Good day, and welcome to the Smithfield Foods' Third Quarter 2025 Earnings Call. Please note this 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 Third 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. They 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. Finally, all references to retail volume and market share are based on Circana 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 Fresh Pork. I will now turn the discussion over to Shane.

Thank you, Julie. Good morning, everyone. I'm pleased to report that we delivered a record third quarter adjusted operating profit of $310 million, which represents an 8.5% increase year-over-year and an adjusted operating profit margin of 8.3%. We achieved record third quarter results by delivering innovation, value, and convenience to our customers and consumers and through a continued disciplined execution of our strategies. Our Packaged Meats segment achieved its second highest third quarter profit on record despite persistent higher raw material costs and a more cautious consumer spending environment. This underscores the power of our brand and private label portfolio strategy to deliver quality and value across all price points. Our Packaged Meats segment performance was driven by product mix improvements, our well-diversified portfolio of products and price points, new product innovation, and operating efficiencies. Our Fresh Pork segment was pressured by a compressed industry market spread, which was driven by higher hog prices. As a result, a portion of our Fresh Pork profits moderated to our Hog Production segment, both were retained within our pork operations due to our vertically integrated model. In the face of challenging market conditions for our Fresh Pork segment, I'm proud of our team for mitigating more than half of the year-over-year compression in the industry market spread. Additionally, Fresh Pork has been navigating in a challenging tariff environment. To achieve the level of profitability that the segment has accomplished demonstrates our team's outstanding execution on all controllable aspects of the business, including optimizing the net realizable value of each hog and continuing to drive operational efficiencies. As I noted a moment ago, our Hog Production segment benefited from higher hog prices. Additionally, the team has tirelessly executed our strategy to improve operational performance and lower our raising cost. Hog Production segment adjusted operating profit more than doubled since last year as a result of more favorable markets, coupled with the improvements on our retained farms. Now turning to our outlook for fiscal 2025. I'm pleased to report that we've raised the midpoint and tightened the range of our outlook for 2025 adjusted operating profit by staying true to our strategies and delivering on our commitments. Mark will share more details in a few minutes. Now I'll turn to our key growth strategies. Our five strategic growth priorities are as follows: Increased profits in Our Packaged Meats segment through enhanced product mix, volume growth, and innovation; grow profits in our Fresh Pork segment by maximizing the net realizable value across channels; achieve a best-in-class cost structure in our Hog Production segment; optimize operations and deliver operating efficiencies in manufacturing, supply chain, distribution, procurement, and SG&A; and finally, evaluate synergistic M&A opportunities across North America. First, in Packaged Meats, which is our largest and most profitable segment. Protein remains a growing category with quality protein representing a core staple in consumer diets. Consumers are also looking for value, convenience, and new flavors. Our Packaged Meat segment is delivering on each of these consumer preferences without sacrificing profitability. Our 3-pronged strategy to grow Packaged Meat segment profit encompasses product mix improvements, volume growth, and innovation. First, product mix. We remain focused on continuing to improve our product mix, which enhances margins and drives unit velocity. A key driver of this strategy is to convert sales of our more commoditized heritage products, like large holiday hams, into increased unit sales of higher-margin products for everyday consumption, such as packaged lunchmeat and quarter hams. Smithfield Prime Fresh packaged lunchmeat continues to win with both customers and consumers. Our premium lunch meat offering delivers the quality of a freshly sliced daily meat without the wait. During the third quarter, while volume for the $6.3 billion packaged lunch meat category was down, Prime Fresh volume increased double digits, and we gained a full point of volume share versus the third quarter of 2024. This outstanding volume growth was driven by higher ACV and product innovation, and we see a long runway ahead. Our Smithfield Anytime Favorites quarter hams are another great example. Unlike large holiday hams, quarter hams are perfect for everyday family dinners. They are also a great value, which consumers love. Smithfield Anytime Favorites quarter hams increased volume share by 5.7 points versus the third quarter of 2024. Another key component to unit sales growth is expanding our dry sausage offerings to capitalize on the popularity of pepperoni and salami. These products are growing faster than the packaged meats category as a whole and have higher margins. To position our dry sausage products with well-diversified price points, we market them under specialty brands like Margherita and Coronado as well as value brands like Armour. During the third quarter, our total branded dry sausage category grew volume by nearly 8% versus the third quarter of 2024. Second is volume. We participate in 25 key packaged meat subcategories in retail, 10 of which are valued at over $1 billion, and we see continued white space opportunities to grow volume and increase market share in each of these categories. Year-to-date, through September 28 versus the same time period a year ago, we grew branded market share in 6 of these $1 billion plus categories. We are driving volume in today's economy by delivering quality protein at a good value. Our portfolio of quality branded products spans multiple categories and price points and is an important competitive advantage for Smithfield. We are attracting and retaining consumers within our branded portfolio, even as they trade up and down the value spectrum. Value seekers are also turning to private label, which is a key competitive advantage for us. Retailers and food service operators look to us as a trusted partner who consistently and reliably deliver high-quality products at scale. Over the past several years, we have improved private label profitability, which represents just under 40% of our retail channel sales. Another great example of delivering value is in the sausage category, which spans all dayparts with an average retail price per pound of $4.23. Our sausage offerings help today's consumers get their protein cost-effectively. Our sausage offerings collectively grew volume by 2.9% in the third quarter versus the third quarter of last year. In addition to delivering value, we are driving volume by investing behind our brands with direct-to-consumer advertising and by executing effective trade promotion. During the third quarter, our Smithfield brand launched a new We Speak Pork national advertising campaign. For decades, Smithfield has set a standard for quality and craftsmanship in pork. The new campaign is already driving positive engagement across digital and social platforms and helping us reach younger audiences with the focus on millennials and Gen Z shoppers. Beyond awareness, we are seeing early indications of stronger purchase intent and improved brand affinity. Earlier this year, we launched a new campaign for our Eckrich National brand, themed 'Eckrich, the sausage that takes you home.' We are also proud to continue our partnership with the College Football Playoff Foundation and its Extra Yard for Teachers initiative for the 2025, 2026 season. Our brand-building efforts are showing returns. Average cook dinner sausage volume increased 7.8% versus the third quarter of 2024, which was more than 5x the category growth. Next, product innovation. Innovation is an important pillar of our packaged meats growth strategy. We continuously develop new concepts to address emerging consumer trends. These new products target consumers through line extensions of our trusted brands, new flavors, and more convenient packaging and sizing options. On October 1, we launched our Smithfield Mike's Hot Honey Bacon, a sweet heat innovation that merges our signature honey-smoked bacon with Mike's Hot Honey's iconic flavor. The product taps into the fast-growing sweet heat trend and strengthens our connection with younger consumers. It also serves as a strong proof point of how Smithfield is modernizing the category and driving brand relevance through innovation. This exciting new launch is part of Smithfield's We Speak Pork brand campaign. Another great example of an innovative product that aligns with evolving consumer preference for new flavors is our Curly's Ready In Minutes BBQ Meals. Curly's is the #3 brand in refrigerated barbecue meats and enjoyed the #1 year-over-year volume share increase during the third quarter at 1.4 points. The growth for Curly's is being aided by innovation from our New World flavors such as Korean barbecue Pulled Pork, Chimichurri Pork Carnitas, and Thai Sweet Chili Pulled Chicken. Innovation is also a key driver of our 13.5% increase in foodservice sales in the third quarter versus the third quarter of last year. Despite high food-away-from-home inflation, our innovative new offerings are attracting foodservice customers. Year-to-date, our foodservice sales increased over 10% with 3% volume growth. Key foodservice innovations include our Smithfield ready-to-eat bacon as well as 55 new limited time offers we have introduced across value-added packaged meats categories. We are giving customers and consumers reasons to keep coming back. In summary, our Packaged Meats segment is successfully driving volume and profitability by improving our product mix, offering value, building brand awareness, and delivering on product innovation. Now let's talk about our second growth strategy, increasing our Fresh Pork segment profitability. We are focused on growing Fresh Pork operating profit by maximizing the net realizable value of each hog and driving best-in-class operating efficiency. A key to effective whole hog utilization is developing multiple channels as outlets for our fresh pork products and operating with agility across these channels. The execution of our strategy is why our third-quarter results outpaced the significant compression in the industry market spread. At a time when volume and consumer staples are challenged, our fresh pork segment delivered 5% volume growth in the U.S. retail channel. This was driven by consumers' desire for quality protein in their diets. We saw U.S. retail profit enhanced by value-added case-ready items. We also have increased profitability in our pet food and pharmaceutical channels. These channels offer alternatives to certain export markets for some of our products. Our Fresh Pork segment continued to deliver operating efficiencies and cost savings which also helped mitigate the impact of the compressed market spread on segment profitability. Now to our strategy to optimize our Hog Production segment. I'm proud of the team's work to achieve a best-in-class cost structure on our retained farms. Over the past several years, we have sold underperforming farms and improved our genetics, our nutrition, feed procurement, and herd health. While we still have work to do, we are pleased with our progress to date, and we are already demonstrating the power of our vertically integrated model with our more streamlined hog production operations. Improved sow productivity and feed conversion are key contributors to our cost savings versus last year. We still have more room to benefit from continued optimization. We expect our raising costs will continue to trend lower from the benefit of our reform measures and our genetics and overall herd health initiatives. This year, our Hog Production segment is on track to produce under 11.5 million hogs, which represents about 40% of our Fresh Pork segment's processing needs. Over the medium term, we remain focused on actively resizing our business to reduce to approximately 30% the number of hogs we produce ourselves. We believe this will provide a sufficient assured supply of high-quality raw materials to our Fresh Pork segment while reducing the impact of commodity fluctuations on our consolidated results. Next, our strategy to optimize operations and deliver operating efficiencies in manufacturing, supply chain, distribution, procurement, and SG&A. Each year, we look for cost savings to offset inflation. We also dedicated a large portion of our capital investments toward automation, waste elimination, and throughput maximization. Automation has enabled us to redeploy labor to higher-value activities as well as to reduce our overall labor count. We also continue to refine and optimize our transportation and logistics activities. Through these strategies, we continue to lower our overall operating costs. Finally, we continue to evaluate opportunistic M&A in North America to support our growth strategies. We will remain disciplined in evaluating complementary and synergistic opportunities for our packaged meats business. In summary, we delivered a record third quarter result through solid execution across all segments. Our Packaged Meats segment has demonstrated resilience in today's market, underscoring our ability to grow share and expand profitability over the long term. Our Fresh Pork and Hog Production segments support the packaged meats segment with an assured supply of quality protein, and our disciplined operating approach continues to help us navigate a dynamic macro environment. With that, I will turn it over to Mark to review our financials in more detail.

Thanks, Shane, and good morning to everyone joining the call. As Shane stated, we set a record for the third quarter adjusted operating profit and net income, which reflected the resilience of our business model in a challenging market environment. Strong profit growth in our Hog Production segment more than offset market headwinds in our other operating segments, underscoring the benefit of our vertically integrated model. I'm pleased to report that we ended the third 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 third quarter results, starting with the consolidated results and then a review of our performance by segment. Consolidated sales in the third quarter were $3.7 billion, representing a 12.4% or $412 million increase compared to the prior year. This was driven by sales growth across all segments. Our record third quarter adjusted operating profit was $310 million with an adjusted operating profit margin of 8.3%. This was 8.5% higher than the adjusted operating profit of $286 million with a margin of 8.6% in the third quarter of 2024. Third quarter 2025 adjusted net income from continuing operations was also a record at $230 million and compared to $203 million in the third quarter of 2024. Adjusted EPS was $0.58 per share, representing a 9.4% increase from $0.53 per share in the third quarter of 2024. Now on to our third quarter segment results. Our Packaged Meats segment delivered third quarter adjusted operating profit of $226 million, which was the second highest third quarter profit on record and a healthy adjusted operating profit margin of 10.8%. These strong results in the face of persistent higher raw material costs and a challenging consumer spending environment demonstrate the success of our Packaged Meats segment strategy. Third quarter packaged meat sales were up $2.1 billion, increased by 9.1% compared to the third quarter of 2024. This was driven by a 9.2% increase in the average selling price with flat sales volumes. Industry-wide, volume growth has been challenged due to inflation and consumers' tight budgets. As Shane mentioned, we were able to maintain volume by delivering innovation, value, and convenience. The higher average selling price was driven primarily by higher market prices across the pork value chain with key raw materials such as bellies up 40%, trim up 35% to 68%, and ham up 14% year-over-year in the quarter. Next, in Fresh Pork, for the third quarter of 2025, we delivered adjusted operating profit of $10 million and an adjusted operating profit margin of 0.5%. While this was down from the third quarter of 2024, it is an impressive achievement given the compression in the industry market spread year-over-year at roughly a $40 million unfavorable impact on profitability during the third quarter of 2025. By delivering outstanding execution on all controllable aspects of our business, our Fresh Pork segment results only declined by $18 million, or less than half the market impact. Profitability was strengthened by sales and volume growth in the U.S. retail channel with profit enhanced by value-added case-ready items. We also grew volume and profitability in our pet food and pharmaceutical channels, executing well on our next best sales strategy. In addition, we continue to deliver operating efficiencies and cost savings, which helped mitigate the impact of the compressed market spread on segment profitability. Fresh Pork segment sales of $2.2 billion increased 12% year-over-year, primarily driven by a 12% increase in average selling price and flat volume. Turning now to Hog Production. We're pleased to report adjusted operating profit of $89 million for the third quarter of 2025 versus a profit of $40 million in the third quarter of 2024. The substantial increase was driven by improved commodity markets as well as actions we've taken to optimize our operations. Third quarter 2025 Hog Production segment sales of $813 million increased by 10.1% year-over-year. This was despite a 25% or approximately 850,000 head reduction in the number of hogs produced as part of our planned rationalization strategy. The third quarter sales increase was primarily due to increased external grain and feed sales of $120 million, largely due to sales to our new joint venture partners while our average market hog sales price was up 8% year-over-year, inclusive of the effects of hedging. Adjusted operating profit for our other segment, which includes our Mexico and Bioscience operations of $10 million in the third quarter, was down $10 million compared to the third quarter of last year, primarily due to lower bioscience sales volumes. Our corporate expenses came in at $4 million below the prior year, reflecting our disciplined cost management strategies. In summary, we are pleased to deliver record third quarter operating profit and net income despite challenging market headwinds due to solid, consistent execution across all of our operations. Next, let's review our strong balance sheet and financial position. At the end of the third quarter, our net debt to adjusted EBITDA ratio was 0.8x, well below our policy of less than 2x. Our liquidity at the end of the quarter was $3.1 billion, including $773 million in cash and cash equivalents. This is well above our policy threshold of $1 billion of liquidity. Capital expenditures for the first 9 months were $246 million compared to $268 million for the first 9 months of 2024. We now expect to spend between $350 million to $400 million in capital expenditures this year, primarily due to the timing of projects moving into 2026. Approximately 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 automation and improvement projects as we continue to lower our manufacturing cost structure and better utilize labor. Reinforcing our commitment to return value to shareholders, we expect to pay $1 per share in annual dividend this year, subject to the board's discretion. To date, we have paid dividends of $0.75 per share. Now on to our outlook for fiscal 2025. Today, we again raised our outlook for adjusted operating profit, this time by $25 million at the midpoint, given strong year-to-date performance as well as our forward outlook. This brings the total increase to $75 million since the original guidance we provided in March. While we continue to navigate higher raw materials and a dynamic consumer spending environment, we still expect to continue to increase total company profitability by executing our core strategies that Shane reviewed. First, we continue to anticipate total company sales to increase in the low to mid-single-digit percent range compared to fiscal 2024. Please note for comparability purposes, our sales outlook excludes the impact of Hog Production segment sales to the newly formed joint venture partners. Outlook for segment adjusted operating profit is as follows: For our Packaged Meat segment, we anticipate adjusted operating profit in the range of $1.06 billion to $1.11 billion. Our revised outlook reflects the impact of persistent higher raw material costs and a cautious consumer spending environment, including the potential impact of delayed SNAP benefits. For Fresh Pork, we now anticipate adjusted operating profit of between $150 million to $200 million. Our revised outlook primarily reflects the impact of the tighter market spread that we expect to see throughout the end of the year. For Hog Production, we've raised our anticipated adjusted operating profit range to $125 million to $150 million. Our revised outlook reflects the improved market conditions and better operational performance. As a result, we now anticipate total company adjusted operating profit in the range of $1.225 billion to $1.325 billion, which is a midpoint increase of $25 million from our guidance last quarter and $75 million from our original guidance. This primarily reflects the consistent execution by our flagship Packaged Meat segment combined with the benefits of our vertical integration. In summary, we're executing our strategy and delivering record results in a challenging market environment. We've raised our consolidated fiscal year 2025 adjusted operating profit outlook based on the stability of our $1 billion-plus Packaged Meat segment, combined with our ability to capture the outperformance of our Hog Production segment through our vertically integrated model. Our strategies are working, and we're well positioned to continue to grow profitability over the long term.

The first question comes from Leah Jordan with Goldman Sachs.

I just wanted to ask about packaged meats. I saw that volumes were flat in the quarter. You talked about a cautious consumer, you're even considering some SNAP funding changes here. So as you look to the fourth quarter and maybe an early look into next year, how are you thinking about the balance of volume and price as top line drivers there? And I may have missed it, but I recall last quarter, you were talking about 1% volume growth in this segment for the full year. I mean, any change to that look as you think about elasticity in the current environment?

Thank you, Leah. Steve, do you want to take that question?

Sure. Thank you. So first, I'll start out on the retail side of the business. So I would say that despite a soft retail environment, we are gaining ground. So if you take a look at Q3, retail sales were up 6%, and our dollar share and unit share were both up 0.1%, while the industry is flat on dollars and down 0.8% on units. So the big thing is we continue to execute our strategy to grow our value-added items and really focus on higher-margin units versus commodity bulk items, which really continues to drive our industry-leading profitability. So when you think about it, we're winning not only on our bottom line performance, but we're also seeing strong category performance. So a good example would be, in Q3, our ham units were up 11% versus last year, while the industry was down 1.7%. And then if you dig deeper into that ham category, Smithfield Anytime Favorites quarter ham was up 3.8%, while the category was down 5.9%. And then as Shane touched on when he went through his opening comments, dry sausage really continues to deliver some excellent results with units up nearly 13% versus last year, while the industry units were down almost 2%. And of course, Prime Fresh continues to be an outstanding item for us and very positive results, not only for Q3 but also as we go through the year.

That's very helpful. Regarding packaged meats, I wanted to discuss profitability considering the ongoing pressure from input costs. How do you plan to implement price increases? Looking ahead to 2026, what are your thoughts on the timeline for long-term margin recovery?

Yes. Thanks for the question. So first, I would say that I feel very good about where our packaged meats business stands today when you think about the sales increase that we were able to deliver in Q3, and also the strong profit margin coming in at 10.8%. So when you compare that to last year, obviously, yes, it's down slightly. And from a dollar standpoint, it's down about $13 million. But I think the key point to take into account is that our overall costs were up about 12%. And just the raw material side that was over a $200 million increase in Q3 this year versus last year. So I think that really shows the ability that we have to take pricing with our customers and also manage and mitigate some of those higher raw material costs with a lot of the different activities that Shane had kind of walked through, whether it's from a manufacturing footprint standpoint and really lowering our cost, supply chain, SG&As, and other areas. So when you take into account all those different initiatives, it's really helped us offset some pretty significant inflation, including about a 20% increase in the raw materials that I mentioned.

The next question comes from Heather Jones with Heather Jones Research.

I wanted to ask about your comment regarding another 30% decline in the final target for the number of hogs. The packaged meats environment is becoming increasingly competitive with new capacity coming online next year in sausage and bacon. I'm curious about your thoughts on this and how you view Smithfield's vertical integration as a competitive advantage compared to others in the industry.

Yes, Heather, if we look back to 2019, we were producing about 17.6 million hogs. We started a process to reduce that to around 10 million, resulting in about 30% vertical integration. Currently, for 2025, we anticipate production to be approximately 11.5 million, which will represent 40% vertical integration. It's crucial to note that we've removed our highest-cost farms, which tend to be located in areas with increased transportation expenses, whether for feed or for transporting hogs to processing plants. Even with the rising profitability in hog production, these farms that we've phased out would have been operating at a loss per head in some instances. Thus, it remains the right strategy to continue reducing production. Looking ahead to the medium term of moving from 11.5 million to 10 million, we want to ensure there’s an adequate supply of hogs for our plants. We have adjusted our approach in various ways, such as our actions in the East Coast over the past two years, where we transitioned contract growers into independent producers. Overall, the objective behind this reduction is to diminish the volatility associated with commodity hog production. I believe that maintaining a 30% target is appropriate, and we are still progressing toward that goal. The reductions made so far have maintained our hog availability for the Fresh Pork business and, ultimately, for the packaged meat sector. Therefore, we are confident in our plan to continue heading towards that 30% vertical integration.

And the follow-up, just wondering, I mean, clearly, this year, input costs have been affected by widespread disease. But as we're thinking about over the next few years and more of the industry becomes forward integrated into packaged meats and all, are you all expecting more volatility on that belly side? And is there anything you can do to mitigate that, just less of those become available to trade on the open market?

Yes, when we look at the supply side, hog producers have faced challenges for several years. They are starting to see profits this year, and the futures market indicates continued profitability through 2026. However, there hasn't been significant expansion in hog production. The USDA forecasts pork production to rise to about 28 million pounds in 2026, which is a roughly 3% increase. Nevertheless, the latest hogs and pigs report suggests a potential decrease. We are attentive to industry reports, but we are also closely monitoring our internal observations. At the start of 2025, there was a considerable amount of disease, particularly in the Midwest. We are keeping an eye on external reports regarding the disease outlook as we enter the colder months, which typically see more disease spread. However, I don't anticipate much expansion in the Fresh Pork sector. Donovan, would you like to add anything regarding Fresh Pork?

In terms of availability, we still believe the product market will remain strong well into 2026. We're not expecting any expansion or a decrease in disease to alleviate some of the markets we operate in. We are well-positioned to see elevated pork markets, especially given the current high prices in the protein sector. Our product categories are priced reasonably, and when compared to other proteins, we anticipate this trend will continue. Although there has been some recent pressure on the belly market, prices remain relatively high compared to historical trends, and we expect this higher belly market to persist through 2026.

The next question comes from Peter Galbo with Bank of America.

Maybe to stick on the topic of cost inflation. I guess, Shane, like one of the surprises was how high some of the cut markets remained over the course of the summer between bellies and trim. But now even since the end of the quarter, those have come in quite a bit. So I just want to get maybe an understanding from you whether that's just normal seasonality in terms of what you've seen even since the start of the quarter? Or has there been any sort of demand destruction that's caused some of the hog markets to kind of roll a bit more? Additional color there would be helpful.

No, I don't think we're seeing demand disruption, Peter. I think this is normal seasonality that we're beginning to go through. As Donovan said a while ago, the belly market is still elevated compared to historical terms, where we're sitting at in the fourth quarter. So I don't think we're seeing any level of demand destruction across the industry. Again, we don't see and hear a lot of expansion talk, at least not at a material level across the industry. And so when we look at that going into 2026, especially with beef markets still at elevated levels. I think pork is set up to continue to perform well in comparison to the other proteins. And again, Donovan, Steve, I don't know if there's anything you would add there, but I really don't see any type of demand destruction taking place.

Yes. To reiterate what we discussed, we're currently in a strong market. The conversation around the compressed industry spread is contributing to that, but regarding some near-term relief, we expect the usual seasonality as we approach Thanksgiving. However, I don't anticipate a significant drop in these markets. Demand for pork remains exceptionally strong from our perspective, and we expect that fresh pork demand will continue to increase after the Thanksgiving holiday, with solid demand anticipated for the first quarter of 2026. From the demand side, I believe this will mitigate any potential weakness, as we simply don't have enough supply in the market right now to negatively impact pork prices significantly. Overall, I think pork is positioned well as we move into 2026.

I want to quickly add that we are having many discussions regarding the belly side, particularly with bacon in the Packaged Meats segment. We are pleased with the overall performance we've seen in Q3 for Packaged Meats. Despite dealing with a high belly market, we have been very intentional about managing our pricing and promotions to protect category profitability in these inflated markets, which have remained high throughout the quarter. Even if we have to sacrifice a little volume, our volumes have generally remained flat. The focus is on managing those higher markets and ensuring we work closely with our customers, both in retail and food service, to implement appropriate promotions, while avoiding giving away our pricing or products due to high raw material costs or trying to lower prices via increased promotions.

Great. Shane, I'd like to hear your thoughts on beef. You mentioned it briefly, and I understand it can constitute around 20% of your packaged meats purchases. We've seen some comments from the administration regarding this, but how do you perceive the beef trim markets developing over the next year? Do you think there could be some relief on the horizon? This is a significant part of your raw material costs and has been a challenging area, so I'd appreciate your insights on this moving forward.

Yes. Everything we see, Peter, is still pointing to a recovery in beef being out in '27, later parts of '27. And I know there's been a lot of discussion recently in the last few days about Argentina and what can come in from there. If you look at what Argentina produces or what they're looking to go to, it could equate to about maybe 175 million, 176 million pounds. But to put that in context, the U.S. as an industry produces 25.5 billion pounds a year. So even if all of that export from Argentina was to come to the U.S., it represents about 1% of U.S. production. And about 85% of that is lean trim. Again when we think about the positioning where forecast from a value perspective as it relates to beef. I think we're really well positioned as a protein because, again, me personally, I don't see a material recovery in beef, again for another probably 18 months or so.

The next question comes from Ben Theurer with Barclays.

Shane, Mark, thanks for opening space for some questions here. Most of it has been asked, but just wanted to follow up a little bit within Packaged Meats across the portfolio, your brand versus private label. Obviously, a very successful give or take 9% increase here on pricing with essentially no impact on volume. So can you help us understand a little bit about the pricing initiatives and the mix effect maybe in between the different segments and the strategy you've been following? And how should we think about this price level as we move into the fourth quarter and maybe into the first quarter of next year? Is that something you think you could stick on? Or is there a component of it that might come back if the commodity markets were to come down? That would be my first question.

Yes, Ben, thanks for the question. And Steve, do you want to take that?

Sure. So I'd start off by saying that when you think about the pricing and the elevated markets that we've been dealing with, one of the big things we have to our benefit is we've really reduced the volatility in our business through our formula pricing on our private label business. And then on top of that, we have our well-known brands, whether it's a national brand or regional brand, along with strong consumer loyalty, really enables us to maintain those margins and pass along higher raw material costs. But at the same time, as Shane had walked through, we've been relentless on our operational efficiencies and lowering our costs. So all those things combined help us mitigate some of those higher raw material costs. And then how are we managing that? So when you think about some of the promotions that we run and not only what we're seeing, but also what we see our competitors do is that we are actually being very selective with our promotions. So we're focusing on quality over quantity. And we've really seen others in the industry do some pretty sporadic heavy discounting that might drive some short-term volume spikes. But the reality is it has limited impact in overall share growth or long-term consumer loyalty. So instead, we're focused on leaning into promotions that are more effective at driving volume and also keeping our brands top of mind. So the reality is our end game is to not trade dollars at the shelf with our competitors, but for us to build our brands actively with our retail categories, retailers categories. So really, our end goal is we want to make sure that we attract new consumers to a category. We also want to increase consumption. And at the end of the day, we want to reengage consumers that may have walked away from some of these categories. So I think when you combine all those things, that's how we're addressing the market and also dealing with some of these higher raw material costs.

Okay. Got it. And then just for clarification, you've lowered the CapEx guidance for the year. So maybe a little bit of clarity here on what is delaying that? Is that a delay? Or is that just a review? How should we think about the lower CapEx versus the prior guidance?

Yes, Ben, it's Mark. The changes are mainly due to the timing of certain projects that are now moving into early 2026, influenced by factors like plant availability for downtime. We will continue to manage our cash carefully and ensure that our returns justify any investments. However, we still have many opportunities to grow the business and enhance our cost structure through capital investments. So it's really just a matter of timing.

The next question comes from Megan Clapp with Morgan Stanley.

Just a couple of follow-ups from me as well. First, on the Packaged Meats profit outlook, I was wondering if we could just go back to Leah's question, if you could just unpack the change in the deceleration kind of in the year-over-year profit decline that's implied in the fourth quarter for Packaged Meats? And is there any way to just contextualize to what extent does that just reflect maybe pricing lagging the raw material costs because they stayed higher for a bit longer? And how should we think about that correcting as pricing catches up in the first half of next year, if that's the case?

Steve, you want to go first?

Yes, I would say there are two main points to consider. First, we have the ability to adjust our pricing in line with market conditions. Our private label business accounts for around 40% of our retail mix, giving us the flexibility to implement price changes as the market changes. Timing varies by category, as each one has different factors affecting the timing of these changes. On the branded side, we similarly have the flexibility in both retail and food service to adjust pricing when appropriate based on market conditions and competition. Our outlook for the remainder of the year reflects our current view of the business and where we expect the market to trend. This is why we are providing a range. Our focus areas include our national and regional brands and maintaining discipline in pricing and promotional strategies. Ultimately, we are concentrating on optimizing our product mix to grow unit volume on high-margin items, fostering innovation, and improving operational efficiency. All of these factors contribute to the guidance we've given for Q4.

That's helpful. This leads into my follow-up question for Shane. You've discussed a lot about the momentum in your strategies for Packaged Meats, including mix improvements, efficiencies, and innovation. Can you provide an overview of what stage you believe you are at with these strategies, especially regarding mix optimization and efficiency, which have supported margins this year? I'm trying to understand how these elements might trend into next year and beyond.

Yes, Megan, I'm not sure how to categorize our current progress, especially considering last night's game went 18 innings. What I can share is that the mix we've discussed is something that will continue to evolve. For instance, regarding our holiday ham components, the industry anticipates a 5% to 6% volume loss each year. Our objective at Smithfield is to compensate for that by offering more smaller packaging and everyday-use items. As we gradually lose holiday ham volume each year, we will be adjusting accordingly. In the dry sausage category, which Steve mentioned, we've experienced significant growth. A plant we invested in Nashville a couple of years ago has greatly increased our capacity, which we are now expanding into. Continuously assessing our product mix and flavor profiles will be crucial. We've made strides in attracting younger consumers with our flavors, which is also enhancing the profitability of our overall product mix. Looking beyond Packaged Meats to the company as a whole, it's clear that our unique supply chain and vertically integrated model are yielding benefits. By streamlining our hog production operations, we are seeing positive results on the bottom line. Q3 was a record quarter for us overall, even though no individual segment reached a record. However, the entire company is achieving record profits collectively. We notice profit shifts; for instance, we are facing pressure from hog prices, which is increasing meat costs in our Packaged Meats segment, but overall profitability remains high. As I consider the company's momentum, I'm focused on our vertically integrated model and ensuring that our bottom line continues to grow, generating consistent earnings and cash flow across the board.

We have time for one more question. Our last question comes from Max Gumport with BNP Paribas.

You mentioned throughout the call the cautious consumer spending environment that you're seeing now. I was hoping you could expand on what you're seeing and how that's informing your outlook for the next several months?

Yes, Steve, you want to talk to the consumer environment?

Sure. So it's a good question. We actually spend obviously a tremendous amount of time really understanding what's happening to the consumer. So I would say from a settlement standpoint, it certainly remains cautious, and we really continue to observe value-seeking behavior. So this trend is really consistent across the industry. So higher-income consumers are really demonstrating more resilience in maintaining spending levels. While we continue to see lower-income households across age groups really becoming more selective than what they're spending. So I would say the bottom line is consumers are definitely feeling challenged, and they're adjusting their shopping habits by making more shopping trips with fewer items, opting for larger pack sizes, stretching meals, and cooking at home more often, all those things are to really reduce their overall cost. Now despite these trends, we feel that we're in a great position because our protein really remains a clear priority for the consumer to provide their families, and pork products, whether it's fresh pork, with Donovan's team or Packaged Meats, the items are really doing well due to its affordability and also its versatility across both retail and food service. So really, when you think about it, our expensive brands that we continue to talk about and the portfolio that we have is really playing into the current state of the consumer because we have the ability to really capture that consumer across that pricing spectrum in a lot of different categories. And you've heard me mention several times that we've got strong brands that fit those needs for that consumer and it really puts us in a good spot. And then when you take into account private label as well, it really provides us the opportunity that as the consumer moves up and down that value spectrum. There's a good chance we can capture that consumer with a Smithfield-made product, whether it's branded or private label.

Great. And then just related to that, you had mentioned in the prepared remarks that your outlook for 4Q embeds an impact from delayed SNAP payments. I was hoping you could quantify what that impact is that's embedded in your outlook for 4Q and then provide a bit of color for how you got to that quantified impact?

Yes. So I would say for SNAP, so we're definitely paying close attention to what's happening with SNAP right now. So obviously, there's a lot of uncertainty around the federal funding and the potential for benefit disruptions happening in November. Now with categories that we sell, so this is for the total industry, about 7.5% of dollars are really tied to SNAP usage. So while any reduction will be a major issue for those consumers who rely on that, the overall impact to our business would be relatively minor. At the end of the day, families still need to buy protein to feed their households. And we don't expect a dramatic shift really in demand for the products that we sell. Now that said, I'd say we're certainly concerned about the broader impact to the American consumer. And we're working closely with our retail partners to make sure we're promoting items that really deliver on strong value and affordability based on the current situation with SNAP. And we do believe that our diversified portfolio that I just talked about really gives us a significant competitive advantage, and we're better positioned than others due to our pricing strategy to deliver really quality products across that pricing spectrum that we continue to reference. And of course, that would also include our ability to produce private label products. So we're taking that into account. Obviously, it's a very fluid situation and continues to change, but we did take some of that into account into the guidance that Mark was referencing.

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

I'd like to thank everyone who joined the call today. We are pleased with our record third-quarter results. I think the solid execution by our teams demonstrated this year underscores how well we're positioned to deliver growth and increase value for our shareholders over the long term. So thank you all for joining.

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