Good evening, friends. Welcome to WH Group's conference call for the announcement of our results for the first half of 2026. This is Guo Lijun, Executive Director and Chief Executive of WH Group. Joining today's results announcement are members of the management team from WH Group and from our subsidiaries, Shuanghui Development, Smithfield Foods, and Morliny Foods in Europe. Namely, Mr. Wan Long, Chairman of the Board and Executive Director of WH Group. Mr. Wan Hongwei, Vice Chairman of the Board of WH Group and Chairman of Shuanghui Development. Mr. Ma Xiangjie, Executive Director of WH Group and President of Shuanghui Development. Mr. Liu Songtao, Executive Vice President and Chief Financial Officer of Shuanghui Development. Shane, Luis, Chief Executive Officer of Morliny Foods. Ms. Zhen Jinyan, Chief Financial Officer of the company, and Zhou Xiaoming, Vice President of the company.
Today's announcement is divided into two parts. We will first present the company's financial and operating performance for the first half of the year, and we will then take your questions. First part. For the first half 2026, packaged meat sold is 1.522 million metric tons. Pork sold 2.079 million metric tons, year-over-year growth of 6.1%. Revenue, $13.827 billion, 3.3% higher than last year. EBITDA, $1.681 billion, 6.1% higher than last year. Operating profit, $1.231 billion, 2.2% decline compared to last year. Profit before tax, $1.221 billion, 6.2% higher than last year. Profit for the period, $947 million, 10.5% higher than last year. Profit attributable to the owners of the company, $773 million, 6.6% higher than last year. Basic earnings per share, $0.0602. The board has also declared an interim dividend per share of HKD 0.2. Total amount would be roughly $330 million.
Despite challenging operating environment, we have achieved robust performance with growth in both revenue and volumes. Looking at the business segments, packaged meat is still our core business, contributing to 51.3% of our revenue and 89.4% of our operating profit. Pork business is also our major business, contributing to 39.1% of our revenue and 14.3% of our operating profit. Other business contribute to 9.6% of revenue and a loss of $45 million. From a region perspective, North America contributes to more than 50% of our revenue, which is 52.9% in the first half. China business was 30.5% and contributed to 36.8% of the operating profit. European business contribute to 16.6% of revenue and 9.7% of the operating profit. In the first half, the global economic growth moderated, geopolitical conflicts elevated, trade tensions continued, and the policy environment remained uncertain. China sow herd continued to reduce while productivity improved.
Abundant supply caused the hog price to decline sharply year-over-year. U.S. pork supply increased. Hog price dropped year-over-year. Feed cost was favorable due to lower grain prices. Hog production remained profitable. However, fresh pork faced the challenges from narrowing market spread. In Europe, animal disease export restrictions resulted in pork oversupply inside European Union. Hog price dropped significantly, pressuring upstream pork operations. WH Group leveraged our global platform and value chain, promoted efficiency improvement and cost savings, optimized the business structure, continued with pricing mix and control strategy, achieving the growth in volume while the operating profit decreased slightly. Packaged meat, as the core business, saw growth in both volume and profits. In the first half, the number of slaughter hogs in China increased by 1.7% to 372.46 million heads. The number of slaughter hogs in the U.S. decreased by 0.5% to 63.08 million heads.
From a pricing perspective, the prices dropped in all the regions. In China, the average hog price was RMB 11.23 per kilogram, down 27.5% year-over-year. U.S. average hog price was $1.48, down 1.5% year-over-year. European average hog price was EUR 1.2 per kilogram, down 20% year-over-year. In the U.S., in the first half, the average pork cutout value was $2.13 per kilogram, a decrease of 2.2% year-over-year. The market spread narrowed due to pork price decreased more than hog price. The spread has narrowed. In China, the operating profit was $454 million, 4.4% higher than last year. Packaged meats, $458 million, 11.4% higher than last year. Pork business is a loss of $7 million, and year-over-year declined by $35 million. In China, we captured market opportunities, achieved a growth both in volume and profit.
Meat and the packaged meats products' external sales volume reached a record high. In packaged meats, we continued to deepen professional reformation, stepped up investment in the market, improved the customer service quality, continued the price mix optimization and cost control strategy, adapted to changes in the consumption trend. Volume increased while unit profit remained at high level. In pork business, it captured market opportunities, expanded customer base, harvest volume achieved a significant growth. Fresh pork profit under pressure due to severe competition. Hog production faced challenges driven by weak hog price. In poultry, it continued to expand and scale poultry production. KPI improved while raising costs reduced. Fresh poultry optimized the product mix, expanded network, and enhanced the competitiveness. Total poultry operations improved significantly.
In terms of digitalization, we continue to deepen digitalization, deployed extensively in production, sales, animal production, and internal management, empowering the company to achieve high-quality development. In North America, first-half operating profit was $658 million, 2.5% lower than last year. Packaged meats, $545 million, 4.2% lower than last year. Pork, $182 million, 11.7% higher than last year. In the North America, we leveraged integrated business model focused on cost efficiency. Operating profit was stable, while net income achieved a record high. In U.S. packaged meat, we leveraged breadth of product portfolio and the channel volume remained stable. We continued the pricing mix optimization and cost control strategy, mitigating raw material cost inflation, profitability maintained at high level. In U.S. pork, the hog production benefit from favorable market and effective hedging strategy. Results improved significantly year-over-year. Fresh pork profit dropped due to narrower market spread.
Total U.S. pork profit maintained growth. In Mexico, hog price dropped while the volume increased. Profit achieved a growth year-over-year. In Europe, in the first half, operating profit was $119 million, 20.1% lower than last year. Packaged meats, $97 million, 44.8% higher than last year. Pork profit, $1 million, year-over-year decline by $63 million. In Europe, amid unfavorable market conditions, we continue to integrate synergistic M&As, maintain volume growth, packaged meat, and poultry performance continue to improve. New M&A contribute to volume growth. Operating profit increased significantly year-over-year due to lower raw material cost and pricing discipline. Hog price dropped sharply due to animal disease as well as export restrictions. Pork business faced the challenges, and the performance was under pressure. Broiler price dropped. Poultry business grew both in scale and profit.
In terms of M&As, we further expanded business footprint and increased the product offerings. We completed acquisition of Wolf Group, a leading German producer of premium sausages, convenient and ready meals. In terms of business strategies, WH Group will continue to consolidate global resources, leverage synergies, adhere to the business philosophy on improved mix, adjust price, and control costs, and the strategy of industrialization, diversification, globalization, and digitalization to enhance our leading position in the global meat industry. In terms of business priorities, we will focus on the following to lay a solid foundation for the long-term sustainable development. Number one, first enhance the pork business, optimize cost structure, improve hog production performance, grow fresh pork and strengthen competitiveness. For packaged meats, further optimize the product portfolio, expand the customer network and maintain steady growth in scale and profit.
Number three, continuously optimize the pork value chain, steadily promote meat diversification, enhance global footprint and strengthen overall competitiveness. Number four, promote automation and artificial intelligence across the organization. Drive digitalization upgrades to improve quality, cost and efficiency. That is all from the business review. Now we will move on to the Q&A.
[Foreign language]
The question from Ming Pao. The first one relates to the impact of the Middle East conflict on the cost structure of the company. Has that impacted on the company's cost structure and what will be the impact in the second half? The second question relates to the trade tensions between China and U.S., China and Europe. What has been the impact of these trade tensions on the company's performance in the first half? What are the expected impact on the performance in the second half? What mitigation measures can the company take to address these trade tensions?
[Foreign language]
In terms of the first question, since the conflict broke out in end of February and early March, the crude oil prices has increased sharply and has remained at relatively high levels. That has indeed caused the-
[Foreign language}
[Foreign language]
[Foreign language]
The answer was from Guo Lijun, the CEO of WH Group. The elevated crude oil prices, if continues, will impact the company's transportation cost, fuel cost and the packaging material cost. But overall the impact is not material, considering the scale of the company's operations. The company will also take a lot of measures to try to mitigate the increased input costs in relation to the fuels.
[Foreign language]
In recent years, indeed, because of the trade tensions, there has been tariffs against many products, including pork. In China, the tariff against pork import from Europe and U.S. has increased significantly compared to a few years ago. On the other hand, the hog prices and pork prices in China are very low. It has caused challenges for importing U.S. pork into China. In light of the tariff against the U.S. imported pork into China, we are taking a few measures. Number one, because the tariff against U.S. pork is 47%, we are focusing on importing more offal products from U.S. For these offal products, we also try to improve the quality so that we can expand its export. Secondly, we are also exploring more channels for U.S. pork export into other countries such as Mexico, Japan, Korea.
Number three, in China, we are also exploring more importing channels to try to obtain high quality products at competitive pricing. New channels including Europe as well as in South America.
[Foreign language]
That concludes Guo Lijun's answers.
[Foreign language]
[Foreign language]
[Foreign language]
The question relates to the forecast for the second half. In the second half, we will continue to face challenges due to weak consumer demand, inflation pressures, commodity market volatility, competition in the market, as well as the uncertainties of the policy environment as we described with respect to the tariffs. From the company's perspective, we are focusing on optimizing our product mix, focusing our core strengths, and leverage the advantage of our vertically integrated business model and try to deliver stable and good results to create long-term shareholder values.
[Foreign language]
[Foreign language]
Further elaboration on product mix optimization. By product mix optimization, we try to adapt to the consumer demand and consumption trends. For example, in China's K-shaped economy, we try to develop both high-end and premium products as well as mid to low-end value for money products to better serve our customers and to also achieve higher volume as well as maintain good profit.
[Foreign language]
In terms of payout ratios, our dividend policy is no less than 50% of net profit attributable to the owners of the company. For the first half, the board has declared dividend of HKD 0. 20 , which is flat, same as last year.
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
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[Foreign language]
First to review the performance of the global pork business. In the first half, the operating profits of pork business in China declined year-over-year. In Europe also declined year-over-year. But in U.S., actually increased compared to last year. In the first half across the world, the hog prices has decreased. The pork prices also decreased. In China, the hog prices on average has decreased by 28% compared to last year. In European Union, the price decreased by 20% compared to last year. The substantial drop in the European hog price is really driven by weak consumer demand as well as the export restrictions as well as a result of the outbreak of animal diseases.
[Foreign language]
[Foreign language]
The performance of China pork business as well as the China market competitive dynamics. In terms of market competitive dynamics, there has been changes in the dynamics in China in the last few years. In the past, the fresh pork industry are primarily dominated by some smaller, fragmented slaughtering houses. But in the last few years, because a lot of the large scale hog production companies are entering into the slaughtering business, these large industrialized players are more aggressive in expanding market shares. The market becomes more competitive. In the past, we are primarily competing against the small players, but now we have many more large scale competitors. That has resulted in industry level compression of gross margins. For our China business, it has also been negatively impacted by the reduced volume and profit from imported meat as a result of the trade tensions.
[Foreign language]
[Foreign language]
In the future we expect this trend will continue and the industry consolidation will continue. In the past there are a lot of smaller companies, but in the future there will be fewer but larger companies. In light of this evolution, we will focusing on expanding our scale while maintaining stable profit. We'll also try to expand our market shares to participate in the market competition.
[Foreign language]
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Expand market share [Foreign language]
[Foreign language]
[Foreign language]
For market share expansion, for pork business, it is our major business. We will continue to optimize the pork business and also expand its market share across the globe. For packaged meat business, it's our core business and we will optimize the product mix, optimize the pricing of our products and also control cost to achieve expansion of market shares.
[Foreign language]
[Foreign language]
In terms of product pricing, in China, we do not expect any material changes in pricing, particularly in the second half as the hog prices and other raw material costs are not expected to have a significant movement. In U.S. and Europe, we obviously will adjust our pricing according to competition, according to raw material cost. But we also will maintain our pricing discipline to try to reduce the volatility in our prices and try to capture more profits.
[Foreign language]
We will also adapt to the market demand to optimize our product mix through product mix improvement to gradually enhance our pricing.
[Foreign language]
[Foreign language]
[Foreign language]
As there are no additional questions, we can conclude today's media presentation. Thank you all.
Conference call for the announcement of our results for the first half 2026. This is Guo Lijun, Executive Director and Chief Executive Officer of WH Group. Joining today's results announcement are members of management from WH Group and from our subsidiaries, Shuanghui Development, Smithfield Foods and Morliny Foods in Europe, namely Mr. Wan Long, Chairman of the Board and Executive Director of WH Group.
Mr. Wan Hongwei, Vice Chairman of the Board of WH Group and Chairman of Shuanghui Development. Mr. Ma Xiangjie, Executive Director of WH Group and President of Shuanghui Development. Mr. Liu Songtao, Executive Vice President and Chief Financial Officer of Shuanghui Development. Shane Smith, President and Chief Executive Officer of Smithfield Foods and Mark Hall, Chief Financial Officer. Luis, CEO of Morliny Foods. Ms. Zhen Jinyan, Chief Financial Officer of the company.
Zhou Xiaoming, Vice President of the company. Today's announcement is divided into two parts. We will first present the company's financial and operating performance for the first half of the year and will then take your questions. Now, review of the first half performance. In the first half 2026, WH Group packaged meat sold was 1.522 million metric tons, 4.9% higher than last year. Pork sold was 2.079 million metric tons, 6.1% higher than last year. Revenue in the first half was $13.827 billion, 3.3% higher than last year. EBITDA $1.681 billion, 6.1% higher than last year. Operating profit, $1.231 billion, 2.2% lower than last year. Profit before tax, $1.221 billion, 6.2% higher than last year. Profit for the period, $947 million, 10.5% higher than last year. Profit attributable to the owners of the company, $773 million, 6.6% higher than last year. Basic earnings per share, $0.0602 .
The board has also declared an interim dividend of HKD 0.2 per share. The total amount is approximately $330 million. Looking at our different business segments, packaged meat is our core business, contributing to 51.3% of our revenue and 89.4% of operating profit. Pork is our major business, contributing to 39.1% of revenue and 14.3% of operating profit. Other business, including corporate expenses, contributed to 9.6% of revenue and a loss of $45 million. From a geographic distribution perspective, North America is 52.9% of revenue and 53.5% of operating profit. China business is 30.5% of revenue and is 36.8% of operating profit. Europe business was 16.6% of revenue and 9.7% of operating profit. In the first half of 2026, global economic growth moderated, geopolitical conflicts elevated, and the trade tensions continued, and the policy environment remained uncertain. In China, sow herd continued to reduce while productivity improved.
Abundant supply caused the hog price to decline sharply year-over-year. U.S. pork supply increased, hog price dropped year-over-year. Feed cost was favorable due to lower grain prices and hog production remained profitable. However, fresh pork faced the challenges from narrowing market spread. In Europe, animal disease and export restrictions resulted in pork oversupply inside the European Union. Hog price dropped significantly, pressuring upstream pork operations. WH Group leveraged the global platform and value chain, promoted efficiency improvement and cost control, optimized the business structure, continued with pricing mix and cost control strategy, achieving the growth in volume while the operating profit decreased slightly. Packaged meat as the core business, saw growth in both volume and profit. In the first half of 2026, the number of slaughter hogs in China increased by 1.7% year-over-year to 372.5 million heads.
The number of slaughter hogs in the U.S. decreased by 0.5% year-over-year to 63.08 million heads. China average hog price was RMB 11.23 per kilogram, down 27.5% year-over-year. In U.S., the average hog price was $1.48 per kilogram, down 1.5% year-over-year. In Europe, the average hog price was EUR 1.2 per kilogram, down 20% year-over-year. In the first half, the average pork cutout value in the U.S. was $2.13 per kilogram, a decrease of 2.2% year-over-year. The market spread narrowed as the pork price decreased more than the hog price. In China, first half operating profit was $454 million, 4.4% higher than last year. Packaged meats operating profit was $458 million, 11.4% higher than last year. Pork business was a loss of $7 million, which was $35 million lower than last year.
In China, we captured market opportunities, achieved growth both in volume and profit. Meat and packaged meats products' external sales volume reached record high. In packaged meat, we continue to deepen professional reformation, stepped up investment in the market, improved the customer service quality, continued the price mix optimization and cost control strategy, adapted to changes in consumer trends. Volume increased year-over-year, while unit profit remained at high level. In pork business, we captured market opportunities, expanded customer base, harvest volume achieved a significant growth. Fresh pork profit was under pressure due to severe competition. Hog production faced the challenges driven by weak pork price. In poultry, we continued to expand in scale, and poultry KPI improved while raising cost reduced. Fresh poultry optimized the product mix, expanded network, and enhanced competitiveness. Total poultry operations improved significantly.
We also continued to deepen digitalization, deployed extensively in production, sales, animal production, and internal management, empowering the company to achieve high-quality development. In North America, the operating profit was $658 million, 2.5% lower than last year. Packaged meats operating profit was $545 million, 4.2% lower than last year. Pork operating profit $182 million, 11.7% higher than last year. In North America, we leveraged our integrated business model focused on cost efficiency. Operating profit was stable, while net income achieved a record high. In U.S. packaged meats business, we leveraged the breadth of product portfolio and the channel volume remained stable. We continue the price mix optimization and cost control strategy, mitigating raw material cost inflation. Profitability maintained at high level. In U.S. pork business, hog production benefit from favorable market and effective hedging strategy. Results improved significantly. Fresh pork profit dropped due to narrower market spread.
Total U.S. pork profit maintained growth. Mexico hog price dropped while volume increased. Profit achieved growth year-over-year. In Europe, operating profit was $119 million, 20.1% lower than last year. Packaged meat business, the operating profit was $97 million, 44.3% higher than last year. Pork, $1 million of operating profit, which is $63 million lower than last year. In Europe, amid unfavorable market condition, we continue to integrate in synergistic M&As to maintain growth. Packaged meats and poultry performance continued to improve. In packaged meat, new M&As contribute to volume growth. Operating profit increased significantly due to lower raw material cost and pricing discipline. In pork business, hog price dropped sharply due to animal disease as well as export restrictions. Pork business faced challenges and performance was under pressure. In poultry, broiler price dropped. Poultry business grew both in scale and profit.
In terms of M&A, we further expanded business footprints and enriched product offerings. in February this year, we completed acquisition of Wolf Group, a leading German producer of premium sausages, convenience and ready meals. In terms of our strategy, WH Group will continue to consolidate global resources, leverage synergies, adhere to the business philosophy of improved mix, adjust price and cost controls, and a strategy of industrialization, diversification, globalization and digitalization to enhance our leading position in the global meat industry. We will focus on the following business priorities to lay a solid foundation for the long term sustainable development. Number one, further enhance the pork business, optimize cost structure, improve hog production performance, grow fresh pork and strengthen competitiveness. Number two, for packaged meats, further optimize the product portfolio, expand the customer network and maintain steady growth in scale and profit.
Number three, continuously optimize the pork value chain, steadily promote meat diversification, enhance global footprint, and strengthen overall competitiveness. Number four, promote automation and artificial intelligence across the organization. Drive digitalization upgrades to improve quality, cost, and efficiency. That is the overview of the first half results. Now we will move on to the Q&A.
[Foreign language]
[Foreign language]
Two questions from [Foreign language] of BofA Securities. First one relates to China packaged meat business. The second quarter profit per ton in packaged meat business has dropped significantly compared to last year, and based on his calculation, is roughly RMB 4,000 per metric ton. On the other hand, the volume growth was not very high. What are the reasons behind the sharp drop in profit per ton, but relatively moderate growth in volumes? What is the outlook of volume and profit per ton in the second half?
[Foreign language]
[Foreign language]
[Foreign language]
The answer first question from Ma Xiangjie, CEO of Shuanghui Development. The second quarter profit per ton for packaged meats dropped by RMB 500 per ton.
For the first half, the decrease was RMB 150 per ton. There are a few reasons behind the drop in profit per ton. Number one is we have adopted various initiatives to reform our packaged meat business, including more professionalized sales force and we also increased headcount in the professional teams. Number two, we also stepped up investment or expenses in certain key growing channels. These are really the initiatives we took to support our strategy of expanding our scale at a stable profit.
That has caused a temporary short-term decrease in profit per ton. As the impact of these investments gradually ease in the third quarter, we expect the profit per ton will gradually recover. For the full year, our outlook is still around RMB 4,500 per metric tons, which is just slightly below last year's level. This is consistent with the strategy that we formulated at the beginning of the year, which is to grow our volume at stable profitability.
[Foreign language]
The second question relates to the dividend. First of all, the company's operations are all normal. In the first half of this year, because the hog price in China was very low, which was a decade's low. We have took advantage of this market opportunity to build some inventories, including some frozen meat for the packaged meat raw materials. We believe these inventories would benefit the company's long term operations.
On the other hand, these inventories will tie up some of the company's cash flows and working capital. In light of the cash flows as a result of the inventory build up, the company has decided, the board, after considering all the factors, decided not to pay an interim dividend this time. Because this inventory building is a relatively short-term activity, we believe that in the future we will continue our strategy of shareholder return through cash dividend and maintain a relatively high dividend payout ratio.
[Foreign language]
[Foreign language]
The question is that with the lower investment or expense in the market in the second half, will that impact the company's packaged meats volume growth? The response is that number one, because a lot of the investment in the marketing and the sales force is really on the personnel cost. As the volume grows, these investment will be amortized. Also last year, fourth quarter, we had a relatively lower base. We are very confident that we can achieve the volume growth in the second half.
[Foreign language]
A clarification on the question on WH dividend. When talking about whether WH can maintain the dividend per share versus 2025, the 2025 number should exclude all the special dividends. The base should be just the ongoing dividend interim and final dividend. In 2025, it was HKD 0.61.
[Foreign language]
Response from Joanna, the company CFO. First, our dividend policy has not changed. The dividend policy is no less than 50%. The payout ratio is no less than 50% of the net profit attributable to the owners of the company. Number two, we have a strategy or business philosophy of delivering stable returns to our shareholders. For the interim dividend, after considering the company's balance sheet cash flows, we have decided to pay HKD 0.2 per share interim dividend, which was same as last year.
[Foreign language]
[Foreign language]
[Foreign language]
Three questions from [Tiffany of CT]. The first follow-up question relates to dividends. Per Mr. Ma's comments earlier, will Shuanghui pay dividends to fill the gap that has for the interim dividend in the next few months, or will use the higher final dividend to fill the gap of the interim dividend? For WH Group, what is the source of the cash flows for the interim dividend? Secondly, what is Shuanghui's outlook of hog price in the second half as well as for next year? In the interim report, there is roughly RMB 300 million of inventory write down because of low hog/pork prices. Is it possible that this write down will be reversed in the second half? Number three, what is the latest progress of the investigation of the antibiotic incident? If there is a potential monetary penalty, what would be the estimated size?
[Foreign language]
The first question, the decision of not paying interim dividend is really driven by the strategy to build some low-cost inventories. For the final dividend, the board will evaluate based on the cash flows at that time. For Shuanghui, the philosophy or the policy of paying a relatively high payout ratio has not changed.
[Foreign language]
For the hog price outlook for the second half, we expect moderate increase in hog price in China compared to the first half, which means that it will be higher than the first half, but will not be significantly higher.
[Foreign language]
For 2026, we also expect the hog price will be moderately higher than 2026, and in 2027, will be moderately higher than 2026. The trend will be similar to this year, the first half is relatively lower compared to the second half.
[Foreign language]
With respect to the inventory write downs, we strictly adhere to the accounting standard and policies. Whether there would be reversals, it will depend on the movement of hog price.
[Foreign language]
With respect to the investigation, please follow the future announcement.
[Foreign language]
[Foreign language]
With respect to the cash flow for WH dividend, ultimately the cash flows are all, as you mentioned, from the dividend from our subsidiaries in China, in the U.S. and in Europe. But from a timing perspective, the cash flows historically and also in the future does not necessarily always match one by one, match exactly, but from a timing perspective. As explained earlier, there is no change in our dividend policy and there is no change in our dividend philosophy.
[Foreign language]
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Two questions from Veronica of UBS. First relates to China packaged meat business. As Mr. Ma commented earlier, we have stepped up investment in some key growing channels. What are the effect or the returns of this investment? Any changes in terms of the growth, in terms of market shares, or in terms of business mix change? Second relates to the U.S. packaged meats. We noticed a relatively soft volume and a profit per ton in the second quarter. What are the latest consumer trends in the U.S.? Are we making some changes in our product mix to adapting to these consumer trends? What will be the outlook for the second half of U.S. packaged meats?
[Foreign language]
[Foreign language]
On first question response from Mr. Zhao, the president of packaged meat in China. We indeed stepped up investment in the market in the first half. In the past, the traditional channel contributes to most of our business. We also step up investment in the traditional channels. In the last few years, we have seen declines in the volumes in traditional channels. But this year, we have stopped the decline and achieved a small year-over-year growth. The traditional channels include some supermarkets, small grocery stores, and also wholesale markets. For the new channels, it is indeed growing much faster, and we invested in these growing emerging channels. In the first half, the growth from the new channels or emerging channels was 43.8%. This is on the back of last year's very strong growth in the new channels already.
With our investment in the market, we have achieved a 9.1% volume growth for the first half.
[Foreign language]
Shane. Mark, do you want to take the second question relates to the U.S. packaged meats?
Yeah. Mark, maybe I will start and you add anything I miss. Xiaoming, would you like me to stop along the way to translate or just go all the way to the end of my answer?
You can finish your response.
Xiaoming?
Yes, you can finish your response.
Okay, thanks, Veronica. When I look at the second quarter, one thing I would point out when you are looking at profit per ton or volume, just on the second quarter, it is important to keep in mind that the Easter holiday here in the U.S. was actually in the first quarter this year, as opposed to being in the second quarter last year. There is a little bit of a timing shift on some of our higher volume holiday ham business. In general, when I think about packaged meats and I look at the quarter, I feel really good about how the business performed. That is especially considering the environment that we are operating in. Here in the U.S., consumers are still being very cautious, and volumes across a lot of the packaged meats portfolio have remained under pressure, and we are all dealing with higher operating costs.
Even with that backdrop, we held our volume share. We have continued to improve our mix and we saw operating margins for the quarter at 13.1%. We are pleased with that. What we are also pleased with is that we are seeing some momentum from areas that we have been investing in for really several years now. When you look at the quarter, our points of distribution were up about 6.2% and we saw multiple brands in our portfolio gaining shelf space. We are seeing a lot of strong results from some of the innovative products like Smithfield Prime Fresh or Nathan's Famous Grass-Fed Beef Franks, our Eckrich smoked sausage.
The innovation piece of our portfolio is really playing an important role, and that accounts for about 20% of our year to date volume coming from products that have been introduced through that innovation pipeline. Some of the investments we have also made in the first half that we saw benefit from, but are also setting us up for a really confident second half, is some of the strong returns we are seeing from the investments we are making behind our brands. Our marketing support was up, but e-commerce volume grew by about 21.7%.
We saw our Gen Z dollars increased by about 15.2%. We are continuing to bring a lot of younger consumers into the brand. As we think about the second half and the confidence we have there, our focus really has not changed. We like the balance of the portfolio right now. We are going to continue to build our business innovation through distribution gains, through stronger marketing support, and then continuing to move our mix to that mix of higher margin value added product. I think there is still a lot of opportunity ahead of us there.
All of these things that we have done in the first half of the year are really setting us up nicely with a lot of momentum as we go into the second half of the year. Really confident in our packaged meats business and how they performed in the first half, considering the environment and how it is placed us for what we believe is going to be a strong second half in the packaged meats business.
Shane Smith [Foreign language]
[Foreign language] Thank you Shane for sharing as well.
[Foreign language]
[Foreign language]
[Foreign language]
Two questions from Lillian of Morgan Stanley. First relates to China's packaged meat business. In terms of the channels, what is the contribution of the new channels in the sales volumes? Second half, how confident are the company on the positive growth in the traditional channels in the second half? Second question relates to U.S. business. In the August 11th earning release, Smithfield has revised down the guidance for all the three operating segments. For the upstream business, including hog production and fresh pork, the operating margin guidance are lower than last year. In addition to the cautious consumers, does this guidance revision also reflects changes in the hog price, feed cost and meat prices in the U.S.? What are the drivers of the decision to revise down the guidance for hog production and fresh pork?
[Foreign language]
[Foreign language]
For China's new channels, since the second half of last year, we have been achieving double-digit growth in volumes. First half growth was 43% from the new channels, and the first half contribution in terms of volume was 24%. In the second half, we're confident that it will maintain very high growth, and we expect the full year contribution will be 25% in terms of volume. We also expect the new channel growth will continue in the next two to three years and will exceed 30% in the next two to three years. Shane.
Xiaoming, this is Mark.
I'll take the guidance question. Our team and the business model have really proven resilient in delivering record first half results. As you indicated, we are tempering our 2026 outlook, and it really primarily reflects lower hog prices and hog production, and packaged meats and fresh pork continue to be challenged by a cautious consumer with lower demand and higher input costs. I'd say our guidance really reflects the commodity markets as we see them today.
So we're incorporating in the current hog future strip our expectations for spreads in fresh pork and continued consumer softness. We're also seeing higher freight, diesel, and resin costs. We believe that the assumptions are appropriately prudent given the external environment. From here, I think the largest potential upside drivers would be better-than-expected fresh pork spreads, stronger packaged meats volume from the distribution gains and innovation that Shane had mentioned. I think we could also see a tightening of hog supplies that improves the market pricing later in the year.
The largest risk for us really remains the commodity prices and consumer demands. As Shane mentioned, we're seeing a lot of strength in the packaged meats business. Distribution points increased by 6.2% in the second quarter. You mentioned Prime Fresh was up 18% and really getting some traction with the Nathan's Famous Grass-Fed Beef Franks business. Additionally, we continue to grow our e-commerce share. That was up by almost 22%. I think that coupled with the investments that we're making in marketing and advertising, the second half, certainly for the packaged meats business, looks to be very strong.
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[Foreign language] Thanks, Mark.
[Foreign language] Valerie。
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Two questions from Valerie of Goldman Sachs. First relates to China's package meat business. What is the latest observations in the market in July and August in terms of the package meat performance? Last year, the third quarter profit per ton was relatively high due to the holidays. This year, given the higher contribution from new channels, what is the outlook for the profit per ton? Will last year's high base create some difficulties to achieve growth? Secondly, as mentioned earlier, the company has taken a lot of low-cost inventories to support future package meat business. What is the scale of these inventories? How many months of operations could this low-cost inventory support, and what would be the contributions to the profit?
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In terms of package meat profit per ton, in the first quarter, our profit per ton was very high. In the second quarter, it was much lower because of the low season, also because of our stepped up investment in marketing. The low profit per ton in the second quarter has resulted in a small decline in the first half profit per ton. In the third quarter, as we enter into the peak season and also as we rationalize our marketing investment, we expect a meaningful improvement in profit per ton. As explained earlier, the full year guidance is the profit per ton is generally flat compared to last year or a very small decline compared to last year.
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It is very difficult to quantify the impact of the inventory build up because it is a very dynamic process. We increase our inventories when the hog prices are low and reduce inventories when the hog prices are high. Once the raw materials are put into the warehouses, they will amortize the overall cost base. It is a very, very dynamic process and infeasible to quantify.
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Two questions from Wu Yuxin of CICC. First, on China business, in the first half, the expense in relation to advertising and promotions increased to 30% year-over-year. What is the outlook for the second half? Secondly, relates to the U.S. business, as there has been a lot of speculation about the impact of El Niño effect on the global climate, which may result in higher corn prices. Investors are concerned about the negative impact from higher corn prices. How will that impact our business in the U.S. and can we take some measures to hedge against this risk?
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In the first half, particularly in the second quarter, we have indeed significantly increased spending in marketing, and that has impacted our results for the second quarter. In the second half, we plan to significantly rationalize our spending in marketing. The exact magnitude will depend on the market environment. Shane or Mark, do you want to take the second one?
Yeah, I will take the second one. We also pay a lot of attention to the El Niño weather patterns, but in the context of overall global weather patterns and their impact on corn and soybeans. We do have a very robust hedging program, and so we do take advantage of that where we see opportunities. The good thing about corn is there is longer term liquidity in the futures markets, which can allow us to take longer term positions in corn. While we do not give our hedging positions away, I would just say that that is a key part of our overall strategy.
Outside of corn, we also have to play in all the structural improvements that we have made in the business, from the way we buy corn, through investments we have made in grain elevators through the country, and how we have converted some of our corn usage into bakery byproducts to offset some of the volume requirements we have in corn to maintain that carbohydrate level. So we have a very robust feeding program, and we have a very robust hedging program, and we use both to the benefit of the company.
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