Q1 2026 Smithfield Foods Inc Earnings Call

April 28, 2026

Speaker #1: And our other filings with the Securities and Exchange Commission. The company undertakes no obligation to update or revise any forward-looking statements. Whether as a result of new information, future events, or otherwise.

Speaker #1: Please refer to our legal disclaimer on slide 2 of the presentation for additional information. Today's presentation will also include certain non-GAAP measures, including but not limited to adjusted operating profit and margin, adjusted net income, adjusted earnings per share, and adjusted EBITDA.

Speaker #1: For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our slide presentation on our website.

Speaker #1: Finally, all references to retail volume and market share are based on Draconio Nilo Plus data. With me this morning are Shane Smith, President and CEO, Mark Hall, CFO, Steve France, President of Package Meats, and Jonathan Owens, President of North America Fork.

Julie MacMedan: Our other filings with the Securities and Exchange Commission. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to our legal disclaimer on slide two of the presentation for additional information. Today's presentation will also include certain non-GAAP measures, including, but not limited to, adjusted operating profit and margin, adjusted net income, adjusted earnings per share, and adjusted EBITDA. For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release, and our slide presentation on our website. Finally, all references to retail volume and market share are based on Circana Nielsen class data. With me this morning are Shane Smith, President and CEO, Mark Hall, CFO, Steven France, President of Packaged Meats, and Donovan Owens, President of North American Pork.

Speaker #1: With that, I will now turn the discussion over to Shane. Shane?

Speaker #2: Thank you, Julie. Good morning, everyone. I am pleased to report record first-quarter adjusted operating profit of $339 million, and adjusted operating profit margin of 8.9%.

Speaker #2: Our outstanding results reflect discipline execution of our long-term strategy, particularly in Package Meats, reinforcing the benefits of our vertically integrated model in a dynamic operating environment.

Julie MacMedan: For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release, and our slide presentation on our website. Finally, all references to retail volume and market share are based on Circana/Nielsen class data. With me this morning are Shane Smith, President and CEO, Mark Hall, CFO, Steve France, President of Packaged Meats, and Donovan Owens, President of North America Pork.

Speaker #2: Looking at profit by segment, Packaged Meats delivered operating profit of $275 million, up 4% versus the first quarter of 2025. Packaged Meats sales of $2.1 billion increased by 6% compared to the first quarter of 2025.

Speaker #2: This was driven by volume growth of 3.5%, primarily reflecting the earlier Easter holiday. Excluding the impact of the earlier Easter timing, our volume was still 1.3%.

Julie MacMedan: With that, I will now turn the discussion over to Shane. Shane.

Julie MacMedan: With that, I will now turn the discussion over to Shane. Shane?

Speaker #2: We also saw a 2.6% increase in average sales price related to higher raw material market prices and disciplined pricing across our brand portfolio. We reported Package Meats segment operating profit margin of 12.8%, which was down modestly from last year, driven primarily by the earlier Easter increase in the middle of holiday times, higher raw material input costs, and continued consumer option in the quarter.

Shane Smith: Thank you, Julie. Good morning, everyone. I am pleased to report record Q1 adjusted operating profit of $339 million and adjusted operating profit margin of 8.9%. Our outstanding results reflect disciplined execution of our long-term strategies, particularly in Packaged Meats, reinforcing the benefits of our vertically integrated model in a dynamic operating environment. Looking at profit by segment, Packaged Meats delivered operating profit of $275 million, up 4% versus Q1 2025. Packaged Meats sales of $2.1 billion increased by 6% compared to Q1 2025. This was driven by volume growth of 3.5%, primarily reflecting the earlier Easter holiday. Excluding the impact of the earlier Easter timing, our volume was still 0.3%.

Speaker #2: Fresh Fork reported operating profit of $78 million, with an operating profit margin of 3.9%, which was down slightly versus the first quarter of 2025.

Speaker #2: We saw lower production volume in our East Coast operations due to temporary winter storm disruptions as well as lower gross margin as China export volumes decreased year over year.

Speaker #2: As a reminder, the tariff disruption was introduced in April of 2025, impacting the year-over-year comparison in the first quarter. Our high production segment delivered operating profit of $4 million, up from $1 million in the first quarter of 2025, driven by improved commodity dynamics, including higher selling prices and lower fee costs, and improved operating efficiency on our retained farms.

Shane Smith: We also saw a 2.6% increase in average sales price related to higher raw material market prices and disciplined pricing across our brand portfolio. We reported Packaged Meats segment operating profit margin of 0.8%, which was down modestly from last year, driven primarily by the earlier Easter increase in the mix of holiday hams, higher raw material input costs, and continued consumer inflation in the quarter. Fresh Pork reported operating profit of $78 million, with an operating profit margin of 3.9%, which was down slightly versus Q1 2025. We saw lower production volume in our East Coast operations due to temporary winter storm disruptions, as well as lower gross margin as China export volumes decreased year over year.

Speaker #2: This marks the fifth consecutive quarter of high production segment profitability, and underscores the ongoing benefits from our transformational strategy. We reduced the number of internally produced hogs, closed and exited underperforming farms in geographies, and successfully lowered our cost structure through improved genetics, herd health, and procurement nutrition savings.

Speaker #2: Finally, our culture of continuous improvement drove meaningful cost savings during the first quarter. In addition to efficiencies within our segments, corporate expenses were down 11% versus last year.

Speaker #2: In short, we delivered record first-quarter profit, led by strong Package Meats segment performance and solid execution across the organization. Our financial position continues to be rock solid.

Shane Smith: As a reminder, the tariff disruption was introduced in April 2025, impacting the year-over-year comparison in Q1. Our Hog Production segment delivered operating profit of $4 million, up from $1 million in Q1 2025, driven by improved commodity dynamics, including higher selling prices, lower feed costs, and improved operating efficiency on our retained farms. This marked the fifth consecutive quarter of Hog Production segment profitability and underscores the ongoing benefits from our transformational strategy. We reduced the number of internally produced hogs, closed and exited underperforming farms and geographies, and successfully lowered our cost structure through improved genetics, herd health, and procurement nutrition savings. Finally, our culture of continuous improvement drove meaningful cost savings during Q1. In addition to efficiencies within our segments, corporate expenses were down 11% versus last year.

Speaker #2: We hit the quarter with liquidity of $3.7 billion and leverage of just 0.4 times, providing significant flexibility to support our growth strategies and deliver shareholder value over the long term.

Speaker #2: Now turn into our outlook for fiscal 2026. We continue to navigate a challenging external environment with Middle East conflict adding another layer of macro volatility.

Speaker #2: For us, that flows through higher freight, packaging, and agricultural input costs. Our experienced team is managing through this the same way we have in past cycles: pricing and mix, discipline spending, productivity initiatives, hedging, and contract and procurement actions.

Speaker #2: The U.S. consumer continues to be cautious, and we are focused on delivering value and nutrition for families. As households make every dollar count, our portfolio of trusted brands provides affordable protein solutions without compromising on quality.

Shane Smith: In short, we delivered record Q1 profit led by strong Packaged Meats segment performance and solid execution across the organization. Our financial position continues to be rock solid. We ended the quarter with liquidity of $3.7 billion and leverage of just 0.4x, providing significant flexibility to support our growth strategies and deliver shareholder value over the long term. Turning to our outlook for fiscal 2026. We continue to navigate a challenging external environment with the Middle East conflict adding another layer of macro volatility. For us, that flows through higher freight, packaging, and agricultural input costs. Our experienced team is managing through this the same way we have in past cycles: pricing and mix, disciplined spending, productivity initiatives, hedging, and contract and procurement actions. The US consumer continues to be cautious, we are focused on delivering value and nutrition for families.

Speaker #2: Protein continues to resonate with consumers, given its nutritional benefits and versatility, and within the protein complex, Fork remains competitively positioned. Core SMITHFIELD categories, including lunch meat, bacon, sausage, and hot dogs, offer accessible everyday protein options that align well with current value-oriented purchasing behavior.

Speaker #2: Against this backdrop, we believe staying focused on our five key strategies will help us grow sales and profitability in 2026 and over the long term.

Shane Smith: We continue to navigate a challenging external environment with the Middle East conflict adding another layer of macro volatility. For us, that flows through higher freight, packaging, and agricultural input costs. Our experienced team is managing through this the same way we have in past cycles: pricing and mix, disciplined spending, productivity initiatives, hedging, and contract and procurement actions. The US consumer continues to be cautious, we are focused on delivering value and nutrition for families.

Speaker #2: First, in Package Meats, we plan to continue to grow operating profit through ongoing product mix improvements, volume growth, and innovation. Improving product mix remains a core margin expansion strategy.

Speaker #2: We are increasing the mix of higher margin value-added product categories and expanding unit velocity while reducing volume of lower margin commodity-type product categories. A great example of this is converting large holiday times into products like our prime fresh lunch meat, which increases units and purchase indications while expanding margins.

Shane Smith: As households make every dollar count, our portfolio of trusted brands provides affordable protein solutions without compromising on quality. Protein continues to resonate with consumers, given its nutritional benefits and versatility. Within the protein complex, pork remains competitively positioned. Core Smithfield categories, including lunch meat, bacon, sausage, and hot dogs, offer accessible everyday protein options that align well with current value-oriented purchasing behavior. Against this backdrop, we believe staying focused on our five key strategies will help us grow sales and profitability in 2026 and over the long term. First, in Packaged Meats. We plan to continue to grow operating profit through ongoing product mix improvements, volume growth, and innovation. Improving product mix remains a core margin expansion strategy. We are increasing the mix of higher margin value-added product categories and expanding unit velocity while reducing volume of lower margin commodity-type product categories.

Speaker #2: As 2025, we saw strong momentum in these value-added categories, and that carried over into the first quarter of 2026. During the first quarter, we grew unit and market share in our core high-margin focus areas, for example, we grew units sold to cooked dinner sausage by 9% in the quarter, gaining 0.8 points of unit share growth, and dry sausage by 10%, gaining 1.1 points of unit share growth.

Speaker #2: We expect these higher margin categories to continue to deliver strong unit growth throughout 2026. We are capitalizing on the significant opportunity to drive volume growth and gain share across our portfolio.

Shane Smith: Against this backdrop, we believe staying focused on our five key strategies will help us grow sales and profitability in 2026 and over the long term. First, in Packaged Meats. We plan to continue to grow operating profit through ongoing product mix improvements, volume growth, and innovation. Improving product mix remains a core margin expansion strategy. We are increasing the mix of higher margin value-added product categories and expanding unit velocity while reducing volume of lower margin commodity-type product categories.

Speaker #2: We participate in 25 key Package Meats subcategories at retail, 10 of which are valued at over $1 billion. We are focused on driving volume growth through increased distribution and disciplined brand investment.

Speaker #2: During the first quarter, we increased branded volume share from 25 categories in total by 1.6%, and gained branded volume share growth of 0.4 points.

Speaker #2: A key contributor to growth was increased points in distribution, which was up strong 5.5% versus last year. We also continue to invest in marketing and trade promotion for our brands.

Shane Smith: A great example of this is converting large holiday hams into products like our Prime Fresh lunch meat, which increases units and purchasing occasions while expanding margins. From 2025, we saw strong momentum in these value-added categories, and that carried over into the Q1 of 2026. During the Q1, we grew units and market share in our core higher margin focus areas. For example, we grew units sold of cooked dinner sausage by 9% in the quarter, gaining 0.8 points of unit share growth and dry sausage by 10%, gaining 1.1 points of unit share growth. We expect these higher margin categories to continue to deliver strong unit growth throughout 2026. We are capitalizing on the significant opportunity to drive volume growth and gain share across our portfolio.

Speaker #2: One of the top performing categories was packaged lunch meat, which grew volume by 11.1%, while the industry was down 6.5%. This led to a more than 1-point increase in our packaged lunch meat volume share.

Speaker #2: Q3 is one of our most important packaged lunch meat brands. We grew Prime Fresh volume by 26%, with an 18% increase in point distribution in the first quarter.

Speaker #2: Looking ahead, we see continued white space opportunities to grow volume and increase market share in our top 25 categories. As part of our broader growth strategy and in addition to trade promotions, we are increasing investment in television and digital advertising to build awareness and support the long-term growth of our national brands, SMITHFIELD Average and Macon's Famous.

Shane Smith: We participate in 25 key Packaged Meats subcategories at retail, 10 of which are valued over $1 billion. We are focused on driving volume growth through increased distribution and disciplined brand investment. During Q1, we increased branded volume share for the 25 categories in total by 1.6% and gained branded volume share growth of 0.4 points. A key contributor to growth was increased points of distribution, which was up a strong 5.5% versus last year. We also continue to invest in marketing and trade promotion for our brands. One of the top-performing categories was packaged lunch meat, which grew volume by 11.1% while the industry was down 6.5%. This led to a more than 1 point increase in packaged lunch meat volume share.

Speaker #2: We are also growing volume by delivering what consumers want: a key competitive advantage for SMITHFIELD is our ability to offer a broad portfolio of quality branded products, which spans multiple categories and price points.

Speaker #2: This portfolio strategy allows us to retain consumers within our brands as they trade up and down value spectrums. Additionally, roughly 40% of our Package Meats retail sales are privately, which allows us to capture sales if consumers trade out of brands and into private labels.

Speaker #2: Overall, the combination of branded and private label offerings enables us to forge multi-year strategic partnerships with our customers, supporting volume growth across our portfolio.

Speaker #2: That brings us to product innovation. We focus on introducing new flavors, convenient and easily prepared meals, and package sizes that range from snack sizes to family-value offerings.

Shane Smith: Smithfield Prime Fresh, one of our most important packaged lunch meat brands, we grew Prime Fresh volume by 26% with an 18% increase in point distribution in Q1. Looking ahead, we see continued white space opportunities to grow volume and increase market share in our top 25 categories. As part of our broader growth strategy and in addition to trade promotions, we are increasing investment in television and digital advertising to build awareness and support the long-term growth of our national brands, Smithfield, Eckrich, and Nathan's Famous. We are also growing volume by delivering what consumers want. A key competitive advantage for Smithfield is our ability to offer a broad portfolio of quality branded products that spans multiple categories and price points. This portfolio strategy allows us to retain consumers within our brands as they trade up and down the value spectrum.

Speaker #2: Our new product pipeline for 2026 is robust, with lunches scheduled throughout the year. For example, in the first quarter, product innovation drove 12% year-over-year volume growth in ordered dry sausage, and more than 22% volume growth in curly refrigerated barbecue meats, supported by new snacking formats and globally inspired flavors.

Speaker #2: Our latest introduction in April was a new SMITHFIELD premium pork broilers lineup, featuring three bulk flavors, including a limited-time absolute ribbon beer broth. We look forward to sharing more new product innovations throughout the year.

Shane Smith: We are also growing volume by delivering what consumers want. A key competitive advantage for Smithfield is our ability to offer a broad portfolio of quality branded products that spans multiple categories and price points. This portfolio strategy allows us to retain consumers within our brands as they trade up and down the value spectrum.

Speaker #2: We've talked a lot about retail, the food services also an important channel for Package Meats, representing roughly 30% of sales. During the first quarter, we increased food service channel sales by 4% with volume up 1%.

Speaker #2: Food service customers view us as a skilled, trusted provider of high-quality products that can deliver value-added solutions, saving time and money. Innovation is a key advantage for us in the food service channel, as evidenced by the introduction of 12 new limited-time offers in the first quarter alone.

Shane Smith: Additionally, roughly 40% of our Packaged Meats retail sales are private label, which allows us to capture sales if consumers trade out of brands and into private label. Overall, the combination of branded and private label offerings enables us to forge multiyear strategic partnerships with our customers, supporting volume growth across our portfolio. That brings us to product innovation. We focus on introducing new flavors, convenient and easily prepared meals, and package sizes that range from snack sizes to family value offerings. Our new product pipeline for 2026 is robust, with launches scheduled throughout the year. For example, in Q1, product innovation drove 12% year-over-year volume growth in our dry sausage and more than 22% volume growth in Curly's refrigerated barbecue meats, supported by new snacking formats and globally inspired flavors.

Speaker #2: Even as food away from home inflation remains elevated, our scale, innovation, and value-added solutions are resonating with operators focused on driving traffic and margin.

Speaker #2: Moving to our second quarter growth strategy, growing fresh pork profitability. We are focused on maximizing the net realizable value across channels and continuing to improve operating efficiencies.

Speaker #2: We are executing our strategies to increase fresh pork operating profit in 2026 as follows. Growing volume in retail channel, emphasizing higher margin value-added case study and marinated offerings, expanding adjacent channel opportunities such as pharmaceuticals, pet food, increasing automation and driving plant efficiency yield optimization and supply chain savings, and optimizing harvest levels across our network, all while remaining agile in export markets.

Shane Smith: Our latest introduction in April was a new Smithfield premium pork bratwurst lineup featuring 3 bold flavors, including a limited time Pabst Blue Ribbon beer brat. We look forward to sharing more new product innovations throughout the year. Food service is also an important channel for Packaged Meats, representing roughly 30% of sales. During Q1, we increased food service channel sales by 4% with volume up 1%. Food service customers view us as a scaled, trusted provider of high-quality products that can deliver value-added solutions, saving time and money. Innovation is a key advantage for us in the food service channel, as evidenced by the introduction of 12 new limited time offers in Q1 alone.

Speaker #2: During the first quarter, we grew sales in the retail channel by 3%, with a 6% increase in sales and value-added case study and marinated items.

Speaker #2: We are driving growth in value-added pork through innovation like our February launch of Smithfield Half Point Filets, featuring several bulk flavors, while also delivering convenient package sizes for today's smaller households.

Speaker #2: In April, we launched our new SMITHFIELD meal-ready cuts platform. These sliced marinated premium pork cuts delivered globally in smart flavors in minutes and are perfect for today's consumers who want convenience without compromising taste.

Speaker #2: In short, our new value-added offerings are helping drive mix and margin improvements by meeting the strong demand for nutritious protein at a great value relative to beef, and by expanding pork's relevance across multiple cuisines and use occasions.

Shane Smith: Even as food away from home inflation remains elevated, our scale, innovation, and value-added solutions are resonating with operators focused on driving traffic and margin. Moving to our second core growth strategy, growing Fresh Pork profitability. We are focused on maximizing the net realizable value across channels and continuing to improve operating efficiencies. We are executing our strategies to increase Fresh Pork operating profit in 2026 as follows: growing volume in the retail channel, emphasizing higher margin, value-added, case-ready, and marinated offerings. Expanding adjacent channel opportunities such as pharmaceuticals, pet food. Increasing automation and driving plant efficiency, yield optimization, and supply chain savings, and optimizing harvest levels across our network. All while remaining agile in export markets. During Q1, we grew sales in the retail channel by 3%, with a 6% increase in sales of value-added, case-ready, and marinated items.

Speaker #2: Like our Package Meats INC, our fresh pork segment is also focused on driving growth in the food service channel, and we leverage synergies across these two segments to optimize our go-to-market strategy.

Speaker #2: During the first quarter, we grew fresh pork food service channel sales by 27%. This reflects increased sales and value-added categories as well as strong sales improvements, which are great alternatives to more expensive beef.

Speaker #2: From an adjacent channel standpoint, we are seeing continued interest in the pharmaceutical and pet food channels, and we are capitalizing on that interest. Across our fresh pork segment, our team has been nimble in employing a next-sale strategy, maximizing net realizable value, and seizing the opportunity of the relative value of pork.

Speaker #2: Now, to our strategy to optimize hog production. We continue to progress toward a best-in-class cost structure in hog production and have made great strides.

Speaker #2: During the first quarter of 2026, we delivered improved operating efficiency on our retained farms. That coupled with favorable hog and feed markets helped increase operating profit to $4 million from $1 million a year ago.

Shane Smith: We are driving growth in value-added pork through innovation, like our February launch of filled half loin filets, featuring several bold flavors, while also delivering convenient package size for today's smaller households. In April, we launched our new Smithfield Meal Ready Cuts platform. These sliced, marinated, and premium pork cuts deliver globally inspired flavors in minutes and are perfect for today's consumers who want convenience without compromising taste. In short, our new value-added offerings are helping drive mix and margin improvements by meeting the strong demand for nutritious protein at a great value relative to beef and by expanding pork's relevance across multiple cuisines and usage occasions. Like our Packaged Meats segment, our Fresh Pork segment is also focused on driving growth in the food service channel, and we can leverage synergies across these two segments to optimize our go-to-market strategy.

Speaker #2: Going forward, our team remains dedicated to realizing additional efficiencies. Over the medium term, we continue to progress toward our goal of producing approximately 30% of fresh pork's needs internally.

Speaker #2: This will provide an optimal balance of assured supply and cost-risk management and will continue to improve earnings durability across the sector. Across the whole company, we drive a culture of continuous improvement.

Speaker #2: We have a known stone left unturned approach, eagerly for new ways to improve operating efficiency and reduce costs. We expect efficiency savings to again contribute to an enhanced profitability in 2026.

Shane Smith: In short, our new value-added offerings are helping drive mix and margin improvements by meeting the strong demand for nutritious protein at a great value relative to beef and by expanding pork's relevance across multiple cuisines and usage occasions. Like our Packaged Meats segment, our Fresh Pork segment is also focused on driving growth in the food service channel, and we can leverage synergies across these two segments to optimize our go-to-market strategy.

Speaker #2: In our Package Meats and Fresh Pork processing plants, we see further opportunities to employ automation and food processes to increase yields and drive efficiency.

Speaker #2: For example, we continue to optimize our network by moving dry sausage production from smaller and older East Coast plants to our technologically advanced and efficient facilities such as Nashville.

Shane Smith: During Q1, we grew Fresh Pork food service channel sales by 27%. This reflects increased sales of value-added categories as well as strong sales of ribs, which are a great alternative to more expensive beef. From an adjacent channel standpoint, we are seeing continued interest in the pharmaceutical and pet food channels, and we are capitalizing on that interest. Across our Fresh Pork segment, our team has been nimble, employing a next best sales strategy, maximizing Net Realizable Value, and seizing the opportunity of the aggressive value of pork. Now to our strategy to optimize Hog Production. We continue to progress toward a best-in-class cost structure in Hog Production and have made great strides. During Q1 2026, we delivered improved operating efficiency on our retained farms.

Speaker #2: Our new SMITHFIELD processing plant will be the most modern, efficient, and largest combined fresh pork and Package Meats processing plant in our network. We look forward to sharing more information once we've secured final approvals.

Speaker #2: Across the organization, we are deploying technology to improve efficiency, lower costs, and redeploy talent to higher-value activities. As we continue to invest in improving supply chain operations, it's helping us navigate some of the near-term inflation in transportation costs.

Speaker #2: Finally, we continue to evaluate opportunistic M&A to support our growth strategies. In January, we entered into an agreement to acquire one of our top national Package Meats brands, Nathan's Famous.

Speaker #2: Our anticipated timeline to close the transaction is now the second half of 2026. Due to the impact of the partial government shutdown on statutory deadlines for the CFIA review process, successfully closing the acquisition will secure our rights to the brand for the long term and we are looking forward to maximizing Nathan's Famous brand growth across the retail and food service channels.

Shane Smith: That, coupled with favorable hog and seed markets, helped increase operating profits to $4 million from $1 million a year ago. Going forward, our team remains dedicated to realizing additional efficiencies. Over the medium term, we continue to progress toward our goal of producing approximately 30% of Fresh Pork's needs internally. We believe this will provide an optimal balance of assured supply and cost risk management and will continue to improve earnings durability across the cycle. Across the whole company, we drive a culture of continuous improvement. We have a no-stone-left-unturned approach, for new ways to improve operating efficiency and reduce cost. We expect efficiency savings to again contribute to an enhanced profitability in 2026. In our Packaged Meats and Fresh Pork processing plants, we see further opportunities to employ automation and improve processes to increase yields and drive efficiency.

Speaker #2: We will remain disciplined in evaluating additional complementary and synergistic M&A opportunities to bolster our organic growth. In summary, we deliver record first-quarter results, led by strength in Package Meats and consistent execution across our vertically integrated model.

Speaker #2: By continuing to execute our five core growth strategies, we are successfully navigating a time of consumer and geopolitical environment to drive growth in 2026 and over the long term.

Speaker #2: With that, I'll turn over to Mark to review our financials in more detail. Thank you, Shane, and good morning to everyone joining the call.

Speaker #2: As Shane stated, we're off to a strong start in 2026, building on a record year in 2025, and our strong balance sheet and cash flow give us the flexibility to invest in growth and a competitive dividend, and ultimately create value for our shareholders.

Shane Smith: For example, we continue to optimize our network by moving dry sausage production from smaller and older East Coast plants to our most technologically advanced and efficient facilities, such as Nashville. Our new processing plant will be the most modern, efficient, and largest combined Fresh Pork and Packaged Meats processing plant in our network. We look forward to sharing more information once we have secured final approvals. Across the organization, we are deploying technology to improve efficiency, lower costs, and redeploy talent to higher-value activities. Our continued investment in improving supply chain operations is helping us navigate some of the near-term inflation in transportation costs. Finally, we continue to evaluate opportunistic M&A to support our growth strategies. In January, we entered into an agreement to acquire one of our top national Packaged Meats brands, Nathan's Famous.

Speaker #2: Turning to the details of our first-quarter results, starting with the consolidated results and then a review of our performance by segment. Consolidated sales in the first quarter were $3.8 billion, which was a 1% increase compared to the prior year.

Speaker #2: The increase was primarily driven by higher Package Meats in Mexico sales, driven by strong volume growth, which more than offset $155 million headwind from non-recurring hog production sales to our joint venture partners in the prior year.

Speaker #2: Excluding these one-time sales, consolidated sales increased 5% versus a year ago. We delivered record adjusted operating profit of $339 million, which was up 4% compared to adjusted operating profit of $326 million in the first quarter of 2025.

Speaker #2: Adjusted operating profit margin expanded by 30 basis points to 8.9% from 8.6% last year. First quarter 2026 adjusted net income was also a record, $251 million, up 11% from $227 million in the first quarter of 2025.

Shane Smith: Our anticipated timeline to close the transaction is now in the H2 2026 due to the impact of the partial government shutdown on statutory deadlines for the CFIUS review process. Successfully closing the acquisition will secure our rights to the brand for the long term, we are looking forward to maximizing Nathan's Famous brand growth across the retail and food service channels. We will remain disciplined evaluating additional complementary and synergistic M&A opportunities to bolster our organic . In summary, we delivered record Q1 results led by strength in Packaged Meats and consistent execution across our vertically integrated model. By continuing to execute our five core growth strategies, we are successfully navigating a dynamic consumer and geopolitical environment to drive growth in 2026 and over the long term. With that, I will turn it over to Mark to review our financials in more detail.

Speaker #2: Adjusted diluted EPS of 60% per share increased 10% compared to 58 cents per share in the first quarter of 2025. Next, our first-quarter segment results.

Speaker #2: Our Package Meats segment delivered first-quarter operating profit of $275 million, up $9 million from last year, and operating profit margin of 12.8%. This was down 30 basis points from last year, driven primarily by the earlier Easter this year, which increased the mix of holiday hams as well as higher raw material input costs and continued consumer caution during the quarter.

Shane Smith: In summary, we delivered record Q1 results led by strength in Packaged Meats and consistent execution across our vertically integrated model. By continuing to execute our five core growth strategies, we are successfully navigating a dynamic consumer and geopolitical environment to drive growth in 2026 and over the long term. With that, I will turn it over to Mark to review our financials in more detail.

Speaker #2: First-quarter Package Meats sales of $2.1 billion increased by 6% compared to the first quarter of 2025. Sales were driven by volume growth of 3.5%, reflecting the earlier Easter holiday, combined with a 2.6% increase in average sales price related to higher raw material market prices and disciplined pricing across our brand portfolio.

Mark Hall: Thank you, Shane. Good morning to everyone joining the call. As Shane stated, we're off to a strong start in 2026, building on a record year in 2025, and our strong balance sheet and cash flow give us the financial flexibility to invest in growth, pay a competitive dividend, and ultimately create value for our shareholders. Turning to the details of our Q1 results, starting with the consolidated results and then a review of our performance by segment. Consolidated sales in Q1 were $3.8 billion, which was a 1% increase compared to the prior year.

Speaker #2: Excluding seasonal holiday ham sales, Package Meats grew volume 1.3%, underscoring our ability to win in a challenging consumer spending environment. Turning to fresh pork for the first quarter of 2026, we delivered operating profit of $78 million, an operating profit margin of 3.9%.

Speaker #2: This was down slightly from 82 million and 4% in the first quarter of 2025. In the first quarter, the industry market spread was favorable, up 7% versus the first quarter of 2025, with the CME lean hog price up 0.6% year over year and a 1.1% increase in the USDA cutout.

Mark Hall: The increase was primarily driven by higher Packaged Meats and Mexico sales, driven by strong volume growth, which more than offset a $155 million headwind from non-recurring Hog Production sales to our joint venture partners in the prior year. Excluding these one-time sales, consolidated sales increased 5% versus a year ago. We delivered record adjusted operating profit of $339 million, which was up 4% compared to adjusted operating profit of $226 million in Q1 2025. adjusted operating profit margin expanded by 30 basis points to 8.9% from 8.6% last year. Q1 2026 Adjusted Net Income was also a record, $251 million, up 11% from $227 million in Q1 2025.

Speaker #2: However, this favorable market spread was offset by lower production volume due to temporary winter storm disruptions in our East Coast operations, as well as lower gross margins driven by lower China export volumes year over year.

Speaker #2: We were able to partially offset these headwinds with our next-best sales strategy, including more higher-margin value-added sales in the US retail channel. Fresh pork segment sales of $2 billion decreased 1% year over year.

Speaker #2: This was driven by volume down 2.6% due to the factors I mentioned, which was somewhat offset by an average sales price increase of 1.5%.

Speaker #2: Our average sales price increase was above the increase in the USDA cutout, reflecting the benefits of our next-best sales strategy. Next, in hog production, we're pleased to report $4 million of profit for the first quarter of 2026, up from $1 million in the first quarter of 2025.

Mark Hall: Adjusted diluted EPS of $0.64 per share increased 8% compared to $0.58 per share in Q1 2025. Our Q1 segment results. Our Packaged Meats segment delivered Q1 operating profit of $275 million, up $9 million from last year, and operating profit margin of 12.8%. This was down 30 basis points from last year, driven primarily by the earlier Easter this year, which increased the mix of holiday hams as well as higher raw material input costs and continued consumer caution during the quarter. Q1 packaged meat sales of $2.1 billion increased by 6% compared to Q1 2025.

Speaker #2: This is down sequentially from the fourth quarter of last year, in line with seasonal norms for hog production. Improved hog production segment profitability was driven by improved commodity dynamics, including higher selling prices and lower feed costs, and improved operating efficiency on our retained farms.

Speaker #2: First quarter 2026 hog production segment sales of $769 million decreased by 17% year over year, primarily reflecting the one-time initial sale of inventory to our external joint ventures last year in the amount of $155 million.

Speaker #2: While the average selling price for hogs increased 1%, we saw a 4%, or 125,000 head, decrease in the number of hogs marketed. Taking a look at our other segment, which includes our Mexico and bioscience operations, operating profit of $12 million was down $3 million versus the prior year, due primarily to softer sales and related losses in bioscience that were partially offset by increases in Mexico.

Mark Hall: Sales were driven by volume growth of 3.5%, reflecting the earlier Easter holiday, combined with a 2.6% increase in average sales price related to higher raw material market prices and disciplined pricing across our brand portfolio. Excluding seasonal holiday ham sales, Packaged Meats grew volume 1.3%, underscoring our ability to win in a challenging consumer spending environment. Turning to Fresh Pork. For the Q1 of 2026, we delivered operating profit of $78 million and an operating profit margin of 3.9%. This was down slightly from $82 million and 4% in the Q1 of 2025.

Speaker #2: Our corporate expenses came in $3 million, or 11%, below prior year, reflecting ongoing continuous improvement efforts. And that brings me to our strong balance sheet and transition.

Speaker #2: At the end of the first quarter, our net debt to adjusted EBITDA ratio was 0.4 times, well below our policy of less than two times.

Speaker #2: Our liquidity at quarter end was $2.7 billion, including $1.4 billion in cash and cash equivalents. This is well above our policy threshold of a billion dollars, despite the first quarter historically being a high working capital period.

Mark Hall: In Q1, the industry market spread was favorable, up 7% versus Q1 2025, with the CME lean hog price up 0.6% year over year and a 1.1% increase in the USDA cutout. However, this favorable market spread was offset by lower production volume due to a temporary winter storm disruption in our East Coast operations, as well as lower gross margins driven by lower China export volumes year over year. We were able to partially offset these headwinds with our next best sales strategy, including more higher-margin, value-added sales in the US retail channel. Fresh Pork segment sales of $2 billion decreased 1% year over year.

Speaker #2: Due to seasonality, operating cash flows in the first quarter of 2026 were a net outflow of $65 million, compared to an outflow of $166 million last year.

Speaker #2: For the trailing 12 months, cash flows exceeded $1.1 billion. Capital expenditures in the quarter were $88 million, compared to $79 million in the first quarter of 2025.

Speaker #2: More than 50% of our planned capital investments this year are to fund projects that will drive both top and bottom line growth. This consists primarily of various plant expansions, automation, and improvement projects, as we continue to lower our manufacturing cost structure and better utilize labor.

Mark Hall: This was driven by volume down 2.6% due to the factors I mentioned, which was somewhat offset by an average sales price increase of 1.5%. Our average sales price increase was above the increase in the USDA cutout, reflecting the benefits of our next best sales strategy. Next, in Hog Production, we're pleased to report $4 million of profit for Q1 2026, up from $1 million in Q1 2025. This is down sequentially from Q4 2025, but in line with seasonal norms for Hog Production. Improved Hog Production segment profitability was driven by improved commodity dynamics, including higher selling prices and lower feed costs, and improved operating efficiency on our retained farms.

Speaker #2: On April 21st of this year, we paid a quarterly dividend of $31.25 per share, reinforcing our commitment to return value to shareholders. We expect to pay a $1.25 per share in annual dividends this year, subject to the board's discretion.

Speaker #2: Looking at the remainder of 2026, we feel very good about the momentum we're carrying forward from a record 2025 and a strong start to 2026.

Speaker #2: Our teams are executing with discipline and urgency, and we see clear opportunities to build on that performance as the year progresses. We're reaffirming the guidance we provided on March 24th, balancing our current view of demand and the macroeconomic challenges stemming from the conflict in the Middle East.

Speaker #2: There are clearly many pieces, but our strategies are proven, our team is resilient, and we've demonstrated time and again that we can navigate challenging market conditions.

Mark Hall: Q1 2026 Hog Production segment sales of $769 million decreased by 17% year over year, primarily reflecting the one-time initial sale of inventory to our external joint ventures last year in the amount of $155 million. While the average selling price for hogs increased 1%, we saw a 4% or 125,000 head decrease in the number of hogs marketed. Taking a look at our other segment, which includes our Mexico and Smithfield Bioscience operations, operating profit of $12 million was down $3 million versus the prior year, due primarily to softer sales and related losses in Smithfield Bioscience that were partially offset by increases in Mexico. Our corporate expenses came in $3 million or 11% below the prior year, reflecting ongoing continuous improvement efforts.

Speaker #2: To do that, we'll stay focused on what we can control, which is operational discipline, strong commercial execution, and rigorous cost management. We're proactively managing inflation and volatility across energy, freight, packaging, and other key inputs, and importantly, we have multiple levers we can pull in the near term, including pricing mix, disciplined spending, productivity initiatives, hedging, and contract improvement actions to protect performance and keep us agile.

Speaker #2: Looking beyond the near term, our long-term value creation algorithm remains intact, and our strong balance sheet and liquidity position give us meaningful flexibility. We'll continue prioritizing investments that advance our strategy, and we'll keep returning value to shareholders in line with our capital allocation framework.

Speaker #2: Taken together, we're confident in our ability to navigate uncertainty, protect margins, and deliver profit growth through the remainder of 2026. Now I'll ask the operator to open the call for Q&A.

Mark Hall: That brings me to our strong balance sheet and finance position. At the end of Q1, our net debt to adjusted EBITDA ratio was 0.4 times, well below our policy of less than 2 times. Our liquidity at quarter end was $3.7 billion, including $1.4 billion in cash and cash equivalents. This is well above our policy threshold of $1 billion, despite Q1 historically being a high working capital period. Due to seasonality, operating cash flows in Q1 2026 were a net outflow of -$65 million, compared to an outflow of -$166 million last year. For the trailing 12 months, cash flows exceeded $1.1 billion. Capital expenditures in the quarter were $88 million, compared to $79 million in Q1 2025.

Speaker #2: Operator, thank you. We will now begin the question and answer session. To ask a question, please press star, then one, on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker #2: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our watchdog.

Speaker #2: The first question comes from Peter Galbo, Bank of America. Please go ahead.

Speaker #3: Hey guys, good morning. thanks for, for taking the question. maybe, maybe to, to begin, Mark, I know you don't like to give kind of quarterly guidance, but obviously you, you know, had a had a first quarter, reiterated the guide today.

Mark Hall: 50% of our planned capital investments this year are to fund projects that will drive both top and bottom-line growth. This consists primarily of various plant expansions, automation, and improvement projects as we continue to lower our manufacturing cost structure and better utilize labor. On 21 April of this year, we paid a quarterly dividend of $0.3125 per share, reinforcing our commitment to return value to shareholders. We expect to pay $1.25 per share in annual dividends this year, subject to the board's discretion. Look to the remainder of 2026, we feel very good about the momentum we're carrying forward from a record 2025 and a strong start to 2026. Our teams are executing with discipline and urgency, and we see clear opportunities to build on that performance as the year progresses.

Speaker #3: Maybe just help us a little bit with some of the phasing elements over, over the remainder of the year. anything just to be, mindful of as, as we move into Q2 and, and over the balance of the year.

Speaker #4: Yeah, hey, good morning, Peter, and thanks for the question. As I set it out, you know, we feel very good about the, the momentum that we're carrying forward from, from a record 2025 and, and a strong start to 2026.

Speaker #4: So it's all about execution. and, and really, we see a number of opportunities to build on performance as the as the year progresses. I think specifically at the at the second quarter, you know, the, the macro environment and the consumer remain pressured.

Speaker #4: But we expect to deliver solid second quarter results. If you look at the segments individually, for packaged meats, we're looking for packaged meats to be broadly similar to the first quarter from an underlying performance standpoint.

Mark Hall: We're reaffirming the guidance we provided on 24 March, balancing our current view of demand and the macroeconomic challenges stemming from the conflict in the Middle East. There are clearly moving pieces, but our strategies are proven, our team is resilient, and we've demonstrated time and again that we can navigate challenging market conditions. To do that, we'll stay focused on what we can control, which is operational discipline, strong commercial execution, and rigorous cost management. We're proactively managing inflation and volatility across energy, freight, packaging, and other key inputs. Importantly, we have multiple levers we can pull in the near term, including price and mix, disciplined spending, productivity initiatives, hedging, and contract and procurement actions to protect performance and keep us agile. Looking beyond the near term, our long-term value creation algorithm remains intact, and our strong balance sheet and liquidity position give us meaningful flexibility.

Speaker #4: you know, year over year, I think that the, the comparison is tougher, because of the holiday ham timing benefited the, the first quarter of this year.

Speaker #4: So that pull forward reduces the, the second quarter year over year profit cadence. on, on the cost side, you know, we're seeing higher than expected input inflation versus last year.

Speaker #4: most notably for, for packaged meats and, and beef and turkey. and, and the pressure in, in supply chain costs that, that James talked about.

Mark Hall: We're proactively managing inflation and volatility across energy, freight, packaging, and other key inputs. Importantly, we have multiple levers we can pull in the near term, including price and mix, disciplined spending, productivity initiatives, hedging, and contract and procurement actions to protect performance and keep us agile. Looking beyond the near term, our long-term value creation algorithm remains intact, and our strong balance sheet and liquidity position give us meaningful flexibility.

Speaker #4: So, you know, as, as discussed at the outset, breaking packaging, our areas of focus with, with diesel volatility really pressuring transportation costs and, and, you know, lagging effect in terms of resin-based packaging.

Speaker #4: But we're actively mitigating that through, through pricing mix, you know, productivity and yield gains, and, and really just a part of our, our, our DNA in terms of year over year cost savings.

Speaker #4: So I'd say separately on packaged meats, we're going to continue to invest in brand and, and, and marketing. So year over year, we'll be up in brand marketing.

Mark Hall: We'll continue to prioritize investments that advance our strategy, and we'll keep returning values to shareholders in line with our capital allocation framework. Taken together, we're confident in our ability to navigate uncertainty, protect margins, and deliver profit growth through the remainder of 2026. Now, I'll ask the operator to open the call for Q&A. Operator?

Speaker #4: It's, it's a targeted approach, and it's, it's our why driven. because it really supports our strategy and, and our long-term, share in, in these competitive categories that we're in.

Speaker #4: So, I'd say the packaged meats just continues to be resilient, and, again, reaffirm the outlook for the full year based on the performance that we're seeing. In terms of pork, you know, we continue to see strong execution, although we're managing that volume and market environment.

Operator: Thank you. We will now begin question and answer session. The first question comes from Peter Galbo with Bank of America. Please go ahead.

Speaker #4: But just as a reminder, seasonally, the second quarter are typically softer than the, the first and fourth quarters for fresh pork profitability. But I think even with those dynamics, and, and cost pressures, we still expect fresh pork to be modest year over year.

Speaker #4: And it's, it's really supported by continued strength in our domestic value added business. So it's good performance from, from Donovan and the team. As we start the year and expect that both through, in, in terms of production, you know, seasonally hog production is strongest in the second and third quarters.

Speaker #4: And we're looking for a strong second quarter, driven by favorable market fundamentals. So we're seeing higher hog prices and comparatively moderate grain costs.

Peter Galbo: Hey, guys. Good morning. Thanks for taking the question. Maybe to begin, Mark, I know you don't like to give kinda quarterly guidance. Obviously you know had a nice Q1, reiterated the guide today. Maybe you can just help us a little bit with some of the phasing elements over the remainder of the year. Anything just to be kinda mindful of as we move into Q2 and over the balance of the year.

Speaker #4: But that's also along with the improvements that we've made in our cost structure, on retained farms. So overall, you know, we expect to deliver a solid second quarter and, and full year results.

Speaker #4: And we have leverage we can pull to manage that volatility as the year progresses.

Speaker #3: Thanks so much, Mark. I'll pass.

Mark Hall: Good morning, Peter, thanks for the question. As I said at the outset, you know, we feel very good about the momentum that we're carrying forward from a record 2025 and a strong start to 2026. It's all about execution. And really we see a number of opportunities to build on the performance as the year progresses. Looking specifically at the Q2, you know, the macro environment and the consumer remain pressured. We expect to deliver solid Q2 results. If you look at the segments individually for Packaged Meats, we're looking for Packaged Meats to be broadly similar to the Q1 from an underlying performance standpoint.

Speaker #1: The next question comes from the line of Guy Jordan, Goldman Sachs.

Speaker #5: Thank you. Good morning. just following up on that discussion, seeing if you could comment on the competitive environment you're seeing for packaged meats. You know, how are you thinking about pricing and promotions as we go through the year, given the consumer remains value-focused?

Speaker #5: And I guess at, at the end of the day, how much does being vertically integrated impact your ability to remain competitive within packaged meats as well?

Speaker #6: Hi there. I'll start out by, taking that question. This is, Steve Franz. So first I'll make a few comments as far as, do you want, and then I'll get into, some of the emotional strategy, for the question that you just asked.

Mark Hall: You know, year-over-year, I'd say that the comparison is tougher because of the holiday ham timing benefited the Q1 of this year. That pull forward reduces the Q2 year-over-year profit cadence. On the cost side, you know, we're seeing higher than expected input inflation versus last year. Most notably for Packaged Meats in beef and turkey, and pressure in supply chain costs that Shane's talked about. You know, as we discussed at the outset, freight and packaging are areas of focus with diesel volatility really pressuring transportation costs and, you know, a lagging effect in terms of resin-based packaging.

Speaker #6: But, I think about how we started out, do you want our brands, our certainly performing well, so Q1, our branded business was up 1.6%, versus last year.

Speaker #6: And that's compared to the industry that was actually down 0.2%. So demand has been steady, and it's really coming from consumers who are choosing us because they know the high quality and consistency that's going to, get really every time they buy our product.

Speaker #6: So we're not trying to manufacture volume too heavy promotions. we stay focused on how we, how our business continues to evolve, and we keep moving away from lower value commodity items and putting more emphasis on the value-added product.

Speaker #6: So, things that we continue to talk about—so Prime Cash, Anytime Favorites, Expert Smoked Sausage. So, some of the items that Shane had mentioned in his opening comments.

Mark Hall: We're actively mitigating that through price and mix, you know, productivity and yield gains and really just a part of our DNA in terms of year-over-year cost savings. I'd say separately on Packaged Meats, we're gonna continue to invest in brand and marketing. Year-over-year, we'll be up in brand marketing. It's a targeted approach, and it's ROI driven, because it really supports our value-added strategy and our long-term share in these competitive categories that we're in. I'd say the Packaged Meats just continues to be resilient, and again, reaffirm the outlook for the full year, based on the performance that we're seeing.

Speaker #6: Now, let's shift in and have an overnight, but it's been very consistent and it really continues to show up in our results. When we think about promotional strategies, we're very focused on quality merchandising.

Speaker #6: We're really going after the quality versus unprofitable quantity. so we do see some competitors increasing, produce volume through reduced price points. But that typically is short-lived, and it doesn't support long-term health of a brand.

Speaker #6: So we continue to see improvement with our promoted volume, really sold as feature and display, which is, you know, for us and for most people, it's really the most impactful promotional vehicle.

Speaker #6: So when I look at, some of the performance from Q1, so our quality merchandising will be up 2.3 or, 2.3 points in Q1. And our promoted volume was up 2.5 points.

Speaker #6: So, when I think about the category in total, the one thing that I think is worth mentioning is, on the private label side, from an industry standpoint, we are seeing an increase in private label share, but it's only in certain categories.

Mark Hall: In terms of Fresh Pork, you know, we continue to see strong execution, although we're managing that vol-cost and market environment. Just as a reminder, seasonally, the Q2 and Q3 are typically softer than the Q1 and Q4 for Fresh Pork profitability. I'd say even with those dynamics and cost pressures, we still expect Fresh Pork to be modestly year over year. It's really supported by continued strength in our domestic value-added business. It's good performance from Donovan and the team as we start the year and expect it to pull through. In terms of Hog Production, you know, seasonally Hog Production is strongest in the Q2 and Q3, and we're looking for a strong Q2 driven by favorable market fundamentals.

Speaker #6: as retailers invest in the brands, although I will point out that in Q1, private label volume for the industry declined in 13 categories versus last year.

Speaker #6: So we're starting to see a little bit of a shift when it comes to private label. It's also worth noting that our brand volume is 1.6%, surpassing the industry private label that was actually only up 1%, in Q1.

Speaker #6: I'll also add that our private label business remains very healthy with our volume up over 5% in Q1, and that's in our total business.

Speaker #6: So we know our private label business, will provide us a key competitive advantage. So many of the retailer partners are upscaling their private label offerings, and our participation in both branded and private label really helps us attract consumers that move up and down that, value spectrum.

Mark Hall: We're seeing higher hog prices and comparatively moderate grain costs. That's also along with the improvements that we've made in our cost structure, on paying farms.

Speaker #6: And that's where we can really manage the promotional strategy between working directly with, our retail partners on the private label side of the business while also making sure we get the appropriate, promotions to support our branded side of the business.

Shane Smith: Overall, you know, we expect to deliver a solid Q2 and full year results. We have a number of levers we can pull to manage that volatility as the year progresses.

Mark Hall: Overall, you know, we expect to deliver a solid Q2 and full year results. We have a number of levers we can pull to manage that volatility as the year progresses.

Speaker #6: Once we get strategies working because we saw, share and volume increases, not only on the brand side but also on the private label side of the business in Q1.

Peter Galbo: Great. Thanks so much, Mark. I'll pass it on.

Speaker #1: And, and I think the last question was about vertical integration. Is that correct?

Operator: The next question comes from the line of Leah Jordan with Goldman Sachs.

Speaker #5: Yes. How it overall supports the packaged meats business.

Leah Jordan: Thank you. Good morning. Just following up on that discussion, seeing if you could comment on the competitive environment you're seeing for Packaged Meats. You know, how are you thinking about pricing and promotions as we go through the year, given the consumer remains value-focused? I guess at the end of the day, how much does being vertically integrated impact your ability to remain competitive within Packaged Meats as well?

Speaker #6: Yeah. You know, I can't overemphasize enough the importance of the vertically integrated model now that it's working correctly. And I think you can just look to the past few quarters, where in total, we've recorded record profit after record profit while not one segment within that has been an individual record.

Speaker #6: And I think that shows you that the model is working well. You know, when we think about things that we see in volatile environments, being profit migration across the different segments, what the model provides us is really a consistency and catalytic earnings.

Steven France: Hi, Leah Jordan. I'll start out by taking that question. This is Steven France. First I'll make a few comments as far as Q1, and then I'll get into some of the promotional strategy for the question that you just asked. When I think about how we started out Q1, our brands are certainly performing well. In Q1, our branded business was up 1.6% versus last year. That's compared to the industry that was actually down 0.2%. Demand has been steady, and it's really coming from consumers who are choosing us because they know the high quality and consistency that they're going to get really every time they buy our product. We're not having to manufacture volume through heavy promotions.

Steve France: Hi, Leah Jordan. I'll start out by taking that question. This is Steven France. First I'll make a few comments as far as Q1, and then I'll get into some of the promotional strategy for the question that you just asked. When I think about how we started out Q1, our brands are certainly performing well. In Q1, our branded business was up 1.6% versus last year. That's compared to the industry that was actually down 0.2%. Demand has been steady, and it's really coming from consumers who are choosing us because they know the high quality and consistency that they're going to get really every time they buy our product. We're not having to manufacture volume through heavy promotions.

Speaker #6: Now, I do think we still are a little overweight in hog production. We still have gold to get up to 30%. we're working on now.

Speaker #6: But I think when you look at the hogs that feed into our fresh pork business, and then the fresh pork raw material that is feeding into the packaging business, the way the model is working today, I think you can't overemphasize enough the importance of having all three legs of that stool.

Speaker #5: That was a great color. Thank you.

Steven France: We stayed focused on how our business continues to evolve, and we keep moving away from lower value commodity items and putting more emphasis on the value-added products. Things that we continue to talk about, so Prime Fresh, Anytime Favorites, Eckrich smoked sausage. Some of the items that Shane had mentioned in his opening comments. Now, that shift didn't happen overnight, but it's been very consistent and it really continues to show up in our results. When we think about promotional strategies, we're very focused on the quality merchandising, so we're really going after the quality versus unprofitable quantity. We do see some competitors increasing promoted volume through reduced price points, but that typically is short-lived and it doesn't support the long-term health of a brand.

Steve France: We stayed focused on how our business continues to evolve, and we keep moving away from lower value commodity items and putting more emphasis on the value-added products. Things that we continue to talk about, so Prime Fresh, Anytime Favorites, Eckrich smoked sausage. Some of the items that Shane had mentioned in his opening comments. Now, that shift didn't happen overnight, but it's been very consistent and it really continues to show up in our results. When we think about promotional strategies, we're very focused on the quality merchandising, so we're really going after the quality versus unprofitable quantity. We do see some competitors increasing promoted volume through reduced price points, but that typically is short-lived and it doesn't support the long-term health of a brand.

Speaker #1: The next question comes from Megan Clapp with Morgan Stanley. Please go ahead.

Speaker #7: Hi, good morning. Thanks so much. Maybe continuing on packaged meats and following on some of Mark's commentary, to Peter's question earlier, you know, in terms of if we're looking for similar outlook performance in terms of packaged meats, second quarter, it does look a bit more weight on the second half in terms of the embedded improvement and, and the packaged meats segment outlook.

Speaker #7: And, you know, we'll start to lap some higher raw material costs from last year, which should be helpful on the margin line. But at the same time, some of these newer cost pressures related to the Middle East could, in theory, be building into the second half.

Speaker #7: And it, it does sound like you're confident in managing these costs. But just taking a step back, has anything changed over a month ago as it relates to any of your confidence level, and where packaged meats in particular could fall within the guidance range you outlined?

Steven France: We continue to see improvement with our promoted volume, really sold as feature and display, which is, you know, for us and for most people, it's really the most impactful promotional vehicle. When I look at some of the performance from Q1, our quality merchandising was up 2.3 points in Q1, and our promoted volume was up 2.5 points. When I think about the category in total, the one thing that I think is worth mentioning on the private label side. From the industry standpoint, we are seeing an increase in private label share, but it's only in certain categories, as retailers invest in their brands. Although I will point out that in Q1, private label volume for the industry declined in 13 categories versus last year.

Steve France: We continue to see improvement with our promoted volume, really sold as feature and display, which is, you know, for us and for most people, it's really the most impactful promotional vehicle. When I look at some of the performance from Q1, our quality merchandising was up 2.3 points in Q1, and our promoted volume was up 2.5 points. When I think about the category in total, the one thing that I think is worth mentioning on the private label side. From the industry standpoint, we are seeing an increase in private label share, but it's only in certain categories, as retailers invest in their brands. Although I will point out that in Q1, private label volume for the industry declined in 13 categories versus last year.

Speaker #7: Thanks.

Speaker #6: I, I, I would just I'll, I'll start not I'll kick it over to Steve, a-again. You're, you're spot on in terms of the, the near-term impact.

Speaker #6: And so there's going to be a little bit of lag and a little bit of pressure in the second quarter, and that's why, you know, the guide for the second quarter was what it is.

Speaker #6: But again, I think that the mitigation efforts and the levers that we are able to pull will, you know, turn us back to that growth trajectory that we're looking for in the second half of the year.

Speaker #6: We have strong, strong volume growth, as, as Steve had pointed out. and again, with, with the cost containment plan that we have, we, we feel very good about the second half of the year packaged meats.

Steven France: We're starting to see a little bit of a shift when it comes to private label. It's also worth repeating that our branded volume is up 1.6%, surpassing the industry private label that was actually only up 1% in Q1. I'll also add that our private label business remains very healthy with our volume up over 5% in Q1, and that's in our total business. We know our private label business really provides us a key competitive advantage. Many of our retailer partners are upscaling their private label offerings, and our participation in both branded and private label really helps us attract new consumers as they move up and down that value spectrum.

Steve France: We're starting to see a little bit of a shift when it comes to private label. It's also worth repeating that our branded volume is up 1.6%, surpassing the industry private label that was actually only up 1% in Q1. I'll also add that our private label business remains very healthy with our volume up over 5% in Q1, and that's in our total business. We know our private label business really provides us a key competitive advantage. Many of our retailer partners are upscaling their private label offerings, and our participation in both branded and private label really helps us attract new consumers as they move up and down that value spectrum.

Speaker #3: Megan and Steve, I'll add on a little bit of what, Mark said. So I'll start off by saying really at a high level, nothing has changed as far as how we feel about the long-term, outlook of our packaged meat business.

Speaker #3: Now, in the near term, as already, kind of talked through, the environment feels somewhat challenging from a consumer standpoint. So we're seeing households are being certainly cautious with spending, and we continue to see value-seeking, behavior really across the industry.

Speaker #3: And also the food service general. So on the cost side, we do expect some, really, improvement versus last term raw material that we've mentioned before.

Speaker #3: But we're not assuming returns that historically have been lost. Now, in Q1, raw material costs were higher than last year by 94 million, which was certainly a significant increase.

Steven France: That's where we can really manage the promotional strategy between working directly with our retail partners on the private label side of the business, while also making sure we get the appropriate promotions to support our branded side of the business. I would say that strategy is working because we saw share and volume increases not only on the brand side, but also on the private label side of the business in Q1.

Steve France: That's where we can really manage the promotional strategy between working directly with our retail partners on the private label side of the business, while also making sure we get the appropriate promotions to support our branded side of the business. I would say that strategy is working because we saw share and volume increases not only on the brand side, but also on the private label side of the business in Q1.

Speaker #3: So, while we're now starting to move in the right direction on some of the raw material costs, the backdrop has been challenging, especially in the beef and also turkey categories Mark had mentioned.

Speaker #3: Our brands certainly had a solid performance in Q1, growing our volume and also share. And it's really important to continue driving this growth and to support some of the exciting new items that you're going to see on resource shelves and also the partners we have with some of our food service operators. While we do plan on increasing our AMP spend.

Shane Smith: Leah, I think your last question was about vertical integration. Is that correct?

Leah Jordan: Yes, how it overall supports the Packaged Meats business.

Speaker #3: And in Q1, that spend was up 23% year over year. And from a cost standpoint, we're noting, the recent CPI data showed a meaningful move in energy which certainly matters for us as Mark had talked about because of the large impact on diesel and also the resin for packaging.

Shane Smith: Yeah. You know, I can't overemphasize enough the importance of the vertically integrated model now that it's working correctly. I think you can just look to the past few quarters where in total, we've recorded record profit after record profit, while not one segment within that has been a, an individual record. I think that shows you that the model is working well. You know, when we think about things that we see in volatile environments being profit migration across the different segments, what the model provides us is really a consistency in cash flows and earnings. Now, I do think we still are a little overweight in Hog Production. We still have a goal to get down to 30%, that we're working on now.

Speaker #3: Certainly a big impact on, the packaged meats business. Now, with all that said, I would say given that backdrop and geopolitical uncertainty, we are running the business with appropriate levels of, conservatism from packaging and also distribution costs.

Speaker #3: But despite those influences, we feel good about how we're positioned. Our portfolio has shrunk, with the brands that we have and also the categories that we participate in.

Speaker #3: And we also have a meaningful private label business. And we believe that that really gives us the ability to serve, not only our customers but consumers across all price points.

Speaker #3: And that flexibility certainly matters in an environment like we're in today as shoppers move up and down that value spectrum. we're also able to really keep them within our portfolio.

Shane Smith: I think when you look at the hogs that feed into our Fresh Pork business and then the Fresh Pork raw material that is feeding into the Packaged Meats business, the way the model is working today, I don't think you can overemphasize enough the importance of having all three legs of that stool.

Speaker #3: Now, taking all that into consideration, as Mark had talked about, when you take into account the shift of Easter, from where it fell last year in Q2 to Q1, we really look to have, Q2 and Q1 look very similar.

Speaker #3: From a, from an overall profit standpoint. And based on a lot of the things that Mark talked about as far as cost mitigation and some of the levers that we have at our disposal, at this point, we're maintaining, the, the call that we have for the outlook for the rest of the year, the 1.1 to 1.2 billion.

Leah Jordan: That was a great color. Thank you.

Operator: The next question comes from Megan Clapp with Morgan Stanley. Please go ahead.

Speaker #7: Okay. That's super helpful. Thanks for all the color. And if I could just follow up more explicitly on transportation, you talked about term inflation, transportation costs.

Megan Clapp: Hi, good morning. Thanks so much. Maybe continuing on Packaged Meats and following up on some of Mark's commentary to Peter's question earlier. You know, in terms of if we're looking for a similar outlook performance in terms of Packaged Meats Q2, a bit more weight on the H2 in terms of the embedded cost improvement and the Packaged Meats segment outlook. You know, understand we'll start to lap some higher raw material costs from last year, which should be helpful on the margin line. At the same time, some of these newer cost pressures related to the Middle East could in theory be building into the H2. It does sound like you're confident in managing these costs.

Speaker #7: Steve, you just mentioned, you know, diesel and freight in particular. You know, our understanding was that you did own some of your own fleet.

Speaker #7: So could you just give us a little bit more color just in terms of your exposure, direct exposure to diesel, and then your freight and, you know, how, how the contracts work and just in the context of obviously this is an ongoing and dynamic situation.

Speaker #7: So, you know, any color just as you kind of think about the next couple of months as, as things progress and what we should be watching.

Speaker #7: And how that can impact your cost would be helpful. Thanks.

Speaker #6: Yeah, Megan, this is Shane. I'll talk to that for a minute. So y-you're right. You know, diesel costs are the biggest near-term impact for us.

Megan Clapp: Just taking a step back, has anything changed versus a month ago as it relates to kind of your confidence level and where Packaged Meats in particular could fall within the guidance range you outlined? Thanks.

Speaker #6: And we do use a variety of methods from, you know, percentages. Our own company fleet, we use, outside fleet dedicated fleet. We also have been, working on NMO as well.

Speaker #6: now, one thing I would tell you as we think about the impact this year is we actually started, transportation network optimization. Actually, back in 2024.

Mark Hall: I would just follow. I'll start, and I'll kick it over to Steve. Again, you're spot on in terms of the near-term impacts. There's gonna be a little bit of a lag and a little bit of pressure in the Q2, and that's why, you know, the guide for the Q2 was what it is. Again, I think that the mitigation efforts and the levers that we are able to pull, will, you know, turn us back to that growth trajectory that we're looking for in the H2 of the year. We have strong volume growth, as Steve had pointed out.

Speaker #6: and so when you look at the miles we drive, we took about a million miles all the way between 25 versus 24. And we also plan and have on a site to a million miles that we'll take off the road in 26 compared to 25.

Speaker #6: Now, that wasn't a reactionary. it goes really to one of Mark's earlier points. You know, optimization across all of our network really embedded in our DNA.

Speaker #6: So these were things that we were already, working on prior to, to say. But again, we've done lane consolidation, adding NMO. We still look at hedging opportunities for diesel where we can, drive in fewer miles.

Mark Hall: And again, with the cost containment plans that we have, we feel very good about the H2 of the year for Packaged Meats.

Steven France: Megan Clapp, this is Steve. I'll add on a little bit to what Mark Hall is saying. I'll start out by saying really at a high level, nothing has changed as far as how we feel about the long-term outlook of our packaged business. Now, in the near term, as Mark Hall already kind of talked through, the environment is still somewhat challenging from a consumer standpoint. We are seeing households are being certainly cautious with their spending, and we continue to see value-seeking behavior really across the country and also the food service channel. On the cost side, we do expect some really improvement versus last year on raw materials, as we mentioned before, but we're not assuming a return to historical norms.

Steve France: Megan Clapp, this is Steve. I'll add on a little bit to what Mark Hall is saying. I'll start out by saying really at a high level, nothing has changed as far as how we feel about the long-term outlook of our packaged business. Now, in the near term, as Mark Hall already kind of talked through, the environment is still somewhat challenging from a consumer standpoint. We are seeing households are being certainly cautious with their spending, and we continue to see value-seeking behavior really across the country and also the food service channel. On the cost side, we do expect some really improvement versus last year on raw materials, as we mentioned before, but we're not assuming a return to historical norms.

Speaker #6: And then you couple that with the ability to increase volumes and decrease costs. We feel like we're going to be in a good position as we go through the remainder of this year, or in a relatively good position as we go through the remainder of the year.

Speaker #6: And again, that's the medium-term impacts. When you look at, or the long-term impacts, medium-term, and Mark talked to this is really on, things like our resin-based packaging where we have procurement strategies.

Speaker #6: value engineering processes taking place right now. And then in the longer term, it's going to come down to, corn and agricultural inputs and how that hits our operation operations.

Speaker #6: Later in the year—which, as you know and we've talked about on earlier calls—we have hedging strategies in place surrounding those input costs as well.

Steven France: Now, in Q1, raw material costs were higher than last year by $94 million, which was certainly a significant increase. While we're now starting to move in the right direction on some of the raw material costs, the backdrop remains challenging, especially in the beef and also turkey categories that Mark had mentioned. Our brands certainly had a solid performance in Q1, growing our volume and also share. Really, we plan to continue driving this growth and to support some of the exciting new items that you're gonna see on retailer shelves and also the partnerships we have with some of our food service operators. We do plan on increasing our AMP spend. In Q1, that spend was up 23% year-over-year.

Steve France: Now, in Q1, raw material costs were higher than last year by $94 million, which was certainly a significant increase. While we're now starting to move in the right direction on some of the raw material costs, the backdrop remains challenging, especially in the beef and also turkey categories that Mark had mentioned. Our brands certainly had a solid performance in Q1, growing our volume and also share. Really, we plan to continue driving this growth and to support some of the exciting new items that you're gonna see on retailer shelves and also the partnerships we have with some of our food service operators. We do plan on increasing our AMP spend. In Q1, that spend was up 23% year-over-year.

Speaker #6: So all of those things combined, you know, we, we've taken a really hard look at guidance that we've given and, we really feel confident in our ability to, to execute against this year.

Speaker #7: Great. Thank you.

Speaker #6: Thank you. The next question comes to the line of Ben Dürer.

Speaker #8: Good morning. And to my question—Shane, Mark, following up on just the last comment, a little bit on the outlook: grain costs and as it kind of, like, flows through, is going to flow through hog production, etc.

Speaker #8: But also the need to potentially invest more in working capital. So, we've seen a better improvement with last year in terms of investments in working capital.

Steven France: From a cost standpoint, it's worth noting, obviously, the recent CPI data showed a meaningful move in energy, which certainly matters for us, as Mark had talked about, because of large impact on diesel and also the resins for packaging, certainly a big impact on the Packaged Meats business. With all that said, I would say given that backdrop and the geopolitical uncertainty, we are planning the business with an appropriate level of conservatism around packaging and also distribution costs. Despite those headwinds, we feel good about how we're positioned. Our portfolio is strong with the brands that we have and also the categories that we participate in, and we also have a meaningful private label business. We believe that that really gives us the ability to serve not only our customers, but our consumers across all price points.

Steve France: From a cost standpoint, it's worth noting, obviously, the recent CPI data showed a meaningful move in energy, which certainly matters for us, as Mark had talked about, because of large impact on diesel and also the resins for packaging, certainly a big impact on the Packaged Meats business. With all that said, I would say given that backdrop and the geopolitical uncertainty, we are planning the business with an appropriate level of conservatism around packaging and also distribution costs. Despite those headwinds, we feel good about how we're positioned. Our portfolio is strong with the brands that we have and also the categories that we participate in, and we also have a meaningful private label business. We believe that that really gives us the ability to serve not only our customers, but our consumers across all price points.

Speaker #8: So I just want to understand within your, your heading strategies and, and a little bit of that uptick on the feed cost, how we should think of, of A, that managing that cost, and then B, what it potentially does, to your cash from operations system and, what it might do to working capital.

Speaker #6: Yeah. There, you know, you can look at the future strip and see how both corn and soybean are moving throughout the year. You can see that daily change.

Speaker #6: for us, and as you know, we've talked about this before, some of the initiatives we've taken around feed and grain procurement in hog production from using alternative ingredients, bakery byproducts, look at ways that we can use grain elevators across the country to get grain here to, really or get grain to our hog production operations and really affordable, feed.

Steven France: That flexibility certainly matters in an environment like we're in today. As shoppers move up and down that value spectrum, we're often able to really keep them within our portfolio. Now, taking all that into consideration, as Mark had talked about, when you take into account the shift of Easter, from where it fell last year in Q2 to Q1, we really look to have Q2 and Q1 look very similar from an overall profit standpoint. Based on a lot of the things that Mark had talked about as far as cost mitigations and some of the levers that we have at our disposal, at this point, we're maintaining the call that we have for the outlook for the rest of the year, the $1.1 billion to $1.2 billion.

Steve France: That flexibility certainly matters in an environment like we're in today. As shoppers move up and down that value spectrum, we're often able to really keep them within our portfolio. Now, taking all that into consideration, as Mark had talked about, when you take into account the shift of Easter, from where it fell last year in Q2 to Q1, we really look to have Q2 and Q1 look very similar from an overall profit standpoint. Based on a lot of the things that Mark had talked about as far as cost mitigations and some of the levers that we have at our disposal, at this point, we're maintaining the call that we have for the outlook for the rest of the year, the $1.1 billion to $1.2 billion.

Speaker #6: But it also goes back to the overall hog production optimization we've done. So removing those inefficient farms, removing those underperforming geographies, and really making sure that the KPIs we have out of our hog farms and things like livability and PMSY are really at levels that can help us absorb some of these changes as we become through.

Speaker #6: And again, you put all those things together, Ben, and really, again, those to our ability to look at a guidance that we've given in hog production for the year, and feel good about that guidance.

Speaker #3: I would just add from, from a cash flow perspective, you know, 2025 cash flow is exceeding a billion dollars. It was the second highest in our history.

Speaker #3: And it would have been by far the highest, excluding the repayment of our $230 million AR securitization—or, excuse me, monetization. You know, and the business continues to have strong cash flow generation.

Megan Clapp: Okay. That's super helpful. Thanks for all the color. If I could just follow up more explicitly on transportation. You talked about near-term inflation, transportation costs. Steven, you just mentioned, you know, diesel and freight in particular. You know, our understanding was that you did own some of your own fleet. Could you just give us a little bit more color just in terms of your exposure, direct exposure to diesel and then your freight and, you know, how the contracts work? Just in the context of obviously this is an ongoing and dynamic situation. You know, any color just as we kinda think about the next couple of months as things progress and what we should be watching and how that could impact your costs would be helpful. Thanks.

Speaker #3: And it's really attributable to the changes that we've made in the business, and the reform in the hog production side of the business, and the stability of our cash flow from packaged meats.

Speaker #3: You know, the first quarter is seemingly a cash outflow period for us, and the first quarter of '26 outflows are about $65 million. That was down from an outflow of $166 million in the prior year.

Speaker #3: And that primarily reflects the earlier Easter this year. But again, as far as cash flow generation, we feel very good about where we're at.

Speaker #3: Even with the potential run-up of, of grain costs later in the year.

Shane Smith: Yeah, Megan, this is Shane. I'll talk to that for a minute. You're right. You know, diesel cost is the biggest near-term impact for us, and we do use a variety of methods from, you know, percentages, our own company fleet. We use outside fleet, dedicated fleet, but we also have been working on intermodal as well. Now one thing I would tell you as we think about the impact this year is we actually started a transportation network optimization actually back in 2024. When you look at the miles we drive, we took about 1 million miles off the road between 2025 versus 2024. We also plan and have line of sight to another 1 million miles that we'll take off the road in 2026 compared to 2025. Now, that wasn't reactionary.

Speaker #8: Perfect. Thank you very much. I'll pass it on.

Speaker #2: The next question comes from the line of Heather Jones with Heather Jones Research. Please go ahead.

Speaker #9: Good morning. Thanks for the question. Related to the packaged meat raw material outlook, raw material cost outlook, I'm just wondering—just wanted to talk about your level related to those being lower year-on-year on the pork side.

Speaker #9: And I'm asking because there's been a lot of reports of disease in the meat, but also some underlying expansion. So just wondering how much visibility you have, and if your confidence level as to the magnitude of your relief has changed any since a month or so ago.

Speaker #9: When you were at Q4.

Shane Smith: It goes really to one of Mark's earlier points. You know, optimization across all of our network really embedded in our DNA. These were things that we were already working on prior to be here today. Again, we've done lane consolidation, adding intermodal. We still look at hedging opportunities for diesel where we can. Driving fuel miles. Then you couple that with the ability to increase volumes and decrease costs, we feel like we're gonna be in a good position as we go through the remainder of this year or in a relatively good position as we go through the remainder of the year. Again, that's the medium-term impacts.

Speaker #6: Yeah. Thanks for the question, Heather. So I would say for packaging cost side, you know, the, the biggest concern that we have is really not on, the pork side of the business.

Speaker #6: So it's easier for us to manage that. We have, good visibility of where we're heading on the pork side. But when you look at, you know, the beef side of the market and also poultry, that makes up a sizable piece of our business packaged meats when you consider some of the products that we make that do have beef when you think about Nathan's hot dogs or a beef smoked sausage.

Speaker #6: And the same on the poultry side when you think about some of the lunch meat we have, and also the growth that we've seen in some of our lunch meats like Lime Fresh.

Speaker #6: So we're doing certain things on those areas to, be able to mitigate some of those, costs. as far as, locking into certain contracts or partnering with certain suppliers, but on a, the pork side, I'll probably pass it over to Shane and he can, he can address that.

Shane Smith: You know, the long-term impacts, the medium-term, and Mark will talk to this, is really on things like our resin-based packaging, where we have procurement strategies, value engineering processes taking place right now. Then in the longer term, it's gonna come down to corn and agricultural inputs and how that hits our hog operations later in the year. Which, as you know, and we've talked about on earlier calls, we have hedging strategies in place surrounding those input costs as well. All those things combined, you know, we've taken a really hard look at the guidance that we've given and we really feel confident in our ability to execute against that this year.

Speaker #5: Yeah, Heather. So you mentioned disease. You know, we're, we're doing the same things you are, with higher disease incidence rate across the industry. You know, the biggest piece of external information that we can look at is the reports that come out of the University of Minnesota.

Speaker #5: those most recent reports showed a higher incident rate of both PERS and PEDV. you know, but when you contrast that with what the USDA has put out, I think they were calling for production up about 1.4% for 2026.

Speaker #5: But it is down from about 2.5% in their previous report. So, again, it's hard at this time of the year to have really clear visibility into what's out there.

Megan Clapp: Great. Thank you.

Operator: Thank you. The next question comes from the line of Benjamin Theurer with Barclays.

Speaker #5: but we are hearing and seeing some of the same, same things that you're referring to.

Benjamin Theurer: Good morning, thanks for taking my question, Shane Smith, Mark Hall. Following up on just the last comment, a little bit on the outlook, grain cost as it flow through. Is it going to flow through Hog Production, et cetera, but also the need to potentially invest more in working capital? We've seen a better improvement versus last year in terms of investments in working capital. Just wanna understand within your hedging strategies and a little bit of that uptick on the feed cost, how we should think of, A, that managing that cost, and then B, what it potentially does to your cash from operations, just given what it might do to working capital.

Ben Theurer: Good morning, thanks for taking my question, Shane Smith, Mark Hall. Following up on just the last comment, a little bit on the outlook, grain cost as it flow through. Is it going to flow through Hog Production, et cetera, but also the need to potentially invest more in working capital? We've seen a better improvement versus last year in terms of investments in working capital. Just wanna understand within your hedging strategies and a little bit of that uptick on the feed cost, how we should think of, A, that managing that cost, and then B, what it potentially does to your cash from operations, just given what it might do to working capital.

Speaker #9: Okay. Thank you for that. And then on my follow-up, let's just so wanted to talk about the opportunity for the US with the ASF outbreak in Spain and so far we haven't seen really that big pickup in or I haven't seen a pickup in US exports that seems to have benefited from that.

Speaker #9: And I know there's been a big increase in exports out of Brazil. I don't know if most of that increase is going there. Just how are y'all thinking about that and the outlook for the rest of the year and any help the US could get from that?

Speaker #6: Yeah. Thanks, Heather. This is Donovan. you're right. It, there has been construction with the ASF, aspect coming out of Europe. But, it has been largely thus far a, you know, a non-event in terms of, seeing success and, on domestic US pork anyway.

Shane Smith: Yeah, Ben, you know, you can look at the future strip and see how both corn and soybean meal are moving throughout the year. You can see that daily change. For us, and as you know, we've talked about this before, some of the initiatives we've taken around feed and grain procurement in Hog Production from using alternative ingredients, bakery by-products, looking at ways that we can use grain elevators across the country to get grain to our Hog Production operations at a really affordable rate. It also goes back to the overall Hog Production optimization we've done.

Speaker #6: So I do agree. I think Brazil is playing in that market quite somewhat. And, and, and able to fill in the need there. But, also, there's also, you know, I would say, other areas that are, that are seeing some, some, expected, pickups in, in pork, capacity supply that are able to fill in the need in primarily Asia.

Speaker #6: So, right now, I would agree with your comments. I mean, it's not really impactful for the US pork market at this point.

Shane Smith: Removing those inefficient farms, removing those underperforming geographies, and really making sure that the KPIs we have coming out of our hog farms and things like livability and PMSY are really at levels that can help us absorb some of these changes as feed coming through. Again, you put all those things together, Ben, and it really, again, goes to our ability to look at the guidance that we've given in Hog Production for the year, and feel good about that guidance.

Speaker #9: Okay. Thank you so much.

Speaker #2: The next question comes from the line of Max Campo with BNP Paribas. Please go ahead.

Speaker #3: Thanks for the question. I was hoping with, with rising inflation, if you could discuss your view on consumer sentiment in the, in the US and then how that fits into your outlook for the year and if you've factored in any changes from what you were even just expecting a bit over a month ago for the, the remainder of the year.

Mark Hall: I would just add from a cash flow perspective, you know, 2025 cash flows exceeded $1 billion. It was the second highest in our history, and it would have been by far the highest, excluding the repayment of our $230 million AR securitization or, excuse me, monetization. You know, and the business continues to have strong cash flow generation, and it's really attributable to the changes that we've made in our business and the reform in the Hog Production side of the business and the stability of our cash flow from Packaged Meats. You know, Q1 is seasonally a cash outflow period for us. The Q1 of 2026 outflows were about $65 million.

Speaker #3: Thanks so much.

Speaker #8: Hey, Max. It's Mark. Thanks for the question. Yes, from a consumer standpoint, you know, protein remains a core part of the basket.

Speaker #8: And we manage as well our portfolio to offer value across price points. So, I mentioned our brand and marketing investments. They're really targeted in an ROI-driven way.

Speaker #8: So it's, it's about supporting loyalty and mix in our value-added strategy. I'll continue to be a strong value proposition across the protein space. So at, at this point, we're not seeing, a change that would require a material reset of our demand assumptions.

Mark Hall: That was down from an outflow of $166 million in the prior year. That primarily reflects the earlier Easter this year. Again, as far as cash flow generation, we feel very good about where we're at, even with a potential run-up of grain costs late in the year.

Speaker #8: But we obviously continue to watch that consumer behavior closely, again, our, our portfolio is built to serve consumers across the tiers. You know, we have answers whether it's a mainstream staple, all the way up to premium offerings.

Speaker #8: So, we can adjust our mix as households trade within categories. So, you know, I think based on prior geopolitical disruption and driving inflation, you know, it's about the duration of it and the breadth of any supply chain impact that's going to continue to drive inflation up.

Benjamin Theurer: Perfect. Thank you very much. I'll pass it on.

Ben Theurer: Perfect. Thank you very much. I'll pass it on.

Operator: The next question comes from the line of Heather Jones with Heather Jones Research. Please go ahead.

Heather Jones: Morning. Thanks for the question. Related to the Packaged Meats raw material outlook, raw material cost outlook, I was just wondering, just wanted to talk about your confidence level related to those being lower year on year on the pork side. I'm asking because there's been a lot of reports of disease in the industry, but also some underlying expansion. Just wondering how much visibility you have and if your confidence level as to the magnitude of year on year relief has changed any since say a month or so ago when you reported Q4.

Speaker #8: And that, that matters more than the short-term spot. So, you know, we're planning for volatility and staying agile.

Speaker #3: Great. And then just as a follow-up, there's a lot of, you know, various forms of inflation—whether it's beef, turkey, whether it's your freight, freight costs, or diesel, resin, packaging.

Speaker #3: But you gave plenty of color on. I just wanted to make sure it are the messaging that you— you are going to see these higher costs in ’26, your outlook for cost inflation in ’26 has gone up, but you’re able to reaffirm guide because you’re also leveraging one of these mediums that you’ve talked about as well.

Speaker #3: I'm just trying to get more clarity on if your, your outlook for cost inflation for '26 has, has gone up over the last, month or so since you reported for you.

Steven France: Yeah. Thank you for the question, Heather. I would say for Packaged Meats on the cost side, you know, the biggest concern that we have is really not on the pork side business, so it's easier for us to manage that. We have good visibility of where we're heading on the pork side. When you look at, you know, the beef side of the market and also poultry, I mean, that makes up a sizable piece of our business on Packaged Meats when you consider some of the products that we make that do have beef, when you think about Nathan's Famous hot dogs or beef smoked sausage. Same on the poultry side, when you think about some of the lunch meats we have and also the growth that we've seen in some of our lunch meats like Smithfield Prime Fresh.

Steve France: Yeah. Thank you for the question, Heather. I would say for Packaged Meats on the cost side, you know, the biggest concern that we have is really not on the pork side business, so it's easier for us to manage that. We have good visibility of where we're heading on the pork side. When you look at, you know, the beef side of the market and also poultry, I mean, that makes up a sizable piece of our business on Packaged Meats when you consider some of the products that we make that do have beef, when you think about Nathan's Famous hot dogs or beef smoked sausage.

Speaker #3: Thanks very much.

Speaker #6: Yeah, as we discussed at the outset, we have a number of numbers that we can pull. So, operationally, we're managing the exposure in the same way we do in any volatile input environment.

Speaker #6: It's about disciplined pricing and mix, you know, hedging where appropriate, as Shane mentioned. It's about procurement timing and contract management, and really our ongoing productivity and cost savings initiatives to help mitigate the impact of inflation.

Steve France: Same on the poultry side, when you think about some of the lunch meats we have and also the growth that we've seen in some of our lunch meats like Smithfield Prime Fresh. We're doing certain things on those areas to be able to mitigate some of those costs as far as locking into certain contracts or partnering with certain suppliers. On the pork side, I'll probably pass that over to Shane, and he can address that.

Speaker #6: So, I’d say, you know, net-net, the situation has near-term input and logistics cost uncertainty. But it doesn’t change how we run the business.

Steven France: We're doing certain things on those areas to be able to mitigate some of those costs as far as locking into certain contracts or partnering with certain suppliers. On the pork side, I'll probably pass that over to Shane, and he can address that.

Speaker #6: And, and again, we have multiple levers to mitigate the impact. you know, in the meantime, our focus remains on execution. it's about service to our customers, cost discipline, and, and delivering against our commitments.

Speaker #6: So again, we feel good about where we're at with those mitigation strategies and our outlook for the year.

Shane Smith: Yeah, Heather. You mentioned disease. You know, we're hearing the same things you are, of higher disease incidence rate across the industry. You know, the external information that we can look at is the reports that come out of the University of Minnesota. Those most recent reports showed a higher incident rate of both PRRS and PEDV. You know, when you contrast that with what the USDA has put out, I think they were calling pork production up about 1.4% for 2026. It is down from about 2.5% in their previous report. It's, again, it's hard this time of year to have really clear visibility into what's out there. We are hearing and seeing some of the same things that you're referring to.

Speaker #3: Okay. Thanks very much.

Speaker #2: The next question comes from the line of Somyajin with UPS. Please go ahead.

Speaker #10: Hey, good morning. Thanks for squeezing me in. So, how sustainable is the current outperformance in packaged meats versus fresh pork? Are you seeing more structural share gains or cyclical trade-down behavior?

Speaker #6: Well, is your question about do we see trade-down between packaged meats and fresh pork?

Speaker #10: Yes.

Speaker #8: This is Steve. I'll start, and then I'll pass it over to Donovan. But I would say, until we don't see a trade-down at all, typically, different consumers and, you know, somebody's going to buy fresh, you know, pork.

Heather Jones: Okay. Thank you for that. Then on my follow-up. Wanted to talk about the opportunity for the US with the ASF outbreak in Spain. So far we haven't seen really that big a pickup in or I haven't seen a pickup in US exports that would seem to have benefited from that. I know there's been a big increase in exports out of Brazil. I don't know if most of that increase is going there. Just how are y'all thinking about that and the outlook for the rest of the year and any help the US might get from that?

Speaker #8: They're going to buy fresh pork or they're going to buy packaged. They're going to buy packaged. So, you know, a lot of consumers buy both.

Speaker #8: But they're not typically going to trade down from, you know, a fr buying a fresh item and then buying, you know, certainly a packaged item.

Speaker #8: So we don't see a lot of trade-down. But as far as growth that we're seeing, I would say that's state growth. So when you think about, you know, the overall performance that we saw in Q1, there's a sell performance from a branded standpoint, but also we look at the private label business.

Speaker #8: We have also grew private legal business, which both of those outperformed the rest of the industry. So you know, the, the good thing is, and Donovan can talk a little bit about this, but you know, the strength that we see on package, there's a lot of collaboration between what we do on the package side of the business and also the fresh side of the business.

Donovan Owens: Yeah. Thanks, Heather Jones. This is Donovan Owens. You're right. There has been disruption with the ASF aspect coming out of Europe. It has been largely thus far an, you know, a non-event in terms of seeing excess demand on domestic US pork anyway. I do agree. I think Brazil is playing in that market quite somewhat and able to fill in the need there. There's also, you know, I would say, other areas that are seeing some expected pickups in pork, some capacity and supply that are able to fill the need in primarily Asia. Right now, I would agree with your comments. I mean, it's not really impactful for the US pork market at this point.

Speaker #8: So when you look at some categories on fresh, think marinated is a great example where we participate in those sales calls, working together to promote those items.

Speaker #8: So a great example would be for, we do a family ad of packaged items. We're going to incorporate some of those more value-added profitable fresh items, some of the marinated strips that are on the marketplace or marinated pork.

Speaker #8: That's going to be incorporated in that same ad. So when you think about the strength and success we've had on packaged meats, fresh pork is participating in that with a lot of the growth that we're seeing on some of the value-added products.

Speaker #8: And I'll pass it over.

Speaker #3: Yeah. Thanks, Steve. and, and appreciate the question. But, Steve, the 100% right as, as our focus and our most important piece of the, the fresh pork strategy is to continue to grow our value-added footprint within our domestic retail chain.

Heather Jones: Okay, thank you so much.

Speaker #3: And we're leveraging that strong brand recognition and presence of our packaged meats portfolio, that Steve just mentioned, to grow the share in our marinated and case-ready pork product lines.

Operator: The next question comes from the line of Mark Sampath with BNP Paribas. Please go ahead.

Speaker #3: So just a few stats and Steve that mentioned, he talked about marinated there. In Q1, our marinated pork volume was up 3.2% while the industry was down 3.8%.

Mark Sampath: Hey, thanks for the question. I was hoping with rising inflation, if you could discuss your view on consumer sentiment in the US and then how that fits into your outlook for the year and if you've factored any changes from what you were even just expecting a bit over a month ago for the remainder of the year? Thanks very much.

Max Gumport: Hey, thanks for the question. I was hoping with rising inflation, if you could discuss your view on consumer sentiment in the US and then how that fits into your outlook for the year and if you've factored any changes from what you were even just expecting a bit over a month ago for the remainder of the year? Thanks very much.

Speaker #3: And our case-ready pork volume was up in the high single digits. increase year over year in Q1. And last but not least, Shane mentioned in his opening about the, success of our food service growth of 27%.

Mark Hall: Hey, Mark, it's Mark. Thanks for the question. Yes. From a consumer standpoint, you know, protein remains a core part of the basket, and we manage, as you know, our portfolio to offer value across price points. I mentioned our brand and market investments. They're really targeted and ROI-driven. It's about supporting loyalty and mix and our value-added strategy, while pork continues to be a strong value proposition across the protein space. At this point, we're not seeing a change that would require a material reset of our demand assumptions, but we obviously continue to watch that consumer behavior closely. Again, our portfolio is built to serve consumers across the tiers. You know, we have answers, whether it's a mainstream staple, all the way up to premium offering.

Speaker #3: All of that is tied together with our package strategy, go-to-market strategy for the Smithfield brand. So I don't think it's a trade necessarily, but we're trying to leverage, both of our, our segments here so it's an add-one.

Speaker #3: So you pick up fresh pork, you pick up Smithfield branded fresh pork along with Smithfield bacon. So, that's, that's kind of our strategy.

Speaker #10: Got it, thank you. And then, how are you seeing retailers pushing for future private label penetration? And how would that affect your pricing power more in the long run?

Speaker #6: So I'll, I'll, I'll touch briefly on that. you know, so obviously, as private label is very important for the retailers, not only on the retail side of the business but also on the food service side of the business.

Speaker #6: So they continue to look at different categories, to get involved where they see growth in certain, you know, package categories. They're going to, you know, explore that as a potential to put in private label.

Mark Hall: We can adjust our mix as households trade within categories. You know, I think based on prior geopolitical disruptions and driving inflation, you know, it's about the duration of it and the breadth of any supply chain impact that's gonna continue to drive inflation up, and that matters more than the short-term spot move. You know, we're planning for volatility and staying agile.

Speaker #6: At the same time, they're also looking at more premium-type private label categories to get into. When they do that, we actually see that as a benefit to us because of the capabilities that we have and, you know, our ability to produce high, high-level, high-quality private label products.

Speaker #6: And we can do it in, and provide them the, the volume that they're going to need for some of these categories. So as they get into these categories, you know, we do see some success in private label.

Speaker #6: But as I mentioned, in some of my earlier comments, this Q1 was pretty interesting because they were down in, I believe it was 13 categories.

Mark Sampath: Great. Just as a follow-up, there's been a lot of questions earlier on the call about, you know, various forms of inflation, you know, whether it's hitting beef, turkey, whether it's your freight costs or your diesel resin packaging, which you gave plenty of color on. I just wanted to make sure. Is the messaging that you are gonna see these higher costs in 2026, your outlook for cost inflation in 2026 has gone up, but you're able to reaffirm the guide because you're also leveraging some of these mitigants that you've talked about as well? I'm just trying to get more clarity on if your outlook for cost inflation for 2026 has gone up over the last month or so since you reported Q4. Thanks very much.

Max Gumport: Great. Just as a follow-up, there's been a lot of questions earlier on the call about, you know, various forms of inflation, you know, whether it's hitting beef, turkey, whether it's your freight costs or your diesel resin packaging, which you gave plenty of color on. I just wanted to make sure. Is the messaging that you are gonna see these higher costs in 2026, your outlook for cost inflation in 2026 has gone up, but you're able to reaffirm the guide because you're also leveraging some of these mitigants that you've talked about as well? I'm just trying to get more clarity on if your outlook for cost inflation for 2026 has gone up over the last month or so since you reported Q4. Thanks very much.

Speaker #6: they were down year over year in volume. So I would say that even though private label is very important, it doesn't always work in every category.

Speaker #6: and obviously, if it doesn't work in those categories, we certainly have our brands, but we've also shown our ability to participate with private label and drive success not only in our branded business but also in our private label business in the exact same category.

Speaker #10: Got it. Thank you.

Speaker #6: All right. So thanks to everyone for joining our call today. we are all to a great start in 2026. And we believe we're well positioned to deliver long-term growth and increased value for our shareholders.

Mark Hall: Yeah. As we discussed at the outset, we have a number of different levers that we can pull. Operationally, we're managing the exposure the same way we do any volatile input environment. It's about disciplined pricing and mix, you know, hedging where appropriate, as Shane mentioned. It's about procurement timing and contract management and really our ongoing productivity and cost savings initiatives to help mitigate the impact of inflation. I'd say, you know, net, the situation adds near-term input and logistics cost uncertainty, but it doesn't change how we run the business. Again, we have multiple levers to mitigate the impact. You know, in the meantime, our focus remains on execution. It's about service to our customers, cost discipline and delivering against our commitments.

Speaker #6: And we look forward to updating you on our progress following our Q2 results. Thank you.

Mark Hall: Again, we feel good about where we're at with those mitigation strategies and our outlook for the year.

Mark Sampath: Okay. Thanks very much.

Max Gumport: Okay. Thanks very much.

Operator: The next question comes from the line of Saumya Jain with UBS. Please go ahead.

Saumya Jain: Hey, good morning. Thanks for squeezing me in. How sustainable is the current outperformance in Packaged Meats versus Fresh Pork? Are you seeing more structural share gains or cyclical trade down behavior?

Shane Smith: Minal, is your question about do we see trade down between packaged meats and fresh pork?

Saumya Jain: Yes.

Steven France: This is Steven. I'll start, and then I'll pass it over to Donovan. I would say, in total, we don't see a trade down at all. It's typically, different consumers and, you know, somebody's gonna buy fresh, you know, pork, they're gonna buy fresh pork. Of course, they're gonna buy packaged, they're gonna buy packaged. You know, a lot of consumers buy both, but they're not typically gonna trade down from, you know, buying a fresh item and then buying, certainly a packaged item. We don't see a lot of trade down. As far as growth that we're seeing, I would say that's the state growth. When you think about, you know, the overall performance that we saw in Q1, it's a solid performance from a branded standpoint.

Steve France: This is Steven. I'll start, and then I'll pass it over to Donovan. I would say, in total, we don't see a trade down at all. It's typically, different consumers and, you know, somebody's gonna buy fresh, you know, pork, they're gonna buy fresh pork. Of course, they're gonna buy packaged, they're gonna buy packaged. You know, a lot of consumers buy both, but they're not typically gonna trade down from, you know, buying a fresh item and then buying, certainly a packaged item. We don't see a lot of trade down. As far as growth that we're seeing, I would say that's the state growth. When you think about, you know, the overall performance that we saw in Q1, it's a solid performance from a branded standpoint.

Steven France: Also, when we look at, the strong private label business we have, we also grew the private label business, which both of those outperformed the rest of the industry. You know, the good thing is, and Donovan can talk a little bit about this, but, you know, the strength that we've seen on Packaged Meats, there's a lot of collaboration between what we do on the Packaged Meats side of the business and also the Fresh Pork side of the business. When you look at some of the categories on Fresh Pork, I think that marinated is a great example where we participate in, you know, those sales calls of working together to promote those items.

Steve France: Also, when we look at, the strong private label business we have, we also grew the private label business, which both of those outperformed the rest of the industry. You know, the good thing is, and Donovan can talk a little bit about this, but, you know, the strength that we've seen on Packaged Meats, there's a lot of collaboration between what we do on the Packaged Meats side of the business and also the Fresh Pork side of the business. When you look at some of the categories on Fresh Pork, I think that marinated is a great example where we participate in, you know, those sales calls of working together to promote those items.

Steven France: A great example would be for, if we do a family ad of packaged items, we're going to incorporate some of those more value-added, profitable fresh items, some of the marinated strips that are new in the marketplace or marinated pork, that's going to be incorporated in that same ad. When you think about the strength and success we've had on Packaged Meats, Fresh Pork is participating in that with a lot of the growth that they're seeing on some of the value-added products. I'll pass it over to Donovan.

Steve France: A great example would be for, if we do a family ad of packaged items, we're going to incorporate some of those more value-added, profitable fresh items, some of the marinated strips that are new in the marketplace or marinated pork, that's going to be incorporated in that same ad. When you think about the strength and success we've had on Packaged Meats, Fresh Pork is participating in that with a lot of the growth that they're seeing on some of the value-added products. I'll pass it over to Donovan.

Donovan Owens: Yeah. Yeah. Thanks, Steve. I appreciate the question. Steve's 100% right. Our focus and our most important piece of the Fresh Pork strategy is to continue to grow our value-added footprint within our domestic retail chain. We're leveraging that strong brand recognition and presence of our Packaged Meats portfolio that Steve just mentioned to grow the share in our marinated and case-ready pork product lines. Just a few stats that Steve didn't mention. He talked about marinated there. In Q1, our marinated pork volume was up 3.2%, while the industry was down 3.8%. Our case-ready pork volume was up in the high single digits increase year over year in Q1.

Donovan Owens: Last but not least, as Shane mentioned in his opening about the success of our food service growth of 27%, all of that is tied together with our package strategy, go-to-market strategy for the Smithfield brand. I don't think it's a trade necessarily, but we're trying to leverage both of our segments here, so it's an and one. You pick up Fresh Pork, you pick up Smithfield branded Fresh Pork along with the Smithfield bacon. That's, that's kind of our strategy.

Saumya Jain: Got it. Thank you. How are you seeing retailers pushing for future private label penetration? How would that affect your pricing power more in the long run?

Steven France: I'll touch briefly on that. You know, obviously private label is very important for the retailers, not only on the retail side of the business, but also on the food service side of the business. They continue to look at different categories to get involved. Where they see growth in certain, you know, packaged categories, they're going to, you know, explore that as a potential to put in private label. At the same time, they're also looking at more premium type private label categories to get into.

Steve France: I'll touch briefly on that. You know, obviously private label is very important for the retailers, not only on the retail side of the business, but also on the food service side of the business. They continue to look at different categories to get involved. Where they see growth in certain, you know, packaged categories, they're going to, you know, explore that as a potential to put in private label. At the same time, they're also looking at more premium type private label categories to get into.

Steven France: When they do that, we actually see that as a benefit to us because of the capabilities that we have and, you know, our ability to produce high level, high quality private label products, and we can do it in and provide them the volume that they're gonna need for some of these categories. As they get into these categories, you know, we do see some success in private label, but as I mentioned in some of my earlier comments, this Q1 was pretty interesting because they were down in, I believe it was like 13 categories, they were down year-over-year in volume. I would say that even though private label is very important, it doesn't always work in every category. And obviously, if it doesn't work in those categories, we certainly have our brands.

Steve France: When they do that, we actually see that as a benefit to us because of the capabilities that we have and, you know, our ability to produce high level, high quality private label products, and we can do it in and provide them the volume that they're gonna need for some of these categories. As they get into these categories, you know, we do see some success in private label, but as I mentioned in some of my earlier comments, this Q1 was pretty interesting because they were down in, I believe it was like 13 categories, they were down year-over-year in volume. I would say that even though private label is very important, it doesn't always work in every category. And obviously, if it doesn't work in those categories, we certainly have our brands.

Steven France: We've also shown our ability to participate with private label and drive success not only in our branded business, but also in our private label business in the exact same category.

Steve France: We've also shown our ability to participate with private label and drive success not only in our branded business, but also in our private label business in the exact same category.

Saumya Jain: Got it. Thank you.

Shane Smith: All right. Thanks to everyone who joined our call today. We are off to a great start in 2026, and we believe we're well-positioned to deliver long-term growth and increased value for our shareholders. We look forward to updating you on our progress following our Q2 results. Thank you.

Operator: Thank you. Conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.

Q1 2026 Smithfield Foods Inc Earnings Call

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