Gradual recovery

Investment Thesis
US economic recovery to offset softer China packaged meat sales volume. Packaged meat segment remains the core business as it accounted for 87% of the Group’s operating profit. Geographically, China contributed 66% of operating profit, while US contributed 24%, a contraction due to significant COVID-19- related impact. We currently forecast US revenue and operating
profit to recover by 11% and 120% respectively.

COVID-19-related expenses to subside as US economy recovers. The COVID-19 pandemic in the US has led to operational shortages, which caused a decline in profitability due to a higher outlay of roughly c.US$800m for COVID-19-related expenses in 2020? Or 1Q21. This expense should gradually subside into 2021.

Slaughter volume to recover. With softer hog prices, we expect slaughter volume to begin to recover, which should drive absolute profit growth.