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HKEX Stock Code：288Corporate NewsletterIssue 10 – July 2017 [email protected]
Business Overview
Financial HighlightsThis newsletter covers the latest developments and information relating toWH Group and its subsidiaries, Shuanghui Development and Smithfield Foods,
in the second quarter of 2017 (April to June).
The Wall Street Journal Recognized WH Group’s Contribution in IntroducingWestern Technologies to China, in order to Enlarge Economic Benefit (4th
April 2017)
Wall Street Journal ran an interview piece after interviewing WH Group’smanagement. WH Group bought the pork processor Smithfield Foods in 2013.It is at the forefront of a shift in how China is using Western practices andtechnologies to advance its economy. Mr. Wan Long suggested that theCompany attaches great importance to food safety and makes good use ofSmithfield’s quality assurance techniques to ensure food safety.
For details, please refer to this link.
Smithfield Launched a New Antibiotic-Free Product Line (5th April 2017)
Smithfield Foods recently launched a line of antibiotic-free pork productsunder the brand Pure Farms™. The antibiotic-free pork products are availablein ham cuts, fresh and packaged pork cuts like breakfast bacon and sausage.These products have recently become available in both food services and retailstores. As the only company in the industry to report antibiotics usage since2007, this new product line further affirms Smithfield's continued leadershipof practices, providing consumers with a broader range of healthy products tomeet a variety of needs and preferences.
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Smithfield Introduces Smithfield Bioscience (18th April 2017)
Smithfield Foods, Inc. established Smithfield Bioscience in April, mainly for thedevelopment and promotion of pharmaceuticals, nutraceuticals and medicaldevice solutions. The launch of Smithfield Bioscience indicates the first stepWH Group takes in bioscience industry. The newly added platform use by-products from the meat production process to explore new methods andtechnologies for addressing concerns such as tissue regeneration and theavailability of viable human organs for transplantation.
WH Group Announces 2017 Q1 Results (27th April 2017)
WH Group Announces 2017 Q1 Results. During the Period, the Company’s turnover increased by 3.2% to US$5,319million while its operating profit increased by 2.2% to US$418 million. Disregarding any biological fair valueadjustments and the non-recurrent debt extinguishment costs and related tax during the Period for the refinancingof certain existing indebtedness, WH Group’s underlying profit attributable to owners of the Company increased by10.2% to US$248 million. The packaged meat products segment, which has always been the Group’s core business,remained stable with a sales volume of 0.76 million metric tons. For the fresh pork segment, operating profit rose8.8% to US$123 million during the Period as the Group was able to foster its sales of competitive imported pork inChina. Q1 Hog production volume increased by 9.2% y-o-y while the operating profit of hog production segmentincreased to US$89 million.
HKEX Stock Code：288Corporate NewsletterIssue 10 – July 2017 [email protected]
Page 2
Business Overview (Continued)
Mr. You Mu, President of Shuanghui Development appeared on the CCTV“Business Review” program (9th May 2017)
Mr. You Mu, President of Shuanghui Development attended CCTV’s live show“Business Review” and had an in-depth discussion on the topic “The Originand Development of Food Brand” with other guests. According to Mr. You,product quality is the key to improve a brand, so it is essential to strictlymonitor procurement of raw materials and assure the quality and safety ofraw materials. Shuanghui always adheres to the principles of assuringproduct quality, building a reliable brand, shouldering more socialresponsibilities and delivering safe meat products to Chinese customers.
Shuanghui Development participates In China (Luohe) Food Expo for the15th consecutive time (16th - 18th May 2017)
Management of WH Group, Smithfield Foods and ShuanghuiDevelopment attended the opening ceremony of the 15th China (Luohe)Food Expo. Shuanghui Development has participated in the Food Expofor 15 consecutive times, and has showcased the gourmand foodproducts of Shuanghui to the highest specifications. At the Food Expo,Shuanghui Development exhibited more than 150 products, includingAmerican-style products, leisure products, Chinese products, freshproducts, seasoning products, chilled chickens and Halal products.Shuanghui specially presented the newly launched American-styleproducts, which provide opportunities for domestic consumers to have ataste of international products.
WH Group held Annual General Meeting (23rd May 2017)
The Annual General Meeting of WH Group was held in The Ritz-Carlton, HongKong. Management including Mr. Wan Long, Chairman and Chief ExecutiveOfficer and Mr. Guo Lijun, Executive Director, Executive Vice President and CFOattended the meeting. During the meeting, management actively answered thequestions raised by shareholders and announced the proposed final dividend ofHK$0.21 per share for the year ended December 31, 2016. Management alsopromised to continuously provide the best return to shareholders. Deliciousfood made of own brand products was provided in a food-tasting session andwas enthusiastically tried out by shareholders.
NIKKEI Asian Review published a commentary about WH Group’s acquisition of Smithfield (25th May 2017)
NIKKEI Asian Review, an international financial website, stated in a commentary that the industry have looked to thesuccessful post-acquisition example of WH Group's purchase of U.S. meat processor Smithfield. In addition tobringing some of Smithfield's processes to China, WH Group also successfully optimized Smithfield's operationalperformance. WH Group also effectively improved Smithfield’s management model and imposed a tougherperformance management system. This acquisition project has created a prominent example for Chinese companieswhich have plans in oversea acquisition.
For details, please refer to this link.
HKEX Stock Code：288Corporate NewsletterIssue 10 – July 2017 [email protected]
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April - June 2017 - Smithfield expanded its program “HelpingHungry Homes”: Between April and June, Smithfield donatedmore than 0.86 million pounds of protein food to food banksacross the U.S., equivalent to about 3.44 million meals for those inneed.
17 May 2017 - WH Group announced First Sustainability Report,illustrating the Achievements in Corporate Social Responsibility:The report introduced the performance and result of theCompany in terms of five areas — environment, food safety andproduct liability, employee, community and animal welfare. Itshowed that the Company has entered a phase of growth that isunderpinned by a strong commitment to sustainable development.
23 May 2017 - Smithfield announced 2016 Sustainability Report:The report highlighted Smithfield's policies, long-termcommitment and practice in food safety, charitable donations,employee care and environmental protection.
Corporate Social Responsibility
WH Group, along with Shuanghui Development, Smithfield and its subsidiaries, have long been devoting themselvesto public welfare works, so as to contribute to the industry and the relevant communities served by the Company.They have completed/launched several projects from April to June 2017, including:
Business Overview (Continued)
Shuanghui Group Finance Company achieved remarkable results in itsfirst year of operation (22nd June 2017)
As of the end of May 2017, total asset and total liabilities of ShuanghuiGroup Finance Company reached RMB4.04 billion and RMB3.5 billionrespectively, realizing an accumulated profit of RMB5.51 million. Sinceits establishment on 22 June 2016, the Shuanghui Group FinanceCompany has been actively improving its corporate governance andbusiness innovation, has been strengthening its risk management, andhas strictly implemented all relevant regulations and policies.Operations had been streamlined and were stable, delivering aprominent development in various business sectors.
Financial Highlights
WH Group will announce its 2017 interim results on 14 August 2017 (Monday). The Company will becommunicating with investors in the analyst presentation and the telephone conference will also be held.
If you are interested in joining any of the teleconferences, please contact : [email protected]
HKEX Stock Code：288Corporate NewsletterIssue 10 – July 2017 [email protected]
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Corporate Social Responsibility (Continued) C
WH Group and its subsidiaries, Shuanghui Development and Smithfield Foods, received a number of awards fromApril to June 2017, including the following:
Corporate Honors & Awards
19 June 2017 - Belmont University students visited thefactory headquarters of Shuanghui Development: Studentsvisited the pig segmentation, meat processing, chickenslaughtering and other production lines. After that,students got a better grasp of Shuanghui's productionprocess, food safety control and the characteristics of theChinese market.
20 June 2017 - Smithfield and the Food Research & ActionCenter Team Up to Rally Against Rural Hunger: The eventwas held at Smithfield's facility in Kinston, North Carolinaand aimed to raise awareness about rural hunger in bothNorth Carolina and across the nation.
5 July 2017 - U.S. Consulate General in Hong Kong &Macau invited WH Group to attend the National DayGala Dinner: A gala dinner "Celebrating the 241thAnniversary of the Declaration of Independence" was heldat the Kerry Hotel in Hong Kong. WH Group was invited toattend the event and donated 180 kilograms of Americanproducts for the banquet, including Curly's ribs, SmithfieldBacon and Eckrich sausage. WH Group won praise forbringing an authentic American food experience to theguests.
• WH Group ranked 13th on the Top 100 in ComprehensiveStrength and 4th in Newly-listed Stocks with the Most GrowthPotential lists in the Top 100 Hong Kong Listed CompaniesAwards by QQ.COM and Finet
• Mr. Wan Long, Chairman of Shanghui Development was named2017 Top 50 Most Influential Business Leaders in China byFortune magazine
• Shuanghui development finalisted CCTV China brand list
• WH Group was awarded Best IR in Corporate Transaction (LargeCap) in HKIRA 3rd Investor Relations Awards by the Hong KongInvestor Relations Association
• Smithfield Paul Kafer was named the 2017 Operations Executiveof the Year by MEAT+POULTRY magazine
• Smithfield received Corporate Register's Innovation in ReportingAward for its 2015 Sustainability & Financial Report
HKEX Stock Code：288Corporate NewsletterIssue 10 – July 2017 [email protected]
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The latest brokers’ ratings and target prices for the Company:
Company Ratings
Source：Chicago Mercantile Exchange and Ministry of Agriculture of the People’s Republic of China
Hog prices in China and the U.S.
Market Trends
Volume and YoY growth of U.S. pork exports to China
Source：U.S. Meat Export Federation
Institution Name Date Rating (Changes) Target Price (HKD)
CCBI 6 July Outperform (Initiation) 10.10
Goldman Sachs 28 June Buy (Maintain) 8.50
Morgan Stanley 27 June Overweight (Maintain) 9.00
UBS 27 June Buy (Maintain) 8.96
Credit Suisse 22 June Outperform (Maintain) 9.30
BOCI 20 June Buy (Initiation) 8.80
Macquarie 7 June Outperform (Initiation) 9.90
Daiwa 31 May Buy (Maintain) 8.70
DBS 10 May Buy (Maintain) 7.70
ABCI 4 May Buy (Maintain) 7.68
Merrill Lynch 28 April Buy (Maintain) 8.50
Citi 27 April Buy (Maintain) 8.26
CLSA 27 April Buy (Maintain) 7.30
CICC 25 April Buy (Maintain) 10.69
Huatai Financial 6 April Buy (Initiation) 8.00