们看到疫情带来的开支在2020年大概是8个亿，那么2021年的情况会是怎么样？会有减少吗？然后下游那一些食品服务也受到了影响，大概在什么时候会正常化呢？回到正常的水平呢？是在下半年吗？还是第一个季度已经看到这样的事情了？ Okay, this is Dennis, I'll answer that. First on COVID costs. The only way I could describe our response to COVID would be aggressive. In the face of a pandemic, we really leaned into our response and put worker safety first. As you mentioned, our costs exceeded $800 million. For 2021, just as aggressively as our costs went up, we anticipate them to come down, and we're forecasting close to $675 million reduction in COVID costs year-over-year. As we sit here today towards the end of the first quarter, we're actually exceeding our budget, so slightly better than we thought. You can watch the news and see multiple states opening up and in general COVID restrictions lifting, which as a company, we move and follow that. So feeling really good about the costs and restrictions in the U.S., the country continuing to open up. On the second part, obviously that had some segment impact to our packaged meats business, and we had unprecedented high levels of demand in retail, paired with unprecedented low levels of demand in food service, which is obvious by the restaurant shutdown in the U.S. The good news is that the record demand in retail is continuing. We actually have demand for some of our product categories that far exceeds our production capabilities on the retail side. The food service business is actually coming back much faster than we thought. You can imagine the difficulties that can cause with a supply chain that is essentially empty. So, our customers and their warehouses and our production lines as we get them started back up, there's a lot of pressure on us to get that business turned back on and going. I guess I could only describe it as sooner and more of a quick turn back on than we anticipated, which is good. As far as normalized levels, I do think that'll be late this year to get back to maybe a 2019 number. We are seeing a relatively quick spike, and like I said, in general, I would say both COVID costs and food service recoveries are better than we had anticipated. 好，谢谢你的问题。关于这个疫情，我们的回应是非常积极的，因为我们相信安全永远是应该放在第一位。所以去年我们这一边的花费是有8个亿那么多。我们相信在21年，这个水平应该会有所下降，可能是到达6.5亿或是7个亿那样的水平。其实在第一季度，我们的表现已经超越了我们的预算，也就是说比较我们本来想象的水平，已经是更好的水平了。同时我们看到美国好多个州份，现在一些的社交活动的限制逐步地都已经取消了。所以整体来说，美国这个国家也足够地开放，这些都是有利的因素。你的问题说到肉制品这一个板块，其实我们看到这个零售层面的需求，是在疫情期间有大幅度地上涨的。同时，因为好多的餐厅不可以做生意了，所以餐饮这一边的需求就大幅度地下降。但是现在已经开始回暖了。但是当中当然遇到一些的困难，比方说回暖的同时，供应链基本上是空的，什么都没有。同时我们要快速地开始我们的生产线的工作。中间的确是遇到好多的挑战，但是这个反弹是快速地已经在进行当中。那么到什么时候可以恢复到正常的水平？比方说返回19年的水平呢？可能要到今年的年底吧。 [Foreign language] Just to clarify, are we talking about $650 million expenses reduction in 2021? If that's the case, will that more skew to the packaged business? Or it will be like more some exposure in the fresh business as well. The answer is yes, $675 million. I'm sorry. 刚才那个问题，澄清一下，是那一个下降的幅度是6.5个亿吗？主要是肉制品这一方面，还是新鲜肉那一方的呢？ The answer is yes, that $675 million is a reduction in COVID cost year-over-year. We did experience those spread out across all business units. It isn't focused on packaged or fresh, it was across all units. 那个回复就是说，的确年底下降是6.5个亿左右，这个下降并不集中在任何一个板块，是整体我们的业务的一个下降。好的，谢谢。那我第二个问题可能就比较简单了，我就想问一下万洲的管理层，关于我们现金的使用。因为我知道我们20年的净利润是会有下降，那我们的分红的金额的绝对值下降的幅度其实还是比较多的。当然我们整个公司的债务水平也是很健康的，资产负债表是很健康的。所以想请问一下，我们是怎样考量我们分红的比例呢？那如果分红少一点，这一块我们是不是对现金有别的一些用途的考虑？我们对并购这方面是有任何的一些考虑吗？或者说如果有的话，可不可以讲一下是在哪些方向？ My second question is in relation to the use of cash at the WH Group level. I understand that the net profit level dropped for 2020. In terms of absolute value, the dividend payout ratio or the amount also dropped. At the same time, you maintain a very healthy debt situation. How should we consider the payout ratio moving forward? Do you have any plan on M&A activities? Is that one direction you can provide in terms of using your cash? 分红的情况是这样，我们的分红的政策不低于当年审计后净利润的30%。我们从上市到现在，一直在秉承着这样一个分红的政策。那么今年尽管我们的盈利大幅下降，但是我们的分红比例依然按40%来进行分红。一个是我们坚持了我们的分红政策，另外我们按40%的分红比例，也是对于投资人的一种回报。 In terms of our dividend payout policy, we have maintained the same direction since IPO, which is to pay out no less than 30% of the current year's net profit. This year, despite the fact that our profit level has declined rather substantially, we are still keeping the payout ratio at 40%, because we would like to stick to our usual practice and policy, and also because we believe this is a matter of providing good return to our shareholders. 对于万洲国际本身的现金，主要还是来自于我们下属公司的分红。那么下属公司的盈利减少，尤其是美国的盈利减少，也会减少我们今年美国往我们万洲国际的分红。 In relation to the cash of WH Group, it mainly comes from the dividend from our subsidiary entities. For example, if our U.S. entity has a lower level of profit, then the level of dividend payout will also be lower. 那么我们目前现金主要集中在我们下属公司，尤其是双汇上面的现金存量比较多。这一方面来自于我们经营现金的结余，另外一方面来自于我们去年的一些增发的融资。那么这些现金下一步我们会做一些我们内部的一些行业的投资，你比如说我们双汇方面，要向我们的上游、生猪养殖、鸡肉产业来投资。同时，我们也会做一些我们内部的一些设施的一些改造。你像我们中国老的设施的一些改造，包括美国方面，通过改造来进一步发挥我们的产能。 For the use of our cash, at the moment, we are accumulating a rather high level of cash at Shuanghui. This is because of high level of operating cash balance, and also because of some newly added financing facility that occurred last year. In terms of the usage, we are thinking about internal investment, for example, towards upstream business, including pig farming and also some chicken business. We will also upgrade our facilities in mainland China and also in the U.S., so that we can enhance our overall capacity. 并购方面，我们非常密切关注我们的行业动态。我们在合适的时间、合适的情况下，我们会考虑。目前除了我们公布的一些并购的标的，我们其他没有更多的并购的标的。 In relation to M&A plans, we continue to pay close attention to any new developments in the industry, and we will try to identify suitable opportunities at the right time with the right conditions. At the moment, other than those potential targets that we have already announced, we do not have any new targets. 请各位继续提问。谢谢。我们下一个提问是来自华信资本的Charlie Chen。请开始您的提问。好的，谢谢管理层花时间来回答我的提问。我其实只有一个问题。我想请问一下，我记得之前在更之前的一些业绩会上面，公司也说过，通过中国的这样一个肉制品行业里面，一个调结构会持续造成一个收入的增加。那我记得以前如果没记错的话，可能是预计会有一个双位数的收入的增长。我想请问，基于目前的一个现状和调结构这样一个过程的一个发展，公司目前对双汇肉制品业务今年的关于收入和利润的一个表现，大概是一个什么样的把握？谢谢。 Thank you for taking my question. I only have one question. Previously, during your results announcement, you told us that you have done some restructuring of your packaged meat business in mainland China so as to enhance the level of revenue, and you also shared that there could be a double-digit growth. What is the current situation and development? Can you share some insights in relation to revenue level and profit level for packaged meat business for Shuanghui? 马总。好，我回答这个问题。最近这几年，双汇肉制品一直在进行调结构的工作。我们调结构、调价格、控成本，这是我们公司定的战略，这几年一直在做。去年调结构基本上初见成效。我们在量微幅下降的前提下，我们收入实现了一个大额的增长。这是去年的。利润当然是因为受涨价的因素，增幅更大一些，远远大于收入的增长。就是在去年肉制品量下降的前提下，收入大额增长，利润高幅增长，双双增长。这是去年的。今年我们调结构继续进行，预计量和收入、毛利润都会实现较好增长，应该都在中位数。回答完毕。 To answer your question, I would like to say that in recent years, Shuanghui has been going through restructuring and also repricing practices. On top of the foundation of a slight decrease of sales volume last year, we believe that there will be a single-digit growth in terms of our revenue, and there will be double-digit growth for our profit level. This year we will continue our efforts in terms of restructuring, and we believe that we can achieve medium-level single-digit growth in terms of our sales volume, and there will be very positive momentum and growth potential for revenue and profit. 请各位继续提问。谢谢。我们下一个提问是来自摩根士丹利的Lillian。请开始您的提问。谢谢管理层，我也有两个问题。第一个是关于中国和美国的上游业务。那么咱们中国的业务今年怎么看屠宰的利润？因为其实看到2020年屠宰的利用率只有30%，那今年如果量有所变好的话，屠宰的利用率可能会上升。那这样的话，我们怎么看待整个的屠宰利用率的变化？因为去年的利用率还是比较高的，因为有进口的帮助和相对来说低的一个库存。这是第一个，关于中国的屠宰利用率的问题。那么美国的话也是同样的，在上游的话，这个可能是一个接着刚才的一个问题，到底能不能拆解一下我们生猪的养殖亏损季度的情况和今年的一个展望？然后第二个相对来说是一个小问题了，是想问一下，我们2020年看到在整个万洲的报表上有一个多亿，大概一千万美金的other expense，就是其他开支。然后另外也是在other gain和other expense里面也有6,900万的一个开支，都没有解释什么东西，能不能管理层稍微解释一下，这个到底是什么原因导致的？将近有总共一亿八千万美金的other expense。我稍微自己翻译一下关于美国的那个问题。So I just translate my question regarding the upstream profitability in the US. Just as this follow-up, could management kind of give us a little color on the per head loss for hog production in the fourth quarter 2020, and also the trend of the unit return for hog production in 2021, similarly for fresh pork business in the US? Thank you. The first question is in relation to the upstream business for both mainland China and the U.S. business, because we can see that this year the slaughtering utilization rate is only 30% from last year. It is only 30% or so. Is it going to increase this year? Because last year, I think you got some help from importation and also from your inventory. The lady already translated the part for U.S. business. The second question is for WH Group. In 2020, I can see other expenses amounting to over $100 million. There was another $69 million odd allocation. Can you explain the reasons behind such allocation? The total amount for such other expenses was $180 million. Concerning our China business, yes, you are correct that because of the ASF impact from last year, hog prices were rather high and there was a sluggish consumption trend. There was also a marked drop in terms of our slaughtering volume. As for the projection for this year, while pig production will resume and return to normal level very soon, we believe that there will be a substantial increase in terms of production volume and slaughtering volume. The utilization rate for slaughtering capacity will also greatly improve. Alongside this trend, our cost will be reduced, and the slaughtering business profit level continues to improve over time. At the same time, we are seeing a narrowing of the price spread between the importation business for China and also the U.S., therefore leading to a drop in contribution to our profit level. Our profit level for the entire slaughtering business should show a downward trend. Dennis and Glenn, can you take the question for Smithfield? Robert, was it the question regarding the outlook for hog production in 2021? The question was about hog production loss in fourth quarter and outlook for 2021, and similarly for fresh pork in fourth quarter and outlook in 2021. Thank you. Right. With respect to the fourth quarter of 2021, it was a pretty interesting dynamic where the fourth quarter 2020 rather, where the majority of 2020, we saw extremely low hog prices that were really driven by the slowdown in fresh pork production because of plant closures. We saw that price ramp up in Q4, but at the same time, the COVID-19 impact on raising costs, on our growing costs, were really significant in Q4. Therefore, we incurred a very sizable loss in the fourth quarter of 2020. As Dennis Organ indicated earlier, the lag or drag of COVID-19 on our growing costs continue into 2021. That has everything to do with just biology. The grow-out period for a hog, the amount of time it takes to get a hog from farrow to market is six months. It is going to take us a few quarters to normalize our raising costs. The trend for 2021, from a seasonality perspective, we are going back to what I would indicate as normal, where Q1 and Q4 are our tougher profitability quarters, and Q2 and Q3 are periods of higher performance, higher profitability on the farms. We do expect to see a pretty significant jump in profitability in Q2 and Q3 as compared to the prior period, just given the dynamics of strong hog prices and some of our raising costs beginning to improve as we go throughout the year. With respect to fresh pork in 2021, we are seeing really strong demand here in Q1. The meat prices in the U.S. continue to rally. Even though hog prices are up, the prices have kept up. We have experienced profitability in fresh pork. We are hopeful that we will see continued demand as we get into the summer growing season on fresh pork. Typically, we do not forecast what we think meat is going to do, but we are hopeful to see a continued spread where the meat prices exceed the hog prices as we get into Q2 and early Q3. Thanks, Glenn. The second question was in relation to the expenses amounting to around $110 million. They actually included litigation compensation and some legal fees paid to legal representatives, and also some retirement benefits for our management staff. Glenn Dennis. Robert, to be honest, we had a very difficult time understanding that question. We heard something about acquisitions, but could someone clarify what the question was? Sure. Because in the announcement, you mentioned two company names that is under negotiation, or is it acquired already. I want to know more colors on those acquisitions. Glenn, we announced that we have two acquisitions related to Smithfield. First is- Yeah the acquisition of the First Sausage, and the second one is the acquisition of Mecom. I think the investor is asking about the financial impact of these two acquisitions. Got it. Okay. Sorry about that. Just the connection was really fuzzy there for a minute. With respect to the fresh sausage acquisition in the U.S., our acquisition strategy has remained consistent over the last few years. It is all about finding assets and capabilities that we do not have today that allow us to optimize the utilization of our raw material and migrating that profitability from upstream to downstream, which generates higher margins. Fresh sausage was just that. It was an asset that allowed us to utilize raw material internally and to take part in the higher profitability that comes from packaged meats for that type of product. The acquisition was accretive from day one, and it fits squarely into the strategy we have deployed in the U.S. over the last few years with respect to assets and capabilities. The Eastern Europe acquisition is more of the same. It is an opportunity for us to continue to invest downstream in our business. We take a very balanced approach in Eastern Europe, where we are building a vertically integrated model, and this business allows us to expand our packaged meats presence in Eastern Europe, just like the acquisition we did a couple of years ago in Romania called Elit. We are bullish on the impact Mecom will have on our P&L going forward, and it will allow Europe to realize its profitability and growth plans, like I said, consistent with the previous acquisitions we have made in that area. Quick follow-up. Do we disclose the amount of the money you spent on those targets? We do not. Hold on. Let the translator translate first. Okay. Then go ahead. Yeah. I just want to know the size of the deal, or do we disclose it? We do not. The purchase price for both of those was not significant enough for disclosure, so we have not disclosed those numbers. 明白。我最后一个问题比较简单，就是可不可以请郭总跟我们说一下今年的资本开支跟区域划分的情况是怎么样？谢谢。 A follow-up question is for Mr. Guo. What is the CapEx level for this year? 今年的资本开支，我们预计今年我们整个万洲国际的资本开支总额大约在13个亿到15个亿。这个资本开支主要集中在双汇，双汇占绝大部分。因为双汇我们今年要投资几个，一个是我们养猪场，还有鸡肉工厂，同时也有我们内部建造的一个办公楼，还有我们一些工厂和设施的改造。这13个亿到15个亿主要是中国双汇的投资。 Concerning CapEx this year, the whole group CapEx level is between $1.3 billion to $1.5 billion, and it will mainly go to Shuanghui, because we are going to invest into the hog farming facilities, the chicken plants, our office building, and we also have plans to upgrade our factories, production facilities at the same time. 预计Smithfield美国和欧洲主要还是我们正常的一些设施的改造和正常的资本开支，预计不超过500亿。 As for CapEx for U.S. and Europe, we expect it to be limited to no more than 500 million, and they will mainly be spent on normal upgrading of facilities and plants and other CapEx items. 郭总，我确认一下，你说的是13个亿再加上5个亿，是这个意思吗？不是，我总共是13个亿到15个亿。明白，谢谢。 The total CapEx is between $1.3 billion and $1.5 billion. 你继续提问。我们下一个提问是来自中银国际的Jack Chen，请开始您的提问。好的，谢谢。我有两个问题，首先问一个中国这边的问题，现在来看的话，中美的猪价的价差还是比较明显的，然后国内还是一个缺猪的情况，那如果看今年进口的量的预期大概是什么样？ My first question is concerning the hog price spread between China and the U.S., which is very obvious. What is the level of importation this year? 我们今年预计进口业务还会有比较好的表现，这主要来自于几个方面。第一是今年中国和美国以及其他国家，欧洲和南美的生猪价差还是比较大，也有利于我们往中国进口。 We do expect this year importation business will have very good performance for the following reasons. First of all, the price spread among various regions including China, the U.S., Europe and South America, will be very substantial, which is advantageous to our importation business. 第二个，我们美国和中国以及香港的技术人员也在积极地合作，来挖掘更多的能往中国出口的产品，我们预计这方面的潜力还是比较大。 The second reason being that our technical staff from U.S., China and Hong Kong, have been cooperating very well to identify different products that have the potential to be exported to China. 第三个方面，我们除了内部的贸易之外，也在积极地拓展我们外部的业务。我们在全球合作的贸易商越来越多。同时我们除了猪肉、鸡肉、牛肉这方面的业务也在拓展，这些都会提升我们未来的进口规模。 Thirdly, other than internal trading, we have been identifying overseas business opportunities. We see a growing number of vendors globally collaborating with us, not just on pork products, but also on chicken and beef products. We expect the overall scale of importation to continue to expand. 另外一个就是我们在中国利用我们的生产加工和市场的优势，我们在中国做进口贸易的同时，我们也做进口肉的大力推广，进口肉的加工增值这方面的需求也会越来越大。所以我们预计今年2021年，我们的国际贸易会有很好的表现，还会有很好的表现，预计未来的规模和给我们带来的收益也会越来越大。 The final reason being that we do enjoy in mainland China certain advantages in relation to processing and also to the market conditions. We believe that we can continue to do promotion in relation to processing capabilities and also value adding services. We expect for the year 2021, there will be very positive performance on international trade, and we will continue to expect good growth in terms of scale and revenue. 好的，我这边再追问一个小问题，就是有关于我们现在的关税水平方面，因为我有看到我们的同行是组团申请关税的部分豁免，想问一下我们现在大概是一个什么样的情况？ My next question is in relation to lifting the tariffs. I understand that some peers in the industry have been applying for tariff related concessions. Can you provide some insights into this? 关税的豁免，我们也在享受豁免25%，我们目前执行的美国冷冻猪肉的关税是33%。 We do enjoy a current level of 25% tariff exemption and for frozen U.S. pork, the level is 33%. 由于时间关系，我们现在接受最后一条提问。我们最后一个提问是来自花旗的魏晓波，请开始您的提问。对。郭董事长，我最后一个问题，我也不占大家时间了。我觉得峰会也蛮清楚的，我就直接问一个英文的Smithfield的问题，听到吗？听得到，你问吧。 OK. I think we have two questions on Smithfield. One is about the directional strategy. The management mentioned that in the year to date, the strong demand in retail and also quick recovery in food service. Are we seeing that as the retail demand are going to be one of the areas we will be more focused on looking forward? Because our current understanding that the producers have shifted from food service to the retail last year due to the demand shift. Are we seeing the retail will be the new growth of the demand and where we put more efforts in that area? That is number one. The number two question, we know that 2020 was a rough for everybody. If we look at what Smithfield have done, and we pay out $800 million U.S. dollar more for the COVID-related expenses being invested continuously into supply chain. Shall we say that we are gaining share in U.S. despite the tough times in the industry? If that is the case, in 2020, will we see that we are recovering faster than our competitors in 2021 looking forward? Thank you. 美国业务有两个问题，首先就是我们战略的方向的问题。去年因为疫情的影响，本来那些餐饮的需求就下降了好多，同时零售的需求就大大地增加。那么今年这个势头是否会扭转呢？也就是说今年是否我们关注点就变成了是零售的业务，变成我们业务的一个新的增长的一个引擎呢？第二个问题就是我们大家都经历了20年非常困难的一年，同时听说公司花了8个亿去抵抗这个疫情带来的影响。那么我们可以说在这个疫情过后，公司在美国的份额是有所上升吗？也就是说我们公司是否相比我们竞争的对手，我们恢复的速度是更快呢？ Okay. I am clear. Yep, I will answer it, Robert. The first question about the shift between retail and food service. Yes, it was a dramatic switch last year, which caused difficulties from the production perspective because food service production lines tend to make more bulk product, which is not applicable to grocery stores. We did do some pivots last year to try to fill more of the orders on the retail side. But going forward, we are not switching our efforts to have more retail than food service business. Our business is about half and half, 50/50. And the difference between the two channels that long term are important to us is food service is much more consistent business than retail. If you just think about the demand in a restaurant for our larger customers, it is consistent throughout the year. There is much less seasonality in a restaurant in our food service business than retail. And where our retail business has large holiday spikes and our volume is subject to promotional activity. If we shifted entirely away from food service, I am afraid that the volatility would be very difficult for us to produce and stay in stock. The second is, when it comes to food service recovery, it is not all food service recovering at the same pace. If you can think about the restaurants that fared the best throughout this pandemic, they had the best offering for drive-through service or carryout service and were known for that. The restaurants that fared the worst were what we call mom and pops, but typical sit-down restaurants, and as they were shut down during the pandemic, they just could not have in-room dining, and so it really hit them the hardest. The recovery for us is happening across the food service, but specifically focused on first, the customers are food service providers that they are easier to do carry out and drive through. And then as the dining rooms are opening back up with limited capacity, we are seeing those come back as well. But the gaining share is an interesting point. One that we have been focused on throughout this pandemic is that even though the sales are down and the velocity was down at the consumer, we are working very hard to make sure that we are gaining share and gaining customers. So that as the business does come back, we are in a really good position to get back on our growth channel, and we believe we have had some success there.