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Good day, everyone, and welcome to the Smithfield Foods' Second Quarter 2025 Results Conference Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Julie MacMedan, Vice President of Investor Relations. Ma'am, please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Smithfield's Second 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. Shane?

Thank you, Julie. Good morning, everyone. I am pleased to report that we delivered record second quarter adjusted operating profit of $298 million, that's up 20% from adjusted operating profit of $248 million in the second quarter of 2024. In addition, our adjusted operating profit margin of 7.9% improved from 7.3% in the second quarter of 2024. Our record second quarter results demonstrate the resilience of our business model as we successfully navigated a dynamic consumer spending and geopolitical environment. We grew sales and volume in our Packaged Meats segment, demonstrating the power of our iconic brand portfolio, which continue to deliver quality and value across all price points. Our Fresh Pork segment also increased sales and volume as it adeptly managed short-term disruptions in certain export markets, and our Hog Production segment continued to increase profitability, with a solid first half performance, combined with a more favorable full year outlook for Hog Production, we have raised our full year outlook. Looking at profit by segment. Our Packaged Meats segment delivered adjusted operating profit of $296 million, with an adjusted operating profit margin of 14.2%, as we successfully navigated higher raw material input costs and a cautious consumer spending environment with our well-diversified portfolio of products and price points. We also continue to achieve operating efficiencies and cost savings. Our Fresh Pork segment reported adjusted operating profit of $30 million with an adjusted operating profit margin of 1.4%. This was up from $17 million and 0.9% in the second quarter of 2024. Our team demonstrated agility in executing our strategy to maximize product values through our multiple channels. We've maximized profitability through our ability to flex production over the course of the quarter. We navigated the China tariff disruption, minimizing the impact by selling into alternative countries and channels, and subsequently resuming shipments to China. The team also continued executing our operational strategies, resulting in improved cost and efficiency. Our Hog Production segment delivered adjusted operating profit of $22 million, versus a loss of $10 million in the second quarter of 2024. The increase was driven by improved market conditions and a more efficient cost structure on our retained farms. We achieved strong year-over-year profit improvement during the quarter, despite recognizing a loss of approximately $15 million related to mark-to-market derivative instruments. Our Hog Production segment is performing well this year. Given solid execution on our internal efficiency initiatives, combined with more favorable market conditions, we have raised our full year Hog Production segment operating profit outlook by $50 million. In summary, we delivered record second quarter adjusted operating profit through disciplined execution on our strategies and our relentless focus on continuous operating improvement. Our performance underscores the strength of our experienced executive team as we navigated a dynamic consumer spending and tariff environment. Our balance sheet and financial position are solid. We have ample financial flexibility to support our growth strategies and deliver value for our shareholders over the long term. Now turning to our outlook for fiscal 2025. I'm pleased to report we've raised our outlook for adjusted operating profit, driven primarily by our increased outlook for our Hog Production segment. Mark will share more details in a few minutes. Now I'll turn to our key growth strategies. Our 5 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 product 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, representing 55% of our consolidated sales, with 98% of our packaged meat SKUs sold here in the U.S. While consumer budgets remain tight, our Packaged Meats segment is benefiting from several tailwinds. We are capitalizing on increased demand for protein. In addition, our products span the perimeter of the grocery store where consumers have shifted their spending patterns. Today's consumers are looking for value and convenience. We are meeting these demands with our iconic and diversified brand portfolio that covers a wide range of price points and includes convenient packaging and portion sizes suited to people's busy lifestyles. We are focused on meeting consumers' needs profitably. Our 3-pronged strategy to grow Packaged Meats segment profit encompasses product mix improvement, volume growth and innovation. First, product mix. We remain focused on increasing the mix of higher-margin product category, such as quarter hams, packaged lunch meat, and dry sausage. We continue to see success converting large holiday hams, to smaller, more convenient and profitable items. For example, we are delivering value and convenience with our Smithfield Anytime Favorites quarter hams. We set an affordable price or a fixed weight 1.5 pounds ham, which has been well received by consumers. We've grown unit share in this category to 30% for the first 6 months of 2025, up from 18% for the first 6 months of 2024 according to Circana. Even at this affordable price point, our quarter hams are more profitable than our large holiday hams. Another higher-margin use of ham is packaged lunch meat. Based on Circana data for the 6 months ended June 29, 2025, our Smithfield Prime Fresh packaged lunch meat posted the largest dollar share gain for the packaged lunch meat category up 1.1 percentage points. This is particularly impressive in today's cautious consumer spending environment given that Prime Fresh is at the premium price point. We are also capitalizing on the popularity of pepperoni and salami to grow our higher-margin dry sausage mix. According to Circana, for the 6 months ended June 29, 2025, Smithfield Foods is the #2 branded dry salami and pepperoni vendor, and we are growing volume share. Second, volume. We continue to expect Packaged Meats volume to be up about 1% year-over-year, led by packaged lunch meat and other categories as we deliver quality protein at a good value to consumers. We are currently the #2 branded provider of packaged meats by volume in the key categories in which we operate. Ten of these categories have a market size of more than $1 billion, and we strive to grow volume and market share in each of these categories. In today's economy, our ability to deliver value, with a portfolio of quality branded products spanning multiple categories and price points, is an important competitive advantage for Smithfield. We are able to attract and retain consumers even in a challenging spending environment. Packaged lunch meat is a great example with our portfolio ranging from our Gwaltney brand at an entry price point, all the way up to our premium brand, Smithfield Prime Fresh. Value seekers are also turning to private label, which is a key competitive advantage for Smithfield. Retailers and foodservice operators are elevating their private label offerings, and they look to us as a trusted partner who consistently and reliably deliver high- quality products at scale. Our ability to deliver private label at scale strengthens our customer relationships. We pride ourselves on delivering outstanding service to our retail and foodservice customers. By taking a strategic multiyear planning approach, we help drive increased sales for us and our customers. Next, product innovation. We have a deep innovation pipeline. New concepts are continuously developed based on consumer research and in conjunction with our retail and foodservice customers. These new products target consumers through line extensions of our trusted brands, new flavors and more convenient packaging and sizing options. A good example of an innovative product that aligns with evolving consumer preferences for convenient meal solutions is our pre-cooked half rack of ribs offered at an attractive price point and size. According to Circana, this product grew share volume by 1.4 percentage points for the 6 months ended June 29, 2025. Our foodservice business posted strong sales growth in the second quarter and in the first half, and innovation is at the forefront of helping our foodservice partners keep their menus fresh. During the first half of 2025 we executed over 30 limited-time offers within our strategic national chain partners in the U.S. In January, we launched Smithfield Select into the foodservice ready-to-eat baking category. This premium thick-cut product deliver superior flavor to our restaurant partners while helping them save labor, cost and time in their kitchens, and we are seeing that reflected in strong volume growth. We have some exciting new product innovations scheduled for later this year, and I look forward to sharing with you on future calls. Now let's talk about our second core growth strategy, increasing our Fresh Pork segment profitability. We are focused on growing Fresh Pork operating profit in 2025 by maximizing the net realizable value of each hog and driving best-in-class operating efficiency. I'm very proud of our Fresh Pork team who delivered higher second quarter sales and adjusted operating profit in the face of tighter gross market spreads and a dynamic tariff environment. This is a testament to our relentless focus on optimizing product values, achieving operating efficiencies and containing costs. We continue to closely monitor the tariff and geopolitical environment, which remains fluid. 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 as demonstrated in the second quarter. We believe our 2025 operating profit outlook range for Fresh Pork addresses tariff risk. We have a seasoned team skilled at leveraging multiple channels to maximize profitability, underscoring one of the main competitive advantages for our leadership position as the #1 pork processor in the industry. Now to our strategy to optimize our Hog Production segment. Our Hog Production segment reported a $22 million adjusted operating profit in the second quarter, compared to a loss of $10 million in the second quarter of last year. We continue to benefit from both improved industry market conditions, as well as our focus on operating a best-in-class cost structure on our retained farms. Our initiatives in genetic transformation, herd health improvements and procurement and nutrition savings are yielding results. Based on the strong first half performance for Hog Production, combined with a more favorable market outlook for the second half, we are raising our anticipated full year adjusted operating profit range by $50 million. We remain focused on actively resizing our business to reduce the number of hogs we produce ourselves. We are on track to achieve our medium-term goal of internally producing approximately 30% of the needs of our Fresh Pork segment. We expect to produce approximately 11.5 million hogs in 2025, which is roughly 40% of the needs of our Fresh Pork segment. This is down from 14.6 million in 2024, and from a high point of 17.6 million in 2019. Next, our strategy to optimize operations and deliver operating efficiencies in manufacturing, supply chain, distribution, procurement and SG&A. We continue to reap the benefits of our investments in automation, as well as our multiyear efforts to drive operational efficiencies by eliminating waste and maximizing throughput. Automation has enabled us to redeploy labor to higher-value activities, as well as to reduce our overall labor count, helping to offset inflationary pressures. We also continue to refine and optimize our transportation and logistics activities. Across the entire company, we are driving a culture of continuous improvement. Each year, we look for new ways to improve operating efficiency and to reduce our costs. We expect efficiency savings to again contribute to enhanced profitability in 2025. 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. In summary, we delivered record second quarter adjusted operating profit and a strong first half performance. We are well positioned to achieve our increased outlook for 2025, and to continue to support our growth and market leadership over the long term. 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. In the second quarter, we delivered $298 million in adjusted operating profit, an increase of 20.1% versus the prior year, marking a record second quarter and reflecting the resilience of our business model. We achieved higher adjusted operating profit dollars across each of our three segments. We ended the second 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 second quarter results, starting with the consolidated results and then a review of our performance by segment. Consolidated sales in the second quarter were $3.8 billion, representing an 11%, or $374 million increase compared to the prior year. This was driven by sales growth across all segments. We delivered record second quarter adjusted operating profit of $298 million, and an adjusted operating profit margin of 7.9%, compared to an adjusted operating profit of $248 million, or 7.3% in the second quarter of 2024. Second quarter 2025 adjusted net income from continuing operations was also a record at $217 million, compared to $192 million in the second quarter of 2024. Adjusted EPS was $0.55 per share, compared to $0.51 per share during the second quarter of 2024. Now on to our second quarter segment results. Packaged Meats segment delivered second quarter adjusted operating profit of $296 million and a healthy adjusted operating profit margin of 14.2%, despite higher raw material costs and a greater mix of lower-margin ham sales due to the Easter sales mix shift. Second quarter Packaged Meats sales of $2.1 billion increased by 6.9% compared to the second quarter of 2024. This was driven primarily by a 4.5% increase in our sales volume which reflected the later Easter holiday this year. The strength of our Packaged Meats portfolio is evidenced by the fact that we grew sales volume in the second quarter by more than 1%, when excluding the holiday ham sales. Second quarter sales also benefited from a 2.3% increase in average selling price. The higher average selling price was driven by higher market prices for the pork value chain, with key raw materials such as bellies up 24%, and trim up 10% to 14% year-over-year. Additionally, the higher average selling price was influenced by our continued favorable product mix shift to higher-margin items such as lunch meat and dry sausage. Next, in Fresh Pork. For the second quarter of 2025, we delivered adjusted operating profit of $30 million and an adjusted operating profit margin of 1.4%. This was up from $17 million and 0.9% in the second quarter of 2024. In the second quarter of 2025, the industry market spread was compressed versus last year, and we faced short-term tariff disruption. The team successfully grew adjusted operating profit versus last year by executing our best sales strategy, by flexing production over the course of the quarter, and by delivering cost savings. Fresh Pork segment sales of $2.1 billion increased 5% year-over-year, primarily driven by a 3.3% increase in average selling price, and a 1.7% increase in volume. Turning now to Hog Production. We're pleased to report adjusted operating profit of $22 million for the second quarter of 2025, versus a loss of $10 million in the second quarter of 2024. The substantial increase was driven by improved commodity markets, as well as actions we've taken to optimize our operations. Second quarter 2025 Hog Production segment sales of $840 million increased by 8.4% year-over-year. This was despite a 24% of our approximately 850,000 head reduction in the number of hogs produced. The second quarter sales increase was primarily due to increased external grain and feed sales of $116 million, as well as approximately $103 million for the sale of commercial hog inventories and other goods and services to our new joint venture partners. Our average market hog sales price was flat year-over-year, inclusive of the effects of hedging, while the CME Lean Hog Index was up 4%. As Shane mentioned, during the quarter, our profitability was reduced by approximately $15 million related to mark-to-market derivative instruments. While this unfavorably impacted second quarter results, we've raised our full year Hog Production segment operating profit outlook by $50 million. Adjusted operating profit for our other segment, which includes our Mexico and Bioscience operations of $7 million in the second quarter was flat to the second quarter of last year. Our corporate expenses came in $6 million below the prior year, reflecting our disciplined cost management strategies. Next, let's review our strong balance sheet and financial position. At the end of the second 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 of liquidity. Capital expenditures for the first 6 months were $158 million, compared to $173 million in the first half of 2024. More than 50% of our 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 on April 22 and May 29 of this year, we paid quarterly dividends of $0.25 per share. On July 31, we announced a quarterly dividend of $0.25 per share to be paid on August 28, and we expect to pay $1 per share in annual dividends this year, subject to the board's discretion. Now to our outlook for fiscal 2025, which we raised this morning given strong first half performance as well as our forward outlook. While we continue to navigate a dynamic consumer spending and tariff environment, we still expect to continue to increase profitability by executing our core strategies that Shane reviewed. First, we anticipate that total company sales will increase in the low to mid-single-digit percent range compared to fiscal 2024. And please note that for comparability purposes, our sales outlook excludes the impact of our Hog Production segment sales to the newly formed joint venture partners. Our outlook for segment adjusted operating profit is as follows: For our Packaged Meats segment, we still anticipate adjusted operating profit in the range of $1.05 billion to $1.15 billion. For Fresh Pork, we still anticipate adjusted operating profit of between $150 million to $250 million. And 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 the risk that China or other export market tariffs could again be prohibited. For Hog Production, we've raised our anticipated adjusted operating profit range by $50 million, to between breakeven to a profit of $100 million. And as a result, we now anticipate total company adjusted operating profit in the range of $1.15 billion to $1.35 billion, fully reflecting the $50 million increase in Hog Production. Our total company operating profit outlook reflects continued efforts to more than offset inflation through cost savings and efficiency initiatives. In summary, today, we raised our outlook for 2025 based on solid first half results, an improved outlook for Hog Production, and our continued expectation that we can generate operating profit growth even as we navigate a dynamic consumer spending and tariff environment. Now I'll ask the operator to open up the call for Q&A. Operator?

[Operator Instructions] Our first question today comes from Ben Theurer from Barclays.

Congrats on a very strong second quarter. Two quick ones. The first one really within Packaged Meats, and thanks for sharing a lot of details already in the presentation. But I wanted to understand a little bit better what you've been seeing in terms of like consumer shift, maybe within your brands on the portfolio? And how much potentially has shifted into private label? So any commentary additional that you can make in terms of like trends within your portfolio, that would be great. And then my second question really is, as you look at your -- the Hog Production obviously being very strong, clearly, that does have a negative impact into your Fresh Pork business to a small degree. So just wanted to understand what you're seeing for -- in terms of like profits in between one and the other? How do you feel about the current visibility of the hog crush, let's put it this way and how it impacts on one side, Hog Production, but then on the other side, Fresh Pork.

Thanks, Ben. For your first question, maybe I'll kick it over to Steve to talk about what we've seen from a consumer standpoint.

Sure. So I appreciate the question. And obviously, we spent a lot of time looking at all the different topics that I guess are involved in the question that you just asked. But as far as a retail perspective, so at a high level from a -- for the retail side of the business, really for food and beverage spending, it's -- we still see it's pretty soft, and it's really two ongoing economic challenges. So we see that consumers are hesitant. Weather has certainly been unpredictable, and inflation is still putting pressure on consumers' wallets. So while confidence has picked up a bit in June after a slow start to the year, it's still not where it was last year. And consumer demand really remains resilient but cautious, I would say, in 2025, shaped by inflation fatigue, shifting value perceptions and evolving household behavior. So with that said, we're very pleased with where we ended up in Q2. So if you look at some of the numbers that were just reported from a sales perspective, we're up almost 7% on sales, and volume was up 4.5%. And specifically to our brand. So if you look at Circana data for Q2, our volume share was actually up 60 basis points, which outperformed our key competitors. And I would say that these are very impressive results when you consider that we have not increased promoted volume. So our first half sales are up 4%, which really speaks to the loyalty of our brands and our strategy to diversify across price points. And then the other comment, or question, that you had was really on private label. And I would say that from an industry perspective, and we do see it happening to some of our business on the branded side, but we do see the industry and seeing an increase in private label share growth. And it's really in certain categories as retailers invest in their own brands. But with that said, I would say that our private label business really provides us a key competitive advantage since many of our retail partners are upscaling their private label offerings. And historically, private label producers really focused on commodity value tier products, and the shift of retailers and foodservice distributors looking to offer high-quality, innovative food-safe products has really provided us the platform to excel in this space, and really be a leader in profit margins, which you can see that we delivered in Q2 coming in at the 14.2%.

And then, Ben, to your second question on Hog Production. We do have visibility into the back half of the year. And while we did have a mark-to-market component in the second quarter, we are comfortable raising our guidance. We look at the pricing that we see out in the futures markets and of course, we temper that with things. You look at the USDA report, they're expecting about a 0.9%, or 0.9% increase in overall full year pork production. But we also look at the last 4 weeks slaughter levels or harvest levels across the industry. Compared to the same time last year, and we're actually down 3% on a per head basis, and we know that weights are lighter. And so we believe that's one thing that's going to help support pork prices as we go into the back half of this year and into the first quarter of next year. As a protein, pork is from a price point, really well positioned against both beef and chicken. If you compare retail prices 4 years ago -- to 4 years ago, for example, beef is up, I think, about 24%. Chicken is up about 22%, and pork is up about 7%. And so I think the dynamics in the industry are really setting up for a strong second half and a carryover into 2026 as the meat prices and the meat demand continue to support the hog prices that we see. And then you couple that with the changes that we've made in our Hog Production operations from the genetic improvements that we're now really beginning to see the impacts of. Our health initiatives, while health has been a big topic in the industry this year and a big concern in the industry, from the public data that's available, we see our incidence rates are better than the industry. And then the nutritional things that we've done to improve our feed cost. And so I'm really bullish on our Hog Production operations. And again, I think those things combined is what gives us the confidence to raise the full year outlook in Hog Production for 2025.

Our next question comes from Peter Galbo from Bank of America.

Maybe to start, Shane, there's been a lot of discussion, I think, around the raw material input increases in Packaged Meats. And I know you saw a bit of that in Q2, and it seems like it's continued pretty strongly here in Q3. But despite that, you kept the outlook on Packaged Meats on profitability the same. So maybe you can just talk a little bit more about against the backdrop of increasing raw materials, why you feel confident in that kind of back half profitability guide on Packaged Meats remaining unchanged?

Yes. Maybe I'll start off and Steve, you can jump in here as well again. One of the things our Packaged Meats business has really done well, and not just this year, but over the past few years, it's really become an efficient in our cost structures. And so Peter, we've talked about on previous calls, the things we've done to simplify that business through SKU reductions, through investments in automation and technology, to improve the overall cost structure. Now there is no doubt that this year, we have really been faced with high raw material costs. As Mark mentioned, bellies are up in excess of 20%, and trim anywhere from 10% to 14%. But one of the things we have is with our private label business, which is about 40% of our retail business. We have some formula- based pricing mechanisms in there to allow us to ebb and flow at the underlying commodity. And so again, we feel good with our guidance for the year. And where we see this back half going, especially as we continue to change our product mix from traditional lower-margin products into many of the higher-margin categories that Steve and Mark talked about. So really confident looking forward and where we think the Packaged Meats business will continue to go. Steve, do you want to add anything there?

Sure. No, I appreciate the question, Peter. And you're right. If you think about the first half of this year, from an input raw material standpoint, our costs were up about $200 million. And I would say what we do that's probably a little bit different. And when you think about the input costs going up that much, we're certainly not immune to the impact that this has on our overall business. But we do believe that we are better positioned than most companies really due to the extensive product portfolio that we talk about, including both branded and also the private label product. And what that enables us to do is really meet those consumer needs at all price points up and down the value chain. And if you think about our Packaged Meats and what you've been seeing over the last several quarters, is that our Packaged Meats business has consistently outperformed key competitors in terms of profitability and margins. And our business has demonstrated consistent, strong financial health with annual margin surpassing the industry. And that said, we believe we can mitigate some of the other factors typically considered uncontrollable by continuing to stay focused on our current strategies. So one is our strong brand portfolio, and it really provides us the ability to market, our products to customers, and consumers across multiple categories, and also the price points. And this really helps us to attract and retain consumers as they move up and down that value spectrum. And that enables us to meet the shifting consumer preferences, and to really capture that wallet share. And I would say the big thing is if they do decide to switch into private label, we are well positioned to maintain that consumer and a private label product that there's a good chance that was produced by us. So as we continue to see a shift in retail to more upscale private label, as I mentioned before, it really benefits the structure that we have from our capabilities at the plants and also the ability to, I guess, the redundancy that we have from a production standpoint. So even though we're faced with these higher raw material costs, we believe that we are well positioned to, again, continue to mitigate them as best as possible by sticking to our current strategy which shows that we're certainly successful in the first half of this year.

Great. And just as a follow-up, Mark, on the Hog Production side, I think if I did the math right, based on the 10-Q, you're hedged for about, I think, half of your Hog Production needs in the back half of the year. And so maybe there was a bit of an expectation that you would have taken up the Hog Production profitability a bit more, but potentially that the mark-to-market and hedging are keeping that a bit conservative in the back half. So can you just touch on like the dynamic in the quarter around the mark-to-market? How that hedging is impacting the second half? And again, whether that is the right way to think about potential conservatism into the back half in '26 on Hog Production?

Yes. Sure, Peter. So during the second quarter, our average market hog selling price was flat year-over-year, and that is inclusive of the impacts of hedging. So you compare that to the CME Lean Hog Index, which is up about 4% over the same time period. So as you alluded to, we have a number of instruments that we utilize to mitigate risk and not all of those qualified for hedge accounting. So as a result, our second quarter results were impacted by $15 million with the mark-to-market adjustment that really related to positions that will materialize in the second half of the year. So under mark-to-market accounting rules, we're pulling those forward. So they're not deferred in OCI, like hedge accounting. So overall, the business is performing well, and that's really what has raised -- helped us to raise the outlook for the full year by that $50 million.

Next question comes from Megan Clapp from Morgan Stanley.

I wanted to just pick up with the answer there, Mark. So looking at the futures curve, it does -- it would seem to indicate that maybe you're tracking towards the higher end of that Hog Production guide, especially because those mark-to-market positions are going to materialize in the back half of the year. So it seems like more of a timing impact. Shane, I think you used the word tempered in a response earlier. So maybe I would just love to get your thoughts on the -- range is still quite wide. So how you're thinking about looking relative to the futures curve, and whether the high end is kind of more likely at this point?

Yes, I think that's a fair way to look at it, Megan, right now with where the futures curve is right now. The range is still the $100 million that we quoted at the beginning of the year, but we did raise that by $50 million, but I'd say it leans towards the higher end.

Okay. Great. That's clear and helpful. And then maybe just a follow-up as well on Packaged Meats. Shane, I think in your prepared remarks, you said you expect volumes to be up 1% for the year. The first half came in flattish, I think if I'm doing my math correctly, I think you talked about still some consumer spending uncertainty. So maybe you could just talk about what's underpinning, what seems to be an acceleration in volume performance in the second half of the year in Packaged Meats?

Steve, do you want to talk to that?

Sure. Yes. So obviously, we have -- when you think about and where we ended up on a volume perspective, so volume was up at 4.5%. I believe the 1% you talked about, as Mark referenced, if you exclude the impact of seasonal hands, that volume would have been up that 1%. So when we look at really the remainder of the year, we're confident. And if you think about what I just kind of walked through with the strategy of Packaged Meats, and sticking to that strategy, really leveraging our brands, and also the pricing strategy, the mix optimization, innovation plays a big key of that. So we have new innovative items that will be rolling out this back half of the year. Some have just gotten into the marketplace. So when you take all those things into account, that certainly helps us from a volume perspective that we're referencing and talking about for the remainder of the year. The other big piece is on the foodservice side of the business. So we have seen a very good success, not only in the first half, but also in Q2 when we come to foodservice. So if you look at some of the information that was reported, our foodservice sales were up 9.5% in Q2. And we look to continue the kind of that momentum that we've seen on the foodservice side of the business. So we do believe -- so if you think about foodservice industry as a whole, we believe we are outperforming the industry within our categories. And when you think about foodservice, our growth is really being fueled by product innovation, and our focus is on convenience, and also on-trend flavors. So a core pillar of our foodservice innovation really provides easy-to-use pre-cooked solutions for foodservice operators. And the benefit that they have is obviously the high labor cost and the products that we can provide helps mitigate some of those labor costs, by providing them pre-cooked proteins, it also provides them the ability to provide a consistent product to their consumers. And a great example of that is this year, we rolled out a ready-to-eat roasted bacon. And the sales that we have seen, not only in Q2, but also year-to-date, have far exceeded our original expectations. So by the end of the year, it will probably triple the original projections you have for that category. So we're very excited about not only where we are today, but also where we're heading on the retail side of the business and also on the foodservice side of the business to grow that volume.

Our next question comes from Leah Jordan from Goldman Sachs.

Firstly, if you could comment what you're seeing across the competitive environment for Packaged Meat. How has your promotional activity tracked versus plan? Or has anything changed with how consumers are responding over the past few months, given you highlighted cautious consumer spending?

Sure. No, I appreciate the question. So first, I'd start out by saying, I think that we have probably a best-in-class Packaged Meats team. And I'm really thrilled and proud of the way the team has worked together to really maximize the ROI that we have when it comes to trade spending. So when I think about trade spending, and what we're seeing, not only the way we're handling trade spending, especially in light of escalating raw material markets, but also what we're seeing from the marketplace. So my viewpoint is really taking volume, or growing volume based on price, is definitely not a winning strategy. So we are focused on improving our quality merchandising and really going for quality versus unprofitable quantity, which is different than what we're seeing from others in the industry. So we are really optimizing the effectiveness of our spend by increasing the promoted volume sold as feature and display. So when you think about feature and display, we have actually increased our feature and display activity by 200 basis points when you look at our performance in Q2 this year versus last year. And when we think about feature and display, it's a great way to really bring lapsed buyers back to categories, and it also keeps our brands top of mind. So the execution that we've had with our promotional strategy and what we're seeing in the marketplace, that's one of the things that's driving really our industry-leading profit margin that we just delivered of that 14.2%.

That's very helpful. I just wanted to follow up around the value-added shift. I mean that's been a big initiative for you guys. It sounded like you had constructive comments around lunch meat and dry sausage today. Just could you comment on how the magnitude of that shift toward value-added has evolved throughout this year? Just given the dynamic consumer backdrop? And perhaps how you're thinking it could be changed in the back half? And then just given what you're seeing on the demand side for those products, just how are you thinking about potential incremental needs for more capacity over the next few years as well?

Yes. So it's a great question. And I would say that's one of the key things to really the success that we've been seeing so far this year. So it's been a major initiative over the last couple of years to really shift our focus from commodity-based items. As Shane kind of walked through that example, when you think about seasonal hams, and the number of units that we can sell when you look at seasonal hams and then taking that seasonal hams, and converting that into a value-added convenient ham, the pre-sliced or quarter ham, easier to use, more of a year-round item for that consumer. Obviously, we sell a tremendous number of units compared to 1 or 2 seasonal hams throughout the year. And we've seen really a great amount of consumer acceptance as we've made that change. So those ham items that we've converted to are actually a net weight item now versus random weight. And we've actually seen -- so you think about the potential volume impact of making that change because it is a smaller size item. But we've actually been able to grow that volume substantially because of the consumer acceptance and the ease for that retailer to actually market those items. So it's been a big win within that category. So you asked a question on capacity. So that is one thing that we look at. And as we look at our capital spend for Packaged Meats, a big piece of that is really on the investments we're going to make from a capacity standpoint to really focus on these value-added categories such as the conversion of commodity items into value-added items. And that is a big focus. So we continue to see kind of that winning strategy take effect in our overall results.

Yes. The only thing I would add, Leah, and to add on to Steve's point, and Mark talked about it in his comments, that is 50% of our CapEx is literally at top and bottom line growth and Packaged Meats capacity in key categories, higher-margin categories is absolutely where we're looking to invest our money. The other thing I would say is that our relationships with our customers have really changed over the last few years, where now we're talking to them about not just quantity and -- or volume and price. We're talking about what's next. And so that gives us insight into where they see the market going, where we see the market going and gives us the ability to make sure we're using our capital dollars where we need to. So that's how we're kind of thinking about this from a capacity standpoint is staying ahead of demand. So we're not reacting to a need too late.

[Operator Instructions] And our next question comes from Heather Jones from Heather Jones Research.

I want to start with Packaged Meats. I was wondering if you could give us a sense of how you're expecting the cadence of the second half to play out given the cost inflation you mentioned in bellies and all that is picked up -- accelerated in late June into July? And just -- so how we should think about the second half playing out there?

Yes. So similar to what I've talked about, I think we have the right strategies in place to minimize the overall, I guess, as best we can, the impact to the higher raw material markets that we're faced with. But as you can see through the first half of the year, the strategy has been working. And at this point, I would say, our outlook for 2025 really reflects our best view of the business as we see it today. So we've really guided Packaged Meats to the profit margin of that market referenced of $1.05 billion, versus up to $1.15 billion. And we believe that, that really represents a healthy level of profitability in the face of cautious consumer and the current spending environment that we're faced with, not only on the retail side of the business, but also the foodservice side of the business.

The only thing I would add there, Heather, is, and Steve touched on this a little earlier. Consumers are looking to add protein to their diets. And we believe that pork when you look at it relative to beef and chicken, is a great value. We know consumers are looking for value. And that plays into where we believe we're better positioned than most of the companies due to our product portfolio. Steve mentioned having offerings at all of the value chain, plus into the private label categories. And so I really believe that we're better positioned to meet consumers wherever they are along the value chain.

Yes. The only thing I would add, Heather, is that seasonally, the third quarter is typically a little softer than the fourth quarter because of the 2 holidays in the fourth quarter.

Yes. My concern was you all had mentioned you had the price pass-through mechanisms. And I just didn't know, given what bellies have done if there was a delay that would make the softer seasonality even more pronounced this year for Q3 versus Q4. But it sounds like that's not the case. Moving on to Hog Production, and I hate to belabor the point, but looking at your guide implies close to $15 a head for the back half and getting back some of the mark-to-market hit in the first half. And you all have your productivity initiatives that are giving you an additional tailwind to -- market tailwinds. And so just wondering, is there potential for further upside to that? Are you baking in some conservatism because the portion you don't have hedge just to be conservative on that front? Or just help us to think about that because it's a very strong year, but it does seem like a conservative outlook given what we see in the industry? So just any help you could provide on that front would be awesome.

Yes, Heather, I would say, as Mark mentioned earlier, we do anticipate based on what we see today being at the higher end of the range. I would say there probably is some conservatism baked in as we continue to get clear visibility, particularly into Q4. And I think as we come back a little later in the year, we'll have a much -- we'll be able to offer you some additional details. But I would say, as Mark said, we're looking toward the higher end of that range.

And we do have an additional question from Manav Gupta from UBS.

My first quick question is, obviously, when we look at Slide 7, you are #1 and #2 in most categories. I just wanted to understand if you're also looking to increase your market share in uncooked breakfast sausage and uncooked dinner sausage, or those are not the focus areas at this point of time?

Well, so I would say the quick answer is yes, they are certainly a focus that we have. And part of it is looking at the categories and also, obviously, different categories have different profitability. So we try and stay focused on the higher profitability categories and the categories you're referencing are slightly lower. So even though it's still a focus for the company, there's better opportunities for us to spend time on at this point.

And my quick follow-up here is, obviously, your first half and second half look alike. But between the third and the fourth quarter, should there be any kind of seasonality, or should we kind of think of both those quarters to be contributing similar amounts to earnings? Or would you think one would be relatively stronger than the other one?

Well, kind of as Mark just referenced, the big difference between Q3 and Q4 is Q4, we shipped a lot more seasonal hands. So there's always going to be more volume shift in Q4. Q3 is typically slightly lower from a profitability standpoint, and it's lower just because of the items that are being sold during that time frame versus the seasonal items that will be sold in Q4.

And ladies and gentlemen, with that, we will conclude today's conference call and -- actually, we will conclude today's question-and- answer session. I'd like to turn the floor back over to the President and CEO, Shane Smith, for closing remarks.

Okay. Thanks to everyone who joined our call today. We are pleased with our first half performance and believe we're well positioned to deliver long-term growth, and increase value for our shareholders even in a challenging environment. We look forward to updating you on our progress following our third quarter results. Thank you.