Smithfield Foods Q1 2026 Earnings Call - Record Adjusted Operating Profit Driven by Packaged Meats Strength

Operator: Good day, and welcome to the Smithfield Foods First Quarter 2026 financial results conference call. All participant lines will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Keira Lombardo, Vice President, Investor Relations. Please go ahead.

Keira Lombardo, Vice President, Investor Relations, Smithfield Foods: Thank you, operator, and good morning, everyone. Welcome to Smithfield’s first quarter 2026 earnings call. Earlier this morning, we announced our results. A copy of the release, along with today’s presentation, is available on our investor relations website. Today’s presentation contains projections and other forward-looking statements that are being provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions, or beliefs about future events or performance that do not relate solely to historical periods. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

These risks and uncertainties include, but are not limited to, the factors identified in the release in our annual report on Form 10-K, our quarterly reports on Form 10-Q, 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. 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. 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 MULO+ 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. With that, I will now turn the discussion over to Shane. Shane.

Donovan Owens, President of North America Pork, Smithfield Foods1: Thank you, Keira Lombardo. 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%. 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 the first quarter of 2025. Packaged Meats sales of $2.1 billion increased by 6% compared to the first quarter of 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 up 1.3%.

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 12.8%, 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 caution in the quarter. Fresh Pork reported operating profit of $78 million with an operating profit margin of 3.9%, which was down slightly versus the first quarter of 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.

As a reminder, the tariff disruption was introduced in April of 2025, impacting the year-over-year comparison in the first quarter. Our Hog 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 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 have 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 and nutrition savings. 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. In short, we delivered record first quarter 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 0.4 times, 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 cost. 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, 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. 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. 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. Coming out of 2025, we saw strong momentum in these value-added categories, that carried over into the first quarter of 2026. During the first quarter, 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. 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 the first quarter, 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 continued 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 one point increase in our packaged lunch meat volume share. Smithfield Prime Fresh is one of our most important packaged lunch meat brands. We grew Prime Fresh volume by 26% with an 18% increase in points of distribution in the first quarter. 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. 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 multi-year 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 the first quarter, product innovation drove 12% year-over-year volume growth in Armour dry sausage and more than 22% volume growth in Curly’s refrigerated barbecue meats, supported by new snacking formats and globally inspired flavors. 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. We’ve talked a lot about retail, but food service is also an important channel for Packaged Meats, representing roughly 30% of sales. During the first quarter, 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 the first quarter alone. Even as food away from home inflation remains elevated, our scale, innovation, and value-added solution 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 and 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 the first quarter, we grew sales in the retail channel by 3% with a 6% increase in sales of value-added, case-ready and marinated items. We are driving growth in value-added pork through innovation like our February launch of Smithfield Pork Loin Filet, 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. During the first quarter, 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 relative 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 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. 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 each year looking 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. 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 Sioux Falls 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 cost, 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. Our anticipated timeline to close the transaction is now in the second half of 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 in evaluating additional complementary and synergistic M&A opportunities to bolster our organic growth. In summary, we delivered record first quarter 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.

Mark Hall, Chief Financial Officer, Smithfield Foods: Thank you, Shane. Good morning 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 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. 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 $326 million in the first quarter of 2025. 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. Adjusted diluted EPS of $0.64 per share increased 10% compared to $0.58 per share in the first quarter of 2025. Our first quarter segment results.

Our Packaged Meats segment delivered first quarter operating profit of $275 million, up $9 million from last year, 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. First quarter Packaged 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.

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 first quarter 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 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.

This favorable market spread was offset by lower production volume due to a temporary winter storm disruptions 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 U.S. retail channel. Fresh Pork segment sales of $2 billion decreased 1% year-over-year. 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.

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. This is down sequentially from the fourth quarter of last year, 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. 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.

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. Our corporate expenses came in $3 million or 11% below the prior year, reflecting ongoing continuous improvement efforts. That brings me to our strong balance sheet and financial position. 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 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 the first quarter historically being a high working capital period. 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. 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. 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. On April 21st 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. As we 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.

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. 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.

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?

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

Donovan Owens, President of North America Pork, Smithfield Foods0: Hey, guys. Good morning. Thanks for taking the question. Maybe to begin, Mark, I know you don’t like to give kind of quarterly guidance, but obviously you know had a nice first quarter, 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 kind of mindful of as we move into Q2 and over the balance of the year?

Mark Hall, Chief Financial Officer, Smithfield Foods: Yeah. Hey, good morning, Peter, and 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 second quarter, you know, the macro environment and the consumer remain pressured, 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.

You know, year-over-year, I’d say that the comparison is tougher because of the holiday ham timing benefited the first quarter of this year. That pull forward reduces the second quarter 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 that pressure in supply chain costs that Shane Smith 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. 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.

In terms of Fresh Pork, you know, we continue to see strong execution, although we’re managing that volatile cost and market environment. Just as a reminder, seasonally, the second and third quarter are typically softer than the first and fourth quarters for Fresh Pork profitability. I’d say even with those dynamics, and cost pressures, we still expect Fresh Pork to be modestly up 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 flow through. In terms of Hog Production, you know, seasonally, Hog Production is strongest in the second and third quarters. We’re looking for a strong second quarter driven by favorable market fundamentals.

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 the retained farm. Overall, you know, we expect to deliver a solid second quarter and full year results, and we have a number of levers we can pull to manage that volatility as the year progresses.

Donovan Owens, President of North America Pork, Smithfield Foods0: Great. Thanks so much, Mark. I’ll pass it on.

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

Leah Jordan, Analyst, Goldman Sachs: 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?

Donovan Owens, President of North America Pork, Smithfield Foods2: Hi, Leah. I’ll start out by taking that question. This is Steve France. First I’ll make a few comments as far as Q1, then I’ll get into some of the promotional strategy part of 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 it was actually down 0.2%. Demand has been steady, 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 trying to manufacture volume through heavy promotions.

We’ve stayed focused on how we, how our business continues to evolve, and we keep moving away from lower value, commodity items and putting more emphasis onto value-added products. Things that we continue to talk about, Prime Fresh, Anytime Favorites, Eckrich Smoked Sausage, some of the items that Shane had mentioned in his opening comments. 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, 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.

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 actually 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 is 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. 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 was 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 since many of our retailer partners are upscaling their private label offerings. Our participation in both branded and private label really helps us attract and retain consumers as they move up and down that value spectrum.

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’s working because we saw share and volume increases not only on the branded side, but also on the private label side of our business in Q1.

Donovan Owens, President of North America Pork, Smithfield Foods1: Leah, I think your last question was about vertical integration. Was that correct?

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

Mark Hall, Chief Financial Officer, Smithfield Foods: 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 1 segment within that has been 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.

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.

Leah Jordan, Analyst, Goldman Sachs: That was a great color. Thank you.

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

Megan Clapp, Analyst, Morgan Stanley: 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 in the second quarter, it does put a bit more weight on the second half in terms of the embedded profit improvement and the Packaged Meats segment outlook. You know, understand we’ll start to lap some of the 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 second half. It does sound like you’re confident in managing these costs.

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.

Donovan Owens, President of North America Pork, Smithfield Foods1: 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 going to be a little bit of a 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. 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. We have strong volume growth as Steve had pointed out.

Again, with the cost containment plans that we have, we feel very good about the second half of the year for Packaged Meats.

Donovan Owens, President of North America Pork, Smithfield Foods2: Megan, this is Steve. I’ll add on a little bit to what Mark 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 Meats business. In the near term, as Mark had 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 grocery and also the food service channel. On the cost side, we do expect some really improvement versus last year on raw materials, as we’ve mentioned before, but we’re not assuming a return to historical norms.

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 A&P spend. In Q1, that spend was up 23% year-over-year.

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 the large impact on diesel and also the resins for packaging certainly has 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 also consumers across all price points.

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. 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 a from an overall profit standpoint. Based on a lot of 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-$1.2 billion.

Megan Clapp, Analyst, Morgan Stanley: 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. Steve, you just mentioned, you know, diesel and freight in particular. 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. Any color just as we kind of 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.

Donovan Owens, President of North America Pork, Smithfield Foods1: 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. 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. That wasn’t reactionary.

It goes really to one of Mark’s earlier points. You know, optimization across all of our network is really embedded in our DNA. These were things that we were already working on prior to being here today. Again, we’ve done lane consolidation, adding intermodal. We still look at hedging opportunities for diesel where we can, driving fewer miles. 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.

You know, you look at the long/short term impacts, the medium term, and Mark talked 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 Production operations later in the year, which, as you know, 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.

Megan Clapp, Analyst, Morgan Stanley: Great. Thank you.

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

Benjamin Theurer, Analyst, Barclays: Hi. Good morning, thanks for taking my question, Shane Smith, Mark L. Hall. Following up on just the last comment, a little bit on the outlook, grain cost and as it kind of like 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. I just want to 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.

Donovan Owens, President of North America Pork, Smithfield Foods1: Yeah, Benjamin Theurer, 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.

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 we see 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.

Mark Hall, Chief Financial Officer, Smithfield Foods: 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, first quarter is seasonally a cash outflow period for us. The first quarter of 2026 outflows were about $65 million.

That was down from an outflow of $166 million in the prior year, and 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.

Benjamin Theurer, Analyst, Barclays: 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, Analyst, Heather Jones Research: 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.

Donovan Owens, President of North America Pork, Smithfield Foods2: 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 of the 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 Hot Dogs or a 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 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.

Donovan Owens, President of North America Pork, Smithfield Foods1: Yeah, Heather. You mentioned disease. You know, we’re hearing the same thing as you are of 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. 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, but 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.

Heather Jones, Analyst, Heather Jones Research: Okay. Thank you for that. On a follow-up. Wanted to talk about the opportunity for the U.S. 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 U.S. 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 U.S. might get from that?

Donovan Owens, President of North America Pork, Smithfield Foods: Thanks, Heather. This is Don Owens. You’re right. It, there has been some disruption with the ASF aspect coming out of Europe, but it has been largely thus far an, you know, a non-event in terms of seeing excess demand on domestic U.S. 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 capacity and supply that are able to fill in the need in primarily Asia. Right now, I would agree with your comments. I mean, it’s not really impactful for the U.S. pork market at this point.

Heather Jones, Analyst, Heather Jones Research: Okay. Thank you so much.

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

Max Kompa, Analyst, BNP Paribas: Hey, thanks for the question. I was hoping with rising inflation, if you could discuss your view on consumer sentiment in the U.S. 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.

Mark Hall, Chief Financial Officer, Smithfield Foods: Hey, Max. 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 marketing 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 offerings, so 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.

Max Kompa, Analyst, BNP Paribas: 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 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? 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 4Q. Thanks very much.

Mark Hall, Chief Financial Officer, Smithfield Foods: Yeah, as we discussed at the outset, we have a number of different levers that we can pull. Operationally, we’re managing the exposure in 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.

We feel good about where we’re at with those mitigation strategies and our outlook for the year.

Max Kompa, Analyst, BNP Paribas: Okay. Thanks very much.

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

Manav Gupta, Analyst, UBS: 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?

Mark Hall, Chief Financial Officer, Smithfield Foods: Manav, is your question about do we see trade down between Packaged Meats and Fresh Pork?

Manav Gupta, Analyst, UBS: Yes. Yes.

Donovan Owens, President of North America Pork, Smithfield Foods2: This is Steve. 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, if somebody’s gonna buy fresh, you know, pork, they’re gonna buy fresh pork. Of course, if 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, you know, 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 sustained growth. When you think about, you know, the overall performance that we saw in Q1, it was a solid performance from a branded standpoint.

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. The good thing is, and Donovan can talk a little bit about this, but, you know, the strength that we’ve seen on Packaged, there’s a lot of collaboration between what we do on the Packaged side of the business and also the Fresh side of the business. When you look at some of the categories on fresh, think, marinated is a great example where we participate in, you know, those sales calls of working together to promote those items.

A great example would be for, if we do a family ad of packaged items, we’re gonna 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 gonna 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, President of North America Pork, Smithfield Foods: Yeah. Yeah. Thanks, Steve. I appreciate the question. Steve’s 100% right as 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.

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 packaged 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 add-on. You pick up fresh pork, you pick up Smithfield branded fresh pork along with the Smithfield bacon. That’s kind of our strategy.

Manav Gupta, Analyst, UBS: 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?

Donovan Owens, President of North America Pork, Smithfield Foods2: 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.

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. Obviously, if it doesn’t work in those categories, we certainly have our brands.

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.

Manav Gupta, Analyst, UBS: Got it. Thank you.

Donovan Owens, President of North America Pork, Smithfield Foods1: 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, and we look forward to updating you on our progress following our Q2 results. Thank you.

Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Thank you.