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Good evening, everyone. Welcome to the results announcement for the first quarter of 2024. The management will walk you through the performance of the first quarter of this year and our future strategies. Today, we have Chairman and Executive Director of the company, Mr. Wan Long; Executive Director and CEO of the company, Mr. Guo Lijun; Executive Director of the company and the CEO of Shuanghui Development, Mr. Ma Xiangjie; and CFO of Shuanghui Development,; Shane Smith, CEO of Smithfield; CFO of Smithfield, Mark Hall; CFO, Joanna Yan. And this is Robert Wan, Executive Director and host of today's briefing session.
So Mr. Guo will start with an overview of the first quarter performance.
Good evening, everyone. Now I'm going to walk you through our performance in the first quarter of 2024. In the first quarter, 2024, total packaged meats sold is 786,000 metric tons year-over-year drop of 4.1%. Total pork sold is 941,000 metric tons year-over-year drop of 7.8%. Revenue was $6.2 billion year-over-year decline of 8.3%. EBITDA, we had achieved $674 million, 27% higher than last year.
Operating profit, $501 million, which is 37% higher than last year. Profit attributable to the owners of the company is $301 million, which is 73% higher than last year. So overall, the volume has dropped, but the profitability has improved substantially.
In the first quarter of '24, hog prices in China and the U.S. continue to remain at low levels due to sufficient hog supplies. The hog prices in the Europe were at historical high levels as hog supplies remain tight. In the first quarter of '24, the number of slaughtered hogs in China decreased by 2.2% to 195 million heads. Hog inventory in China decreased by 5.2% to 409 million heads. The number of slaughtered hogs in the U.S. increased by 0.4% to 32.7 million heads.
The average hog price in China was CNY 14.9 per kilogram, a decrease of 5.1% year-over-year. In the U.S., the average hog price during the first quarter was USD 1.26 per kilogram, a decrease 0.8%. In Europe, the average hog price was EUR 1.6 per kilogram, decreased by 3.2% year-over-year. The average pork cutout value in the U.S. was USD 1.97 per kilogram in the first quarter of 2024, an increase of 8.7%.
So the industry market spread, which is the USD cutout minus and the hog prices recovered significantly from the first quarter of last year. In China, the profit of our packaged meat business increased significantly. Earnings of the pork business declined due to the weak demand.
The operating profit in China -- the profit for China in the packaged meats was -- for the pork business of 251 million, dropped by 10%. The package meat business had a profit of $262 million, an increase of 10%.
In the U.S., the profitability of packaged meats remain high. Loss of pork business narrowed substantially, thanks to lower raising cost and operational improvements. The operating profit in the U.S. in the first quarter was $191 million. The packaged meat business has a profit -- operating profit of $288 million, whereas for the pork business, the loss was $62 million, which is 151 million loss compared to last year.
In Europe, the operating profit achieved a record highs as it captured the favorable market conditions. The operating profit in the first quarter of '24 was USD 59 million. The packaged meats business had operating profit of $30 million, increased by 100%. The pork business had operating profit of $26 million, which is increased by 189%.
So from an outlook perspective, we believe the opportunities continue to outweigh the challenges. We see global economy stabilizes, but growth prospects, diverse across regions, inflation has moderated, which is laying the foundation for easy monitory policy. The geopolitical situation remain complex and volatile impact impacting the landscape of global industrial supply chain. Animal protein industry is gradually rebalancing the supply and demand. For WH Group, we'll continue to consolidate our global resources adhere to the adjust price improved mix and control cost philosophy, leverage our strength in industrialization, scale and the diversification, upgrading intelligent manufacturing, automation, digitalization and continue to contain our leading market positions.
[Foreign Language] The first question is from the research analyst of Bank of America, -- Luo Chen. The first question relates to the China's business. The profit in the fourth quarter and the first quarter of this year dropped in China strongly. And in the first quarter this year, the packaged meat business continued to perform well, but overall profitability has been negatively impacted by the slaughtering and the hog production business.
So based on the -- so -- the question is what's the management's outlook for the hog prices in the second quarter and third quarter of this year? And are there any opportunities to see some recovery in hot production and the slaughtering business in China?
[Foreign Language]
[Foreign Language]
So the answer is from a CEO of Shuanghui. Mr. Ma. For the result of the fourth quarter last year, we had discussed in the previous briefing, so we'll not discuss further in this meeting. For the performance in the first quarter of this year, our -- the profit drop is primarily due to our slaughtering business, fresh pork business, whereas the packaged meat business has actually improved the profit.
And in the hog production, we also saw improvements in terms of the raising cost in terms of the KPIs, and we're seeing fewer lower losses. So the reason for the relative -- for the drop in the profit in the slaughtering or the fresh pork business is because in 2023, the price for the frozen meat was relatively high, thanks to the release of the COVID-related controls. So at that time, we have achieved good profit from the frozen products. But in '24, the price of the frozen meats is lower. And -- but on the other hand, the margins or profit from our fresh meat continue to be very good.
In terms of the outlook for the rest of the year, our judgment or view on the pork -- hog price is that it will be relatively low in the first half and will gradually increase in the second half. But overall, the average price in 2024 would be largely same as '23 or slightly improve and will be below CNY 16 per kilogram.
And we think the pork prices -- hog prices will improve a little bit in the second quarter and the profitability on the frozen meat products will improve. And the profit from the fresh meat will remain stable. Overall, we think this year for the fresh pork business, the scale will expand, and we will see some pressures in the profitability from the -- in the fresh pork business.
[Interpreted] Question from Morgan Stanley research analyst, Lillian. The first question relates to China business. Mr. Ma has already talked about the upstream business. Now she wants to ask about the downstream business. As Mr. Ma mentioned earlier, we are facing weak demand from the market. And we have noted the volume decrease in packaged meat business in the first quarter. What's the management's outlook for the full year packaged meat volume, given the performance in the first quarter? In the previous briefing, management had a positive outlook for the volume for the entire year will change.
Second question relates to the U.S. business. We are seeing good improvement in the hog production in the U.S., the narrowing of the losses. Will this trend continue? And if the pork prices increases in the U.S., will that have any negative impact to our packaged meat business in the U.S.?
So the answer from Mr. Ma on the packaged meat business in China. We did have the slight decrease in the volume in the packaged meat business in China for the first quarter, partly because of the lower season after the major holidays and also because we had a higher base in 2023 because the first quarter of 2023 was the first quarter where the COVID-related control on the social movement has been released in China.
So there have been a lot of pent-up demand from the market. So the sales volume in the first quarter of '23 was very strong, even in the historical contact is a relatively high level in Shuanghui's history. So with that in mind, we think that in the second quarter, the volume of packaged meat business was stable and will stabilize in terms of growth.
And in the third quarter, we will see growth and in the fourth quarter, we will see more significant growth. And we do want to highlight that the year-over-year comparison in the first quarter and the fourth quarter of '24 are both impacted by the basis of last year. Mark, do you want to take the second question?
I will take the second question. So as you noted, the U.S. hog production business has narrowed losses. And as we move forward, we do think that we will continue. That's been a combination of both improvement in pricing from the hog index, underlying transformational changes that have been for cost structure and coupled with falling raising coss. We look at is down about 13 year-over-year in, soybean mill is down about 6%.
And so we're seeing a continued improvement in the underlying raising cost to come. So we do expect that to continue. We expect that we are beginning to come back to normal seasonal patterns and profitability of our production. Now 2 quick means we see losses in the first and fourth quarter and profit in the second and thid quarter. we do believe that we are back in that cycle and we will begin to see profitability in hog production as we go through the second and third quarters. As to the impact of our packaged meat business, you're correct that as meat prices change, that does put pressure on packaged meats. However, what I will tell you is we have a very resilient packaged meat business. We continue to remain focused on pricing discipline, controlling our mix and ultimately controlling our costs. And so we feel very encouraged what we see packaged meat and then the outlook for the remainder of the year.
Three questions from CICC. The first question relates to the U.S. hog production business. We have noticed the increase in the hog prices in the U.S. What's management's view on the hog price cycles in the U.S.? Where are we on the site in the cycle? And do we see changed in the supply-demand dynamics? And do we believe we have the opportunity to have a higher expectation on the hog production profitability for 2024?
The second question also relates to the U.S. In the U.S. packaged meat business, we noticed a 4% decrease in profit in the first quarter. What's the reasons of this drop in profitability? And what's the management's view on the current consumer demand in the U.S. retail market? And what's the management's outlook for the packaged meat business? And third question relates to China's network doubling efforts and what's the latest progress and any data that the management can share with the group?
To the first question. In hog production, again, we're seeing improvements coming out of this incredibly bad cycle that we've been and starts with fourth quarter of 2022. As I said a while ago, as we come into the second quarter, we are seeing strengthening in pricing, a reduction in raising cost both driven by the reduction in corn and soybean mill on the input side as well as transformational things that we have done as a company to remove unprofitable parts of that business, unprofitable or underperforming farms.
And so we do expect, as we go forward, and as we go through the second and third quarter, we'll see a return to the seasonal profitability, as I mentioned earlier. Fourth quarter is a quarter that remains historically under pressure from a profitability standpoint.
But we do believe we can come out of this cycle that we've been in and returning to the more normal cycle of losses in the first and fourth quarter profitability in the second and third. So that's the way we look at 2024. That's what the markets would indicate to us to date is our expectation. And so I believe we're in a much better place today in our hog production business than we were as we went into the cycle in the back half of 2022. To the second part of the hog production, you asked about supply-demand. We are and continue to see some contraction in the U.S. herd. We've seen an increase in sales water as well as other in information that there's an overall reduction or contraction in the U.S. industry. However, our there a little bit, we are seeing increases in productivity. And so I think the USDA is held down about 1% or call it over 1%. We think that may actually be flat to down as these are offset by productivity gains. So we don't see a significant change in the supply-demand economics in the U.S.
I'll take the second question on packaged meat. As Shane stated at the outset, our packaged meats business continues to perform exceptionally well. And this first quarter results was actually the third best in our company's history. So you referenced some softness as compared to the prior year. I would say that last year's first quarter was a record first quarter. So it's difficult comp for us, and it's really our first quarter results are heavily dependent on the holiday ham season. So I would say marginally holiday ham business was a little bit softer than last year. But again, the business continues to perform exceptionally well. Our profitability per metric ton was over 880 during the quarter.
So again, just outstanding results from packaged meats. The question as to the health of the consumer. I would say the continues to confine with high prices, driven by inflation and reduced government support programs. It's especially prevalent on the food service side of the business where food inflation on food away from home was over 4% during the last reporting cycle.
So the consumer is still very cautious, but as we've stated before, Smithfield is uniquely positioned across price tiers across brands and also providing a fair amount of private label business so that we're able to capture that consumer trade down and cross the Smithfield franchise and not lose that customer outside of the Smithfield business. With respect to the doubling network initiative in China, it is an important initiative we launched last year to hopefully achieve 2 objectives. One is to double the number of point of sales or the network coverage of fresh pork and packaged meat business in the next 3 to 5 years. And the second is to strengthen the quality and the operating capability of the point of sales of our distribution network.
Last year, it was a -- the project last year was in the experimental stage where we have launched the initiative in selected markets. This year, we expect to roll out this initiative into more cities in China. For the packaged meat business, we hope to add 250,000 new networks and by the end of the year to have 1.74 million point of sales. In the fresh pork business, we hope to add 15,000 new point of sales and to reach 65,000 point of sales by the end of the year.
Two follow-up questions from Bank of America, Luo Chen. First relates to the China business. The -- as Mr. Ma has mentioned earlier, he expects the fresh pork business to improve in the remaining part of the year, and he remains very confident in the packaged meat business. So -- and given that we have a relatively low base in the fourth quarter of '23. Does that mean the management still believe we can achieve a slight increase in the overall profitability in China in the -- for the full year?
And the second question relates to the potential spin-off IPO of Smithfield because in the third quarter of last year, the management has mentioned that they were discussing this plan, are there any more developments or any further updates that can be shared with the market?
And the answer from Mr. Ma on the first question is positive because we believe -- we are seeing improvements the KPIs of our hog production and our poultry raising business, livestock -- poultry livestock raising business. So we expect the losses in those areas will significantly narrow this year. And we are also seeing improvements in the packaged meat business. So we are confident for the increase in profitability in 2024, full year.
So in relation to the spin-off of Smithfield. And as mentioned, it is certainly an idea the management has been discussing, and we are closely monitoring our own operating performance as well as the external market development. When the conditions are mature, we will be presenting the proposals to the Board for -- and to seek approval and make announcements as appropriate to the market.
The next question comes from Veronica from UBS.
[Interpreted] The question from UBS relates to the U.S. hog production business. She wants to understand more about the progress of our hog production capacity reduction plans. Are there any latest updates? And also, are there any impairment we expect to incur in 2024? And given where we are in the cycle, given the gradual improvement in the dynamics in the U.S. hog product -- in the U.S. hog markets, will we slow down our hog production capacity reduction plan?
And also in previous briefings, the management has talked a target of capacity target of less than 10 million heads per year. And when do we expect to hit that target?
Okay. Thank you, Veronica. Yes. So if you think back to our height, we were at about 17.5 million hogs just a couple of years ago. As we look at 2024, we expect that number to be less than 15 million. And we've done that in a number of ways, including and most importantly, removing our highest cost underperforming farms.
When we completed that part of the process in 2023 with the closure of Utah, the removal of some underperforming farms in North Carolina. We do believe that the impairments associated with those are the last of what I would call the material investments -- impairments. We still may have some write-offs here and there, small numbers. I would tell you that materially, all of those impairments have already been taken. I think the third point of your question is, that's how the markets change, do we see this slowing down? The answer to that would be no. And the reasoning in again, the farms that we're taking out again, are very high-cost farms, are underperforming or geographically located in areas that just isn't conducive to raising hogs.
And so our ultimate goal is still to get our overall hog production operations to about 10 million heads or maybe even a little bit less. So that is still a priority for us. It's a focus for us. We'll continue to execute against that as to a timing standpoint.
That depends on the mechanism or the vehicle that we use to exit these -- whether these just continue to be closures, nonrenewal of contracts or the sales. So it can have a period of, I would say, 1 to 3 years is our expectation of when we would be below that 10 million head number.
Next question comes from Mr.
Two questions both related to Shuanghui. The first is about the profit per ton of packaged meat business in the first quarter. And based on his rough calculation, he believed the profit is around CNY 4,700 to CNY 4,800 per metric tons, which is much higher than our objective or our target of CNY 4,000 per metric ton, is this accurate? And is this high profitability sustainable?
And second question relates to the finance cost. The interest income of Shuanghui in the first quarter has dropped quite substantially compared to 2023. What's the reason?
In relation to the first question, the profit per metric ton in the first quarter for the packaged meat business was CNY 5,000 per ton. This is historical high level for us. It's a record for Shuanghui and obviously, much higher than the 4,000 per ton target. Historically, our profit for packaged meat business has been around CNY 4,000 mine to. And if the cost is very high, we will adjust our price. If the cost is lower, we will give some profits to the market.
And for this year, the -- for the first quarter of this year, the profit is CNY 860 higher than last year. That's because of a better product mix as well as a lower cost. And we believe the lower meat cost will continue throughout 2024. And our profit for packaged meat per ton will be significantly higher than the CNY 4,000 targets. And in relation to the second question, the interest -- the finance cost in the first quarter of '24 was CNY 37 million, whereas last year, it is a interest income -- net income of CNY 71 million. So there's a delta of around 100 million. That's because last year, we had a large amount of deposits has matured in the first quarter, so which has resulted in a one-off interest of approximately 100 million. So if we have removed this one-off item, the overall finance income/cost expense should be comparable to last year. And also, when you look at our finance income or cost, it will be reflected into 3 items in our P&L. One is in the gross profit because that's where we book the profit for our finance company and it will also be reflected in the interest income as well as investment income. If we add up all the finance-related income and expenses, overall, it is profitable.
The meeting is finished. Thank you all for your participation, and you may get off the line.
Thank you, Rob. Thank you, everyone. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]