Good day and welcome to the Smithfield Foods First Quarter 2025 Results Conference Call. Please note that today's event is being recorded. I would now like to turn the conference over to Julie MacMedan, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning everyone. Welcome to Smithfield’s first quarter 2025 earnings call. Earlier this morning, we announced our results. A copy of the release as well as today’s presentation are available on our IR website, investors.smithfieldfoods.com. 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 publicly any forward-looking statements, whether because of new information, future events, or other factors. Please refer to our legal disclaimer on Slide 2 of the presentation for more 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. With me this morning are Shane Smith, President and CEO; Mark Hall, CFO; Steve France, President of Packaged Meats; and Donovan Owens, President of Fresh Pork. I will now turn the discussion over to Shane.

Thank you, Julie. Good morning, everyone. I am pleased to report that we are off to a solid start to fiscal 2025. We delivered first quarter adjusted operating profit of $326 million and adjusted operating profit margin of 8.6%. This marked an 86% increase compared to adjusted operating profit of $176 million and 5.1% in the first quarter of 2024. In fact, our first quarter operating profit and net income results were a record first quarter for the company. Interestingly, none of the business segments individually had a record quarter. The results were truly a reflection of strategy execution across the segments and the strength of our vertically integrated model. Our strong improvement reflects more favorable market conditions in hog production, as well as solid execution on our strategies across the business. Looking at profits by segment. Our Packaged Meats segment delivered adjusted operating profit of $266 million and an impressive adjusted operating profit margin of 13.1%, even as we navigated higher raw material input costs and a later Easter this year. We continue to increase sales of higher margin products such as packaged lunch meats and dry sausage, and we achieved operating efficiencies in our Packaged Meats segment. Our Fresh Pork segment reported adjusted operating profit of $82 million with an adjusted operating profit margin of 4%. Executing our strategy to maximize product values across multiple channels helped offset the impact of the tighter industry market spread this year. Our Hog Production segment delivered adjusted operating profit of just over $1 million, which marks an outstanding turnaround from a loss of $174 million in the first quarter of 2024. The increase was driven by improved market conditions and a more efficient cost structure on our retained farms. Across the organization, our team’s relentless focus on driving efficiencies and delivering cost savings paid off with lower manufacturing, distribution, and SG&A costs year-over-year. We continue to unlock value through operational improvements by fostering a culture of continuous improvement. In summary, our strong Q1 profit growth versus last year reflects solid strategy execution across our Packaged Meats, Fresh Pork, and Hog Production segments, as well as dramatically improved market conditions in the hog production industry. Additionally, we continue to prioritize a strong balance sheet and financial position. We ended the quarter with a net debt to adjusted EBITDA ratio of just 0.7x, well below our policy of 2x. This gives us the financial flexibility to support our growth strategies and to deliver long-term shareholder value. Now, turning to our outlook for fiscal 2025. Today, we reaffirmed our fiscal 2025 outlook that we introduced on March 25. Our 2025 outlook calls for increased sales and operating profit despite challenging market conditions, and Mark will review the details in a few moments. I’d like to briefly review the key initiatives underway to deliver growth. First, in Packaged Meats, we plan to continue to grow operating profit through ongoing product mix improvements, volume growth, and innovation. Packaged Meats is our largest and most profitable segment, representing 54% of consolidated sales with 98% of our Packaged Meats SKUs sold here in the United States. We remain focused on increasing the mix of higher margin product categories such as packaged lunch meat and dry sausage. This is evidenced by the shift in our mix away from large holiday hams to more everyday items. From 2019 to 2024, our ham category volume decreased slightly, while the unit velocity dramatically increased by 22%, and the profit per pound improved significantly. Dry sausage is another way to improve our product mix. From 2019 to 2024, we grew dry sausage units by 37%. Our ability to grow this category has been supported by increased capacity, including the acquisition of the dry sausage facility in Nashville last summer. Sales of dry sausage products such as pepperoni and salami are expected to grow at a faster rate than the overall Packaged Meats category. We have significant potential to expand distribution of our Carando and Margherita dry sausage brands, which have ACVs of about 40% compared to our Smithfield consolidated ACV of 93%. During the first quarter, we executed well on our mix shift strategy as evidenced by our double-digit volume growth in both lunch meat and dry sausage. Turning to volume, we expect packaged meats volume to be up about 1% year-over-year. We are currently the number two branded provider of packaged meats by volume in the 25 key categories in which we compete. Ten of those categories have a market size of more than $1 billion, and we strive to grow share in each of these categories. One of our major focus areas in 2025 is the continued growth in our Smithfield Prime Fresh packaged lunch meats. Packaged lunch meat represents a $6.3 billion market opportunity, and we have the number five position and an 8% share. Based on Circana data, Smithfield Prime Fresh posted the largest volume share gain of any branded packaged lunch meat for the 52 weeks ended March 30, 2025. Consumers are increasingly looking for value, and our portfolio offers quality branded products across multiple categories and price points. This helps us attract and retain consumers even as they may look to lower priced options. If they choose private label, we are well positioned to capture more private label sales volume. Private label is a key competitive advantage for Smithfield. The elevation of private label with retailers and foodservice operators requires them to work with trusted partners like us who can consistently and reliably deliver high quality products. Our strength in private label has helped transform the relationship we have with our customers into a strategic multi-year planning approach encompassing both our branded and private label products. This is exemplified by the recognition of our Smithfield Foods sales team who are delivering outstanding service and category management to our retail customers. In March, our teams were recognized by Harris Teeter as 2024 Partner of the Year for Meat and by Save Mart as 2024 Best Meat Supplier of the Year. Finally, looking at innovation. Addressing consumer trends to shift away from buying large holiday hams to more everyday purchases has been a focus of our innovation. Smithfield Prime Fresh has been one of our biggest wins in this endeavor while also addressing consumer convenience trends. Fixed quarter weight hams represent another successful product innovation to address more everyday use occasions for consumers. For the 52 weeks ended March 30, Smithfield branded quarter weight hams gained the most share of any branded or private label offering in the smoked hams specialty cuts category according to Circana. We conduct consumer research to determine what is trending with consumers and attracting new purchasers. We have a strong pipeline of new products scheduled to launch throughout 2025. These new products target consumers through line extensions of our trusted brands, new flavors, and more convenient packaging and sizing options. Moving to our second core growth strategy, optimizing our fresh pork operations. We see further opportunity to grow fresh pork operating profit in 2025 by maximizing the net realizable value of each hog and driving best-in-class operating efficiency. We continue to closely monitor the tariff and geopolitical environment, which is very fluid. We have an experienced team that has worked together for more than 20 years and has navigated through numerous cycles. While we are not immune to the impact of tariffs, we have built flexibility into our system and established multiple outlets for our fresh pork products. I thought it would be helpful to explain how we determine the optimal sales channels for fresh pork. We utilize four main sales channels. The first and most important is producing and transferring high quality fresh pork raw materials to our Packaged Meats segment. We recognize a greater value for the company overall by further converting our fresh pork raw material and selling it through our Packaged Meats segment. Second, we’ve focused on our domestic retail and foodservice partnerships to increase margins by growing the mix of value-added products we offer. We are the market leader in marinated fresh pork with more than a 40% branded volume share in the category. We continue to innovate in fresh pork by meeting customer and consumer needs just as we do in packaged meats. Third, we have a well-established international sales channel and we export to more than 30 countries around the globe. In 2024, Smithfield’s export sales accounted for 13% of total company sales, with the vast majority of that from our Fresh Pork segment. The key to our export strategy is identifying the optimal market for our products. We continue to execute our next best sales strategy, evaluating our options in response to the recent tariff actions. We believe our 2025 operating profit outlook range for fresh pork addresses tariff risk. Finally, we have adjacent business lines, including skins for snacking, pet food and pet treats, and pharmaceuticals focusing on whole hog utilization. Our multiple scale channels represent a real point of differentiation for our business. Based on the dynamic market environment, we can uniquely pull different levers across our channels to maximize profitability. We believe this is one of the main competitive advantages of our leadership position as the number one pork processor in the industry. Regardless of the external environment, our Fresh Pork segment maintains a relentless focus on improving operating efficiencies and we expect to deliver additional savings in 2025. Our focus on optimizing our operations goes beyond our Packaged Meats and Fresh Pork segments. In our Hog Production segment, we are pleased to report a $1 million profit in the first quarter. This strong rebound from the first quarter of 2024 reflects both improved industry market conditions, as well as our focus on operating a best-in-class cost structure on our retained farms through genetic transformation, herd health improvements, procurement, and nutrition savings. We are making great progress toward actively resizing our business. We have reduced the number of company-owned hogs produced from a high point of $17.6 million in 2019 to an expected roughly $11.5 million in 2025. Over the medium term, we plan to further reduce our internally produced hog volume to approximately 30% of the needs of our Fresh Pork segment. The recent transition of 3.8 million hogs to external producers is going very smoothly. These agreements assure a consistent supply of hogs from established farming operations, with longstanding relationships with Smithfield and will reduce our exposure in the commodity markets as we reduce the number of hogs we directly own. Across the entire company, we drive a culture of continuous improvement. Each year, we look for new ways to improve operating efficiency and to reduce our cost basis with a goal to more than offset inflation. We expect efficiency savings to again contribute to enhanced profitability in 2025. We achieve improvements across our manufacturing platform through initiatives such as automation. Within our supply chain, we strive to improve service to our customers while optimizing cost. And in procurement and SG&A, we are continuously looking for ways to reduce overall spend. In conjunction with this effort, we reduced headcount in certain corporate and operations functions during the first quarter, streamlining our operations and improving our overall cost structure. And finally, we continue to evaluate opportunistic M&A in North America to support our growth strategies. In summary, we delivered solid first quarter results that position us well to achieve our outlook for 2025 and to support our growth over the long term. With that, I’ll turn it over to Mark to review our financials in more detail.

Thanks, Shane, and good morning to everyone joining the call. In the first quarter, we delivered $326 million in adjusted operating profit, an increase of 86% versus the prior year. This outstanding growth reflects improved hog production profitability as well as solid execution of our strategies in our Packaged Meats and Fresh Pork segments that partially mitigated tough year-over-year market headwinds. Underscoring what Shane mentioned, we ended the first quarter with a strong balance sheet and we have the financial flexibility to invest in growth and return value to our shareholders. Turning to the details of our first quarter results, starting with consolidated results and then a review of our performance by segment. Consolidated sales in the first quarter were $3.8 billion, which was a 9.5% increase compared to the prior year. This was primarily driven by higher feed and hog sales in our Hog Production segment as well as higher average sales prices across our Fresh Pork and Packaged Meats segments. As I stated earlier, we delivered adjusted operating profit of $326 million and an adjusted operating profit margin of 8.6% compared to adjusted operating profit of $176 million or 5.1% in the first quarter of 2024. First quarter 2025 adjusted net income from continuing operations was $227 million compared to $123 million in the first quarter of 2024. Adjusted EPS was $0.58 per share compared to $0.32 per share in the first quarter of 2024. Now turning to our first quarter segment results, our Packaged Meats segment delivered first quarter adjusted operating profit of $266 million and a robust adjusted operating profit margin of 13.1% in spite of higher raw material costs. First quarter Packaged Meats sales of $2 billion increased by 1.2% compared to the first quarter of 2024. A 5.7% increase in average sales price more than offset volume declines of 4.2%, which were driven by lower sales due to the later Easter holiday this year. The higher average selling price was driven by higher market prices for the pork value chain with key raw materials such as bellies and trim up 15% and 30% respectively year-over-year. Additionally, the higher average selling price was influenced by our continued favorable mix shift to higher margin items such as lunch meat and dry sausage. Turning to Fresh Pork, for the first quarter of 2025, we delivered operating profit of $82 million and an operating profit margin of 4%. This was down from $110 million and 5.7% in the first quarter of 2024 when we benefited from an unusually strong industry market spread between the USDA cutout and hog prices. In Q1 2025, the industry market spread was compressed as evidenced by a 14% increase in the CME lean hog price year-over-year, while the USDA cutout rose only 6% in the same timeframe. We were able to partially offset the tighter industry market spread with our continuous improvement initiatives to deliver cost savings in manufacturing and distribution. Fresh Pork segment sales of $2 billion increased 4.9% year-over-year. This was driven by an average sales price increase of 4.8% and flat volume. Lower pork supply and steady demand drove USDA pork market prices up year-over-year. Turning now to Hog Production, we are pleased to report a $1 million profit for the first quarter of 2025 versus a loss of $174 million in the first quarter of 2024. The substantial increase was driven by improved commodity markets as well as actions we’ve taken to optimize our operations. First quarter 2025 hog production segment sales of $932 million increased by 32% year-over-year despite a 21% or 800,000 head decrease in the number of hogs produced. The Q1 sales increase was primarily due to the following factors. First, as we transitioned internally produced hogs to external operators, we recognized approximately $155 million for the sale of commercial hog inventories. Second, our average market hog sales price increased primarily due to a 14% year-over-year increase in the CME lean hog index. And finally, we increased external grain and feed sales by $73 million, primarily due to our new external operators. Taking a look at our other segment, which includes our Mexico and bioscience operations, it outperformed the prior year by $23 million, posting an operating profit of $14 million in the first quarter of 2025. This was led by strong performance in Mexico. Our corporate expenses also came in $3 million below the prior year, as we look for ways to lower our cost basis throughout our organization, including SG&A. Turning now to our strong balance sheet and financial position, at the end of the first quarter, our net debt to adjusted EBITDA ratio was 0.7x, well below our policy of less than 2x. Our liquidity at quarter end was $3.2 billion, including $928 million 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. In the first quarter of 2025, we used $166 million of net cash flows and operating activities versus $219 million last year. Capital expenditures in the quarter were $79 million compared to $92 million in the first quarter of 2024. More than 50% of our planned CapEx 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 22 of this year, we paid a quarterly dividend of $0.25 per share, reinforcing our commitment to return value to shareholders. And we expect to pay a dollar per share in annual dividends this year, subject to the Board’s discretion. Now turning to our outlook for fiscal 2025, which we reaffirmed this morning. In the face of a dynamic consumer spending and tariff environment, we expect to continue to grow profitability by executing our core strategies that Shane reviewed. First, we anticipate that total company sales to increase in the low to mid single-digit percent range compared to fiscal 2024. Our outlook for segment adjusted operating profit is as follows. For our Packaged Meats segment, we anticipate adjusted operating profit in the range of $1.05 billion to $1.15 billion. For Fresh Pork, we anticipate adjusted operating profit of between $150 million to $250 million. As Shane mentioned, we continue to execute our best sales strategy in response to recent tariff actions. And we believe our 2025 range for fresh pork addresses tariff risk. For Hog Production, we anticipate adjusted operating profit to range between a loss of $50 million to a profit of $50 million. And we anticipate total company adjusted operating profit in the range of $1.1 billion to $1.3 billion. Our total company operating profit outlook reflects continued efforts to more than offset inflation through cost savings and efficiency initiatives. We anticipate capital expenditures of between $400 million and $500 million for fiscal 2025. And finally, we anticipate an effective tax rate of between 23% and 25% for fiscal 2025. In summary, today we reaffirmed our outlook for 2025 based on solid Q1 results and our continued expectation that we can generate operating profit growth even as we navigate a challenging consumer spending and tariff environment. Now I’ll ask the operator to open up the call for Q&A.

Thank you. And today’s first question comes from Megan Clapp with Morgan Stanley. Please go ahead.

Hey, good morning, Shane and Mark. Thanks so much. I guess we could just start maybe with tariffs, obviously a very dynamic situation. You said the guide addresses tariff risk. Wondering if you could just expand on that? Are you including the 145% China tariff rate as it stands today? And what exactly does that mean in terms of how you’re thinking about your own export demand? I asked because some of the third party data we’ve seen would suggest some pretty meaningful reductions in exports to China recently. So just wondered if you could provide a little bit more detail on maybe what you are seeing specifically if that’s different than the industry and what’s included in your outlook? Thank you.

Yes, thanks, Megan. So, as it relates to China, from an industry standpoint, we can’t underestimate the importance that China has been to the overall industry. Last year, 2024, China was responsible for about $1 billion, a little over $1 billion of sales coming out of the U.S., and that helped keep the overall revenue profile up in hog prices and meat. With China no longer essentially being available, we have really had to pivot our business. And Donovan, I’ll let you talk to this, but it’s – what we’ve built over the last few years is really a lot of different levers in fresh pork that we can pull. So we are able to ebb and flow with different markets. For us, China represents in total about 3% of our revenue. And so while it’s important, we do believe we have other options and other, again, levers we can pull through the channels that we discussed a little bit earlier. So, Donovan, you want to talk to specifics about what we’ve been doing?

Yes, thanks, Shane. I appreciate it, and thanks Megan for the question. We understand how important the tariff topic is, and I think we alluded to this in our last call, but it’s in the narrative that was talked to by Mark and Shane earlier, we kind of put this in perspective. We believe we are better positioned than others to navigate due to our team. We’ve been through this before. It’s nothing new to us. We fully expected this tariff interruption as we came into 2025. So first and foremost, it was alluded to, but specifically as what Shane mentioned, our best customer, we are going to focus on packaged meats, and we are going to focus on our fresh pork segment first in the domestic fresh pork segment, I’ll say, and our higher value fresh pork items. So we understand and we’ve talked a lot about China. It seems to be a continuing topic, but we’ve got 30 other export markets we sell to. So – and we are utilizing our next best sales strategy that we continue to talk about here. So, albeit that this is China at 145% is not a viable sales market for us at the moment, we do believe and we hope that things will continue to work and progress to a settlement there, but if it does not, we’ve got a strategy to mitigate and to improve our sales and to use our next best sales strategy to pretty much mitigate as much as we can from the China aspect. And we’ve got to remember too that and we are one component in this, and we are a large component, but everybody faces the same China struggles that we do. So, and most importantly, I want to say that we have got this fully integrated into our 2025 operating profit outlook. So, we feel comfortable about our profitability range and we also feel pretty good about where we sit with alternative markets as it respects to the products that are currently going to China.

Thanks. That’s really helpful, a lot of detail there. Maybe a follow-up somewhat related just on hog production, maybe you can talk about your current view, I guess two part question. Part a, your current view on industry hog supply and demand as we think about the remainder of ‘25 and whether that’s how the tariff environment impacting that outlook relative to a month ago. And as it relates to your own hog production outlook, you had some strong performance in one queue and the curve would continue to suggest that profitability should remain pretty strong in 2Q and 3Q. So, any updated views there as it relates to the tariff environment, how that’s impacting your own hog production assumptions would be helpful.

Yes. Where we have seen the impact from tariffs as it relates specifically to hog production was really on the revenue side. And so, in the immediate 10 days following the announcement of the tariffs, we saw a tremendous amount of volatility in hog production, again, from the revenue side. That has since rebounded; we have seen that come back, but it did at one point, the industry seen about a $12 a head swing just from the revenue standpoint. As it relates to the input cost, the hogs that we raise here, we feed corn and soybean meal that’s grown here, and those hogs are sold here in the US. So, not a big impact on the raising cost side, just more related to, again, to the potential impacts on the revenue side. Now, we have seen meat remain strong, and that’s helped elevate hog prices back up to more normalized levels and we did have, as you mentioned, a really nice Q1 in hog production. The futures curve does indicate that Q2 and Q3 will remain strong. And then in Q4, what we see is that normal return to seasonality. From an overall supply-demand balance standpoint, I think my personal opinion is we are in a balanced situation now. We are not hearing anything about any expansion going on. However, that could change as profitability moves back into hog production and more normalized cycles return. But what we are hearing today and what we are seeing is a pretty balanced industry at this point.

Great. Thanks Shane.

Thank you. And our next question today comes from Ben Theurer with Barclays. Please go ahead.

Hey. Good morning, Shane. Mark, congrats on the good result for 1Q. Two quick ones, so first, when we look at the results for the first quarter and I know you just spoke about four weeks ago on your fourth quarter results. And back then, it felt like you were a little bit more cautious on the first quarter. So, just wanted to understand if you could maybe break down what your initial expectations were for 1Q and how it then ultimately turned out in the first quarter. Where were the upside surprises within the different segments? That would be my first question and then I have a quick follow-up. Thank you.

Yes. Ben, it’s Mark. Thinking back to the year-end call, really the caution was around the later Easter holiday as we saw it coming into the first quarter. So, with Easter three weeks later this year, some of that volume was pushed into the second quarter additionally. With the higher raw material input costs, primarily bellies and trimmings being up 15% and 30% respectively year-over-year, allowing time for our formula pricing to catch up. And then just a cautious outlook from the consumers in general, trading down across the portfolio, but really that plays to our strength where we have a solution, as we have discussed, to meet that consumer wherever they are in their budgetary constraints with a quality, branded or private label product. So, just a little bit of a trade down in the consumer environment was leading up to the caution in the first quarter.

Okay, Got it. And then second, if we just come back maybe to the packaged meats business, which obviously you have flagged in your prepared remarks, but wanted to dig a little bit deeper into some of the initiatives you are doing on the lunch meat side where you see the largest opportunities. What portion maybe of CapEx or focus of growth investments are you planning for the next couple of years to really drive that position of yours up in the packaged lunch meat, which seems a great opportunity as to further grow the packaged meats business?

Yes, Ben, I will take the capital question and I will throw it to Steve to talk a little bit more about the strategy. But again, as we have said, the expectation is to spend between $400 million and $500 million annually on CapEx, and about half of that spend is on return on investment type projects. So, adding capacity in high margin categories, expanding our capabilities and really about improving our cost structure as well, whether it’s through automation or repurposing labor against higher value yielding positions within the facilities. And the other half is going to be basically on maintenance, repairs and maintenance type spend. But I would say that the skew of the spending again, from a segment basis will be more heavily to the packaged meats and fresh pork segments for the capital moving forward. So, I will turn it to Steve to talk a little bit more about the strategies.

Sure. So, I appreciate the question. So, when you think about the – I guess a couple of ways to answer this. So, when you think about the lunch meat category, so one way we think about lunch or lunch day part, and when you think about lunch day part, the key thing about that is, we have been making gains in this space, really due to the targeted approach that we have to consumers and also from an innovation standpoint. So, when we think about the lunch day part, we actually break that down into three categories. So, we have talked about the bulk deli lunch meat as a category. We also talked about packaged lunch meat and then portable meals. And the thing about all three of those categories, when you look at the results in Q1, is that all three of those categories, we grew share. And then in addition to that, the ACV was up total four points in Q1. So, when you think specifically about one of the categories that we have talked about in the past with Prime Fresh and freshly sliced deli. On the Prime Fresh side, that is the fastest growing brand within that space. So, when you look at Q1, we were up 0.7 points for packaged lunch meat on the branded side. And again, that outpaced everybody else in the category. Likewise, we also saw gains in share in the bulk deli meat. So, as Mark had mentioned, it is a big focus for us. We continue to see some big wins, not only from distribution gains, but also consumer acceptance and velocity that we continue to see increasing within this specific space. So, it’s a big category for us and it’s a big focus. So, we continue to see a lot of opportunity as we go through this year.

Got it. Thanks, Steve.

Thank you. And our next question today comes from Leah Jordan with Goldman Sachs. Please go ahead.

Good morning and thank you for taking my question. I just wanted to stick with packaged meats a little bit, seeing if you could provide more detail on how the volumes trended by month throughout the quarter, just so we can isolate the impact of Easter. And just how are you thinking about the balance of volumes and price in that segment as we go throughout the year?

Sure. No, I appreciate the question. So, I will talk about it in a couple of ways. So, when you think about the packaged meat side, we are going to break it down into really the retail side of the business and the foodservice side of the business. So, when you think specifically about Q1 in the retail side, as Mark and Shane had already mentioned, I would say there are a few different factors that impacted the results in Q1. So, first off, we have the shift and the volume shift that we have between Q1 and Q2 because of Easter, with Easter occurring three weeks later. Obviously, a sizable piece of our business is seasonal hams. So, we see that volume shift from Q1 into Q2. In addition to that, we also saw higher raw material input costs versus last year. Mark had already mentioned bellies were up 15%, trim up 30%, and we also had B-50 is up about 19%. So, all of those had an impact on our overall profit margin percent. And then finally, we are starting to see some consumers trade down to less expensive alternatives. So, I will quickly address each of those. So, when you think about the Easter volume shift that you are asking about, the reality is we see that volume coming through into Q2. And the reality is when we look at where we are going to be for the year, we still expect, as Shane had mentioned, to be up about 1% in total volume for the year. So, we do see that volume coming back the way we expected from an Easter standpoint. When you think about the pricing and the raw material markets that we were dealt with, so although timing varies by category and product line, our formula prices are privately able to help mitigate some of those higher raw material costs that we saw in Q1. And also, we are seeing slightly, although they have come down, we are still seeing slightly higher markets in Q2 versus where we were a year ago. And then the other one is the key point is when you start to see that consumer shift that’s taking place. To me, that really highlights the benefits of our strong brand portfolio. So, we can really help mitigate some of these factors that we typically consider uncontrollable by really staying focused on our current strategies. So, our diverse brand portfolio that we have, this really provides us the ability to market our products, the customers and consumers across multiple categories and price points. So, as those consumers start to shift down that you are hearing a lot about. So, if they decide to shift down and they are buying a premium product, they are going to shift from a premium product down to mid-tier or mid-tier down to value or opening price point. If that consumer does decide to trade out a brand to enter private label, we have a good opportunity to capture that sale at that point because of the breadth and depth of private label that we produce for a lot of our retail partners. So, all of those things combined really had an impact in Q1. But I would say that the strategy that we have in place and staying focused on really the portfolio that we have and the way we can cover that pricing spectrum, mix optimization that you have heard us talk about and how we continue to shift that mix to higher margin products and not be tied to so much commodity product, which is really certainly being impacted because of the higher raw material costs. The innovation that we continue to bring to the market and then Shane and Mark had both mentioned the operational efficiencies, which is a big focus that we have. So, all of those things combined, the reality is we are sticking with the guidance that Mark had already mentioned on package meats when we look at the remainder of 2025.

Thank you. That’s all really helpful color. Just kind of a related follow-up, speaking about the consumer trading down, I know you have a range of price points across your brands. Just what have you seen in the competitive environment within package meats? Maybe how did promotional activity track versus your expectations in the quarter and just how are you thinking about the promotion environment as we go through the year?

Yes. So, I would say that from a promotional standpoint, from a competitive set, it’s nothing new. So, it’s always going to vary depending on what their specific strategy is at the time. So, whether somebody decides to try and grab share short-term through increased promotions to drive in-trade, to drive some volume. The reality is, we have always dealt with that. So, we are very consistent with how we drive our overall business. And the way we look at this business is it would be very easy to grab share short-term by increasing our trade or promotional strategy. But the reality is that it’s really not the right way to really manage that business because it’s short-term. And if you are going to gain it on price, you are probably going to lose it on price. So, when we look at opportunities to grow our business, we are focused on the long-term. So, how do we gain that consumer acceptance and drive consistent volume and repeat purchases with that consumer versus just trying to drive a one-time purchase by having a low price point out there.

Great. Thank you.

Thank you. And our next question comes from Thomas Palmer with Citi. Please go ahead.

Good morning and thanks for the questions. I wanted to, I guess first just ask on the hog production outlook. The first quarter was fractionally profitable in a seasonally weak quarter. And then your messaging when answering one of Megan’s questions about 2Q and 3Q seems pretty positive. So, I guess was there at least a contemplation in terms of boosting the hog production outlook or at least raising the low end of the outlook, because it does seem like the next couple of quarters should be positive at least?

Yes. Tom, we do again see 2Q and 3Q looking at the futures curve, they do look to be strong. Looking at the fourth quarter, right now it looks like normal seasonal losses will occur, but we are a little bit cautious. We saw the impact of the tariff announcements, what that did to the revenue side of the business. And we believe we have appropriately priced that in when you look at our forecast for the year in hog production.

Okay. Thanks for that. And then I just had a follow-up on the second quarter. You have noted some of the discrete headwinds that maybe are a little more isolated to 1Q in terms of Easter and some of the raw material factors. I guess as we are thinking about packaged meats, especially. Any help on kind of how you are thinking about the flow through of profitability? I mean I would assume sequential improvement is expected in the second quarter, but any help I guess as we are thinking about last year in terms of puts and takes?

Tom, you are cutting in and out in the question. So, I didn’t get it. So, could you repeat the question again, please?

Yes. Sorry about that. Yes, just on the Packaged Meats segment, you noted some of the puts and takes, it sounds like that weight on 1Q maybe and then become a benefit in the second quarter. So, it did seem like the message was sequential improvement. Wondering how that might compare on a year-over-year basis for profitability in packaged meats?

Yes. Again, I think that cautious consumer that we mentioned and trade downs across the pricing portfolio could compress margins year-over-year, certainly. And again, as Steve indicated, while costs have come down, raw material costs have come down from the first quarter, they are still inflated versus the second quarter of last year. So, with our formula pricing, it does take a little bit of time to catch up. So, I would say there will be a little bit of margin compression as we move into the second quarter as compared to last year.

Thank you. And our next question comes from Yasmine Deswandhy with Bank of America. Please go ahead.

Hey guys. Thank you so much for the question. So, I just had a similar question that Tom asked, but on fresh pork instead. So, quarter-to-date, we have been seeing some continued compression in applied spreads in fresh pork processing. So, how should we think about that impacting 2Q profits for fresh pork?

Yes. So, I will start and turn it over to Donovan. But seasonally, the second quarter and third quarter, you do see compression in that market spread overall with higher hog prices, as we have discussed. But Donovan and the team have done a great job of reducing and improving the cost structure overall, so that we are not necessarily as bound by the industry market spread as we have been in the past. Additionally, by looking to sell up the value-added side of our portfolio, whether it’s case-ready or marinated driving incremental sales margins. But you will continue to see that seasonal compression in the market spread, which will impact profitability overall. Donovan?

Yes. Mark, totally agree with that assessment. I mean we are going to go through that seasonal compression. It’s not unexpected. So – but what I would like to talk about is the focus of our strategy is more related to our significant efficiency gains through automation improvements. Shane talked about it earlier. I think it’s been a common theme here. We are really attacking our cost structure on fresh pork. And that’s going to continue. And that only helps this unknown aspect of compression in the market spread. So, we know we are going to go through it. We don’t know how wide it will be. But we – look, we are very optimistic about how our cost structure compares to that. So, I just want to give you some solace in that our market outlook looks very favorable. Market already addressed that we have got this factored into our outlook and profitability in fresh pork. And we have got bandwidth when it comes to these efficiency gains I am talking about. We are very excited about that and hope to talk more about it in our future calls.

The only other thing I would add as it relates to fresh pork and we talked about this in the context of packaged meats is the timing of Easter. Well, with it being three weeks later, in fresh pork, we have seen a delay in some of that traditional promotional activity that would take place for fresh pork. So, we expect what we typically would see in April pushing a little further into May and June from a promotional standpoint.

Okay. Great. Thank you so much, guys.

Thank you. We have time for one more question today. And our final question comes from Heather Jones with Heather Jones Research. Please go ahead.

Good morning. Thanks for the question. I wanted to start on the Hog Production side and on the genetics piece. I was just wondering if – it’s a two-part question. First, wondering if you could just qualitatively give us a sense of how much of those benefits have you already realized versus how much is still on the come? And then presumably, the benefits are related to sal productivity, but I was just wondering if there are any offsets that we need to be aware of with that genetics change?

Yes. So from a genetic standpoint, we are in the last timeframe, said the last 6 months of having new genetics across our commercial herds. So this has been about a 5-year project, Heather. So we’re in the last phases of that. We are beginning to see the impacts of that manifest in our financial statements. You know with the grow-out cycle of a hog, it’s 10 months from the time that new genetic sal has a market pick that is ready to come to the market. We are beginning to see that. And you’re correct, most of that is on the sal productivity side. We’ve seen things like our PMSY really expand exponentially, which is helping our overall cost structure. So the sal productivity is a big piece of that. From a trade-off standpoint, as you know, there’s always trade-offs. And one of the things we’ve learned in this new genetic is that it is a little more – it is a little more difficult from a health perspective. And so we do see a little bit of trade-off in health across our herds. But again, we’ve implemented a number of practices to improve the health status of our herd. So that’s something we feel like we can overcome. So I would tell you, we’re almost done, and we really expect to begin seeing the full impact of that as we continue to move through 2025 and definitely in 2026.

Thank you for that. And then just talking about industry health and all, I mean, numbers, process volumes have just significantly lagged expectations early part of this year. And my understanding a lot of this is based on industry challenges with disease and all. I was just wondering what your thoughts are on that as far as how quickly that will be resolved and – or do you expect that to be a challenge for the industry for much of ‘25?

We are coming out of the winter months. We are hearing more as it relates to disease across the industry. I think you can see some of that in the futures market, how people feel about disease across the industry. For us, we have seen, depending on the region, some slightly elevated cases, but I don’t think to the level that some in the industry are facing it. So I do think it’s going to be an issue for the industry as we kind of continue to move through 2025. And we’ll see as we get out into the later parts of this year, the second half and really into the fourth quarter, if we have any holes coming in our process. Donovan?

Yes. I mean the only thing I’ll add is I agree with everything Shane just mentioned. We do see, I mean, numbers are tighter. I think that’s a fact. And I think our summertime period I think we’ll see tighter numbers. You can see that currently in the cash market for hogs right now. But all in all, that’s something else we expected, I think the industry expected, and I think we are balanced. I think as far as pork is concerned, we look at – we see or expect a pretty balanced model throughout the summer and the rest of 2025.

Wonderful. Thank you so much. I appreciate it.

Thank you. This concludes the question-and-answer session. I’d like to turn the conference back over to President and CEO, Shane Smith, for closing remarks.

Well, thanks, everyone for joining our call today. As we mentioned, we are off to a great start in 2025. We do have a seasoned team that is prepared to navigate a really dynamic macroeconomic environment. And we believe again that we are well positioned to deliver long-term growth and increase value for our shareholders, and we look forward to updating you on our progress following Q2 results.

Thank you. The conference has now concluded, and we thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.