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Good day, and welcome to the Smithfield Foods' Third Quarter 2025 Earnings Call. [Operator Instructions] 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. Shane?

Thank you, Julie. Good morning, everyone. I'm pleased to report that we delivered 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 tighten 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 confirm 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. Unlocked 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 drive 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

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 demonstrates 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. Now I'll ask the operator to open up the call for Q&A. Operator?

[Operator Instructions] 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 kind of 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, so 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 the 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.

Okay. That's very helpful. And then just sticking with packaged meats, just a little bit more on profitability, just given the continued input cost pressure there. And just how are you thinking about the ability to keep -- putting price through? And then as you kind of look into '26, how do you be thinking about the long-term margin recovery there in the time line there?

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, is 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 $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 chain 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 20% increase in the raw materials that I mentioned.

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

I wanted to talk about your -- ask about your comment regarding another 30% decline in the final target for number of hogs. And I'm asking because the packaged meats environment is getting increasingly competitive, new capacity coming on, I think it's next year in sausage and bacon. So just was wondering how you're thinking about that ultimately and how you think about Smithfield's vertical integration as a competitive advantage vis-a-vis the rest of the space?

Yes, Heather, when you think about our production, if you go back to where we were back in 2019, we were raising about 17.6 million hogs. We began a process of lowering that down to about $10 million. So about 30% vertically integrated that you referred to. Today, as we look at 2025, we expect to be at about $11.5 million. And that will be, again, 40%. I think it's important to recognize where we've taken those hogs out. And so what we've done is removed our highest-cost farms. And so those are farms that are maybe they're geographically displaced, meaning there's an incredibly high cost in transportation, whether that means taken feed through the farms or grain through the feed mills, or moving those hogs to the processing plant. So even in this environment of increased profitability in Hog Production, those particular farms that we've rationalized on a per head basis would have been, in some cases, negative even in this environment. So we still -- it's still the right strategy to continue to reduce. Now as we go from $11.5 million to $10 million over the medium term, I would say, the process there is still to make sure we have an adequate number of hogs coming into the plants. So we'll do that in a number of areas or a number of ways, like we've seen in the East Coast for the last 2 years. We've reduced our exposure in the East Coast by converting contract growers into independent hog producers. And so overall, the goal of that reduction is to remove the commodity side volatility in Hog Production. So I still think 30% is the right number. I think we're on that path still, and we've seen that in the reductions to date. And I don't think it will have a negative impact on our hog availability going into the Fresh Pork business and ultimately feeding to the last part of your question, into the packaged meat side of our business. So we're really comfortable still looking at that 30% number from an overall vertically integrated model and the profitability with inside that model. So we're comfortable still continuing towards that 30%.

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. Well, when you look at -- what we see, again, from the supply side, hog producers have been under pressure for a number of years now. And returning to profitability this year and seeing profitability when you look at the futures market out into 2026, though we don't hear of a lot of expansion that's taken place in hog production, at least not on a material level. You can look at what the USDA is calling for 2026, and they're calling pork to be up to about 28 million pounds. And so about a 3% increase. But then you look at the hogs and pigs report, and it's implying there's actually a decrease. And so we're aware of or conscious of what the industry is saying, but we're also paying a lot of attention internally to what we're actually seeing. 2025 -- early in 2025, there was a lot of disease, particularly out in the Midwest part of the industry. And we're paying attention to those external reports now to see what the disease outlook is as we go into these colder months where disease spread tends to be a little more prevalent. But I don't see a lot of expansion taking place on Fresh Pork side. Donovan, you want to talk to anything on the Fresh Pork side?

Well, I guess, in terms of the availability piece, I think she's mentioning, we still believe we're going to see a robust product markets well into 2026. So I don't think we're going to -- we're not expecting expansion or the lack of disease in order to mitigate some of the markets we have. I mean we're very poised to see elevated pork markets, especially when you look at how the protein sector is sitting right now would be being so high. So we do believe our product categories are sitting priced reasonably. And when you compare against competitive proteins, then I think that's going to continue. And again, I know the question was really specifically around bellies and bacon. But we do think that we've had -- we've seen some recent pressure on the belly market, but still relatively high compared to historical market trends on bellies. And I think that we're going to see that relatively higher belly market continue well into 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. From -- again, I'll just piggyback again on what we just talked about. We're in an elevated market. Hence, the -- much of the conversation about the compressed industry spread that is what's leading to that, but in relationship to some near-term relief, you're going to get the normal seasonality, which we see. We see in the markets back off as we head into Thanksgiving, but quite honestly, I don't think we're going to see a huge plunge in these markets. Demand is still very, very good for pork from what we see on our end. And we're going to continue to see that fresh pork demand surge as we get beyond the holiday season of Thanksgiving and we certainly see pretty good demand for the first quarter of 2026. So from the demand side, I think it's going to temper really any weakness because we just don't have enough supply right now in the market to come in and really, really hurt the overall structure of where we see pork prices. So I think pork is in a good situation as we head into 2026.

And I'll add -- I'll add to that real quick because we're having a lot of conversations on the belly side. But specifically on bacon when you think about Packaged Meats, so we're actually pleased with the overall performance that we've seen in Q3 for Packaged Meats. And despite the high belly market that we had to deal with, we've actually been very intentional on discipline in how we manage our pricing and promotions, and that's really to protect the category profitability during these inflated markets. And not only inflated, but also sustained throughout the quarter. So even if we have to give up a little bit of volume, but for the most part, across the board, our volumes flat, but it's really about managing those higher markets and making sure that we're working specifically with our customers, either on the retail side or food service side to make sure we're getting the appropriate promotions in place, but not just giving the pricing away or the product away because of high raw material markets and then trying to drop our pricing due to increased promotions or peak promotions.

Great. And Shane, I actually wanted to get your perspective on beef as well. You mentioned it a little bit. I know it can be upwards of like 20% of your buy for packaged meats. Obviously, we've had some commentary out of the administration, both kind of informally and formally through USDA. But just -- how do you kind of see the beef trim markets shaping up over the next call it, 12 months? Do you feel like there's potential for some relief there? It can be, again, a decent chunk of your raw material buy and it's been a pressure point? So would love your perspective on that going forward.

Yes. Everything we see, Peter, is still reporting 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 guess 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 and like 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. Really, it's largely just due to the timing of some projects that are shifting into early 2026, whether it's availability of the plant for downtime purposes, et cetera. We're going to continue to be prudent stewards of cash and make sure that the return justifies the investment, but we still have plenty of opportunities to grow the business and improve our cost structure through capital investment. So it's just -- it's really more timing than anything.

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 and 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'd say it's really two things that I kind of touched on. So one is our ability to take pricing with the markets. And obviously, with the private label business that we have, it represents about 40% of our -- just our retail mix. So we have that flexibility to take that pricing as the market moves now. As far as timing, a lot of that depends on the categories. So there's a difference within categories as far as when that time will take into -- go into -- really go into effect. And then on the branded side, so we have that flexibility, same on the retail side and also the food service side to take pricing when it makes sense, depending on where that market is and also from a competitive standpoint. But the reality is, as far as what our outlook is for the rest of the year, it's really taking the best view that we have of our business today, but also where we believe the market is going to end up. So -- and that's really why we're providing that range. But when you think about the focus areas that we have, between our national and regional brands and the ability to be very disciplined about our pricing and also promotional strategy, but it's that mix optimization that you continue to hear us about or hear us talk about is really focused on growing our unit volume on high-profit items, innovation and then the operational efficiency. So when you take all those into account, those help drive that guidance that we provided for Q4.

Okay. That's helpful. And that's a good segue to my follow-up, which is just -- Shane, and you talked a lot about all the momentum you're seeing in the strategies and Packaged Meats, the mix improvements, efficiencies and innovation. Maybe if we just could take a step back. Can you give us a sense of what inning you think you're in on these strategies, particularly around the mix optimization and the efficiency side of things, just provided a lot of ballast in the margins this year? I'm just trying to think about how that trends through next year and beyond?

Yes, Megan, I don't know exactly how to call what inning we're in, last night's ballgame went 18 innings. So I don't know exactly what innings we would be in. But what I will tell you is like mix, you talked about mix. Is that something that's going to be an ongoing evolution. And so for example, if you think about our holiday ham components, we know just as an industry, we're going to lose 5% to 6% of that volume per year. Our goal at Smithfield is to replace that volume with more smaller packaging, everyday use type items. And so that will -- every year as we lose that holiday ham volume, we'll be transitioning that as well. In dry sausage, another category that Steve talked about, where we've seen just great growth. We invested in plant in Nashville a couple of years ago that's really given us a lot of capacity that now we're growing into and pushing into. So it's really going to be a never-ending look at our mix, where we should be, flavor profile. We've talked a lot over the course of the year about reaching younger consumers, and I think we're doing a great job with that through flavors, which again, continues to change that mix into the overall more profitable mix portfolio. But stepping even just outside of Packaged Meats and looking at the company in total, I think what you're seeing is the benefit of our unique supply chain runs our vertically integrated model. And so now that we've really streamlined the Hog Production operations. What we're seeing on the bottom line. Q3 was a record quarter for us. And what's interesting inside of that, if you look at the individual segments, it's not a record quarter for any one of our segments. But the collective company is making record profits. And so you're seeing where we see profit migration. So this -- we see hogs putting pressure on the spread, which is causing higher meat cost in our Packaged Meats business. But overall, a higher level of profitability. And so when I think about the momentum of the company, that's where I think about it, is across that vertically integrated model and making sure the bottom line is continuing to grow, that is continuing to generate consistent earnings and cash flow across the company.

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 -- 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, 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, it 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.