SMITHFIELD FOODS INC (SFD)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Annual Report on Form 10-K filed for the fiscal year ended December 28, 2025. The information reflects all normal recurring adjustments, which we believe are necessary to present fairly the financial position and results of operations for all periods included. Totals and percentages may be affected by rounding. Certain prior period amounts have been reclassified to conform to the current period presentation.

Overview

Smithfield Foods, Inc., together with its subsidiaries (“Smithfield,” “the Company,” “we,” “us” or “our”) is an American food company that employs approximately 31,500 people in the United States (“U.S.”) and 2,500 people in Mexico. We boast a portfolio of high-quality, iconic brands, such as Smithfield®, Eckrich® and Nathan’s Famous®, among many others. We are an indirect, majority-owned subsidiary of Hong Kong-based WH Group Limited (“WH Group”).

Our elected fiscal year is the 52-week or 53-week period which ends on the Sunday nearest to December 31. Each of the second quarters of fiscal years 2026 and 2025, which ended on June 28, 2026 and June 29, 2025, respectively, consisted of 13 weeks. Each of the first halves of fiscal years 2026 and 2025 consisted of 26 weeks.

We conduct our operations through three reportable segments: Packaged Meats, Fresh Pork and Hog Production. We also conduct operations through our Mexico and Bioscience operating segments, which are aggregated and reported as “Other.”

Packaged Meats Segment

The Packaged Meats segment consists of our U.S. operations that process fresh meat into a wide variety of packaged meats products, including bacon, sausage, hot dogs, deli and lunch meats, dry sausage products (such as pepperoni and genoa salami), ham products, ready-to-eat products and prepared foods (such as bacon, sausage and pre-cooked entrées). Approximately 80% of the Packaged Meats segment’s raw materials are sourced from our Fresh Pork segment. We market our domestic packaged meats products under a strategic set of core brands, which include: Smithfield, Eckrich, Nathan’s Famous, Farmland, Armour, Farmer John, Kretschmar, Krakus, John Morrell, Cook’s, Gwaltney, Carando, Margherita, Curly’s and Smithfield Culinary. We also sell a sizeable portion of our packaged meats products as private label products. The majority of the Packaged Meats segment’s products are sold to retail and foodservice customers in the U.S.

Fresh Pork Segment

The Fresh Pork segment consists of our U.S. operations that process live hogs into a wide variety of primal, sub-primal and offal products, such as bellies, butts, hams, loins, picnics and ribs. The Fresh Pork segment sources approximately 40% of its raw materials from our Hog Production segment, with the remainder from farmers with whom we partner across the U.S. Approximately one-third of our fresh pork products, including the majority of hams, bellies and trimmings, is transferred to our Packaged Meats segment. Externally, we sell our fresh pork products to domestic retail, foodservice and industrial customers, as well as to export markets, including, among others, Mexico, China, Japan, South Korea and Canada.

Hog Production Segment

The Hog Production segment consists of our hog production operations in the U.S., which produce and raise our hogs on numerous Company-owned farms and farms that are owned and operated by contract farmers. Nearly all of the hogs produced by this segment are processed by our Fresh Pork segment. The Hog Production segment also sells livestock feed and grains and provides transportation and other ancillary services to external customers. In fiscal year 2025 and through the second quarter of fiscal year 2026, approximately 60% of the Hog Production segment’s cost of goods sold was from animal feed, which is derived primarily from corn and soybean meal.

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Key Factors and Recent Developments Affecting Our Results of Operations and Financial Condition

Our operating results and financial condition have been and/or may be impacted in the future by several key factors and recent developments.

Growth Strategies

The strategic initiatives we are executing across our segments are complemented and enabled by our strong balance sheet and ongoing operational investments, positioning us for future growth. We have several strategic initiatives to grow our business, reduce costs and enhance our profitability and margins. A comprehensive discussion of our growth strategies is provided in Part II, Item 1. Business—Our Growth Strategies in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025.

Sales Drivers

We are focused on driving profitable growth through our Packaged Meats segment. Within the Packaged Meats segment, the primary factors impacting sales of our brands are household penetration, consumption levels, price point and product offerings. As a result, we have pursued strategies that we believe best align our products with consumer trends and behavior. We have shifted our portfolio towards a higher mix of value-added and margin accretive products while leveraging the breadth of our offerings to further penetrate across dayparts. We look to increase brand awareness and encourage consumer adoption of our products through product and packaging innovation and effective and appealing marketing strategies while maintaining our promise to consumers to offer high-quality products for every budget. We have also expanded to new categories and grown distribution of under-indexed brands in under-penetrated locations. In addition, we seek to increase sales in packaged meats products by driving volumes of our private label and foodservice products, by expanding our customer relationships and by offering quality selections across the value chain.

The U.S. packaged meats market is supported by long-term secular tailwinds, including consumer demand for high-protein diets, high-quality nutrition, product versatility and convenience. We expect these tailwinds to continue to drive increases in overall meat consumption. Nevertheless, changes in market trends and consumer preferences could adversely affect our results of operations.

In our Fresh Pork segment, the primary drivers of external sales are the consistent level of global pork consumption, our ability to maximize the value of each hog and our ability to leverage our different end markets including retail, foodservice, industrial and export channels. Through ongoing product innovation, we seek to appeal to ever-changing consumer preferences, including demand for convenience and smaller portion sizes as well as expanded interests in new and varied flavors. We also seek to increase the value of raw materials through whole-hog utilization and by appealing to differentiated, global tastes and preferences. We leverage multiple sales channels to optimize profitability, including value-added retail, export markets, industrial, pharmaceutical and pet foods.

Cost Factors

Our cost as a percentage of sales varies based on fluctuations of raw material prices, as well as manufacturing, distribution and marketing costs. Raw materials are the largest component of our total cost of goods sold, with feed ingredients and hogs accounting for the majority share. The prices of feed ingredients, hogs and pork fluctuate based on market dynamics which can affect our margins. In addition, our operating costs are affected by fuel prices, which also fluctuate based on market dynamics. We enter into hedging transactions for commodities such as feed ingredients, hogs and fuel when we determine conditions are appropriate to mitigate the inherent price risks. While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also reduces the risk of loss from adverse changes in raw material prices.

We continue to optimize the size of our hog production operations and procure a greater mix of hogs from independent suppliers with market-based supply agreements in order to supply our Fresh Pork segment. We have reduced the size of our internal hog production from a peak of 17.6 million head in 2019 to 11.1 million head in 2025, which represents approximately 40% of the hogs processed by our Fresh Pork segment. We continue to explore opportunities to reduce internal production over the medium term.

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We are pursuing best-in-class manufacturing principles in our plants by employing automation to redeploy labor to higher value tasks, increasing yields and driving efficiency by reducing complexity. In our logistics and distribution network, we actively manage transportation and warehousing costs by evaluating transportation carrier mix, optimizing transportation routes, maximizing utilization of our cold storage and trucking assets, improving supply and demand planning and optimizing inventory levels.

Our results of operations will continue to depend on our ability to (1) manage raw material cost movements through optimizing our hog production operations, hedging, forward purchasing, strategic sourcing negotiations and passing inflationary cost increases to customers, (2) operate our manufacturing and logistics footprint efficiently and competitively and (3) continue to attract and retain customers and consumers through effective sales and marketing spend.

Initial Public Offering

On January 29, 2025, we completed our initial public offering (“IPO”) of 26,086,958 shares of common stock, representing 7% of the total outstanding shares, at a price of $20.00 per share. We issued 13,043,479 shares of common stock bringing the total number of outstanding shares to 393,112,711. The remaining 13,043,479 shares of common stock were sold by WH Group, through its indirect wholly owned subsidiary SFDS UK Holdings Limited, our only shareholder at the time. We received net proceeds from the IPO of $236 million after deducting underwriting discounts, commissions and fees. As a result of the IPO, our common stock is listed on the Nasdaq Global Select Market under the ticker “SFD.”

Tariffs

We export our products to over 30 countries, including China. Those exports primarily consist of fresh pork products. For the quarter ended June 28, 2026, our export sales into China accounted for approximately 2% of our total sales. As of June 28, 2026, products we export to China faced tariffs that ranged from 25% to 47%, with most products subject to 47% tariff rates.

Trade relations between the U.S. and China are fluid. China previously had proposed imposing tariff rates on our products ranging from 140% to 172%, but implementation of those increased rates have been repeatedly paused. It is impossible for us to predict whether tariff rates imposed on our products by China will increase, decrease or stay the same, or whether China will ban imports from the U.S. altogether, and we will adjust our sales strategy accordingly.

Geopolitical Conflicts and Market Volatility

Recent hostilities and geopolitical tensions in multiple regions, including the Middle East, Ukraine, and parts of Central and South America, have contributed to increased volatility in global oil, energy, commodity and transportation markets. Ongoing sanctions, export controls, and other governmental actions associated with these conflicts have impacted and may continue to impact the price and availability of oil and other key inputs. Energy prices directly influence freight, logistics and certain raw material costs across our supply chain, which have increased and may continue to increase our operating costs. In addition, these conditions have disrupted trade flows and contributed to broader macroeconomic uncertainty, which could impact demand for our

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Annual Report on Form 10-K. This discussion and analysis includes the results of operations and financial condition, including year-over-year comparisons, for fiscal years 2025 and 2024. For discussion and analysis of fiscal year 2023, including a year-over-year comparison of fiscal years 2024 and 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for fiscal year 2024. The information reflects all normal recurring adjustments which we believe are necessary to present fairly the financial position and results of operations for all periods included. Totals and percentages may be affected by rounding. Certain prior period amounts have been reclassified to conform to the current period presentation.

Overview

We are an American food company that employs approximately 32,000 people in the U.S. and 2,500 people in Mexico. We boast a portfolio of high-quality, iconic brands, such as Smithfield®, Eckrich® and Nathan’s Famous®, among many others. We are an indirect, majority-owned subsidiary of Hong Kong-based WH Group.

We conduct our operations through three reportable segments: Packaged Meats, Fresh Pork, and Hog Production. We also conduct operations through two other operating segments, Mexico and Bioscience, which are aggregated and reported as “Other.”

Our fiscal year is the 52-week or 53-week period which ends on the Sunday nearest to December 31. Fiscal years 2025 and 2024 each consisted of 52 weeks.

For a more comprehensive overview of our company and operations, refer to “Item 1. Business” in this Annual Report on Form 10-K.

Key Factors and Recent Developments Affecting Our Results of Operations and Financial Condition

The following are key factors that have influenced our results of operations in the past and/or may influence our results in the future.

Growth Strategies

The strategic initiatives we are executing across our segments are complemented and enabled by our strong balance sheet and ongoing operational investments, positioning us for future growth. We have several strategic initiatives to grow our business, reduce costs and enhance our profitability and margins. For a comprehensive discussion of our growth strategies, refer to “Item 1. Business—Our Growth Strategies in this Annual Report on Form 10-K.

Sales Drivers

We are focused on driving profitable growth through our Packaged Meats segment. Within the Packaged Meats segment, the primary factors impacting sales of our brands are household penetration, consumption levels, price point and product offerings. As a result, we have pursued strategies that we believe best align our products with consumer trends and behavior. We have shifted our portfolio towards a higher mix of value-added and margin accretive products while leveraging the breadth of our offerings to further penetrate across dayparts. We look to increase brand awareness and encourage consumer adoption of our products through product and packaging innovation and effective and appealing marketing strategies while maintaining our promise to consumers to offer high-quality products for every budget. We have also expanded to new categories and grown distribution of under-indexed brands in under-penetrated locations. In addition, we seek to increase sales in packaged meats products by driving volumes of our private label and foodservice products, by expanding our customer relationships and by offering quality selections across the value chain.

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The U.S. packaged meats market is supported by long-term secular tailwinds, including consumer demand for high-protein diets, high-quality nutrition, product versatility and convenience. We expect these tailwinds to continue to drive increases in overall meat consumption. Nevertheless, changes in market trends and consumer preferences could adversely affect our results of operations.

In our Fresh Pork segment, the primary drivers of external sales are the consistent level of global pork consumption, our ability to maximize the value of each hog and our ability to leverage our different end markets including retail, foodservice, industrial and export channels. Through ongoing product innovation, we seek to appeal to ever-changing consumer preferences, including demand for convenience and smaller portion sizes as well as expanded interests in new and varied flavors. We also seek to capitalize on export markets as an outlet for increasing the value of raw materials through whole-hog utilization and by appealing to differentiated, global tastes and preferences.

Cost Factors

Our cost as a percentage of sales varies based on fluctuations of raw material prices, as well as manufacturing, distribution and marketing costs. Raw materials are the largest component of our total cost of goods sold, with feed ingredients and hogs accounting for the majority share. The prices of feed ingredients, hogs and pork fluctuate based on market dynamics which can affect our margins. In addition, our distribution costs are affected by fuel prices, which also fluctuate based on market dynamics and may contribute to higher prices for feed ingredients and other inputs. We enter into hedging transactions for commodities such as feed ingredients, hogs and fuel when we determine conditions are appropriate to mitigate the inherent price risks. While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also reduces the risk of loss from adverse changes in raw material prices.

We continue to optimize the size of our hog production operations and procure a greater mix of hogs from independent suppliers with market-based supply agreements in order to supply our Fresh Pork segment. We have reduced the size of our internal hog production from a peak of 17.6 million head in 2019 to 11.1 million head in 2025, which represents approximately 40% of the hogs processed by our Fresh Pork segment. We continue to explore opportunities to reduce internal production over the medium term.

We are pursuing best-in-class manufacturing principles in our plants by employing automation to redeploy labor to higher value tasks, increasing yields and driving efficiency by reducing complexity. In our logistics and distribution network, we have reduced transportation and warehousing costs by improving transportation carrier mix, maximizing utilization of our cold storage and trucking assets, improving supply and demand planning and optimizing inventory levels.

Our results of operations will continue to depend on our ability to (1) manage raw material cost movements through optimizing our hog production operations, hedging, forward purchasing, strategic sourcing negotiations and passing inflationary cost increases to customers, (2) operate our manufacturing and logistics footprint efficiently and competitively and (3) continue to attract and retain customers and consumers through effective sales and marketing spend.

Initial Public Offering

On January 29, 2025, we completed our IPO of 26,086,958 shares of common stock, representing 7% of the total outstanding shares, at a price of $20.00 per share. We issued 13,043,479 shares of common stock bringing the total number of outstanding shares to 393,112,711. The remaining 13,043,479 shares of common stock were sold by WH Group, through its indirect wholly owned subsidiary SFDS UK, our only shareholder at the time. We received net proceeds from the IPO of $236 million after deducting underwriting discounts, commissions and fees. As a result of the IPO, our common stock is listed on the Nasdaq Global Select Market under the ticker “SFD.”

In connection with the IPO, we granted to certain of our directors and employees and certain directors and employees of WH Group: (1) options to purchase 9,822,467 shares of common stock with an exercise price equal to the IPO price of $20.00 per share with an aggregate grant date fair value of $30 million and (2) 1,527,000 restricted stock units (“RSUs”) with an aggregate grant date fair value of $31 million. The options and substantially all RSUs vest over a five year period, with 20% vesting each year. We recognized compensation expense totaling $9 million

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associated with these equity instruments in fiscal year 2025. Unrecognized compensation expense totaled $37 million as of December 28, 2025, which is expected to be recognized on a straight-line basis over the remaining vesting period of 4.1 years.

Tariffs

We export our products to over 30 countries, including China. Those exports primarily consist of fresh pork offal products. For fiscal year 2025, our export sales into China accounted for approximately 2% of our total sales. As of December 28, 2025, products we export to China faced tariffs that ranged from 25% to 47%, with most products subject to 47% tariff rates.

Trade relations between the U.S. and China are fluid. China previously had proposed imposing tariff rates on our products ranging from 140% to 172%, but implementation of those increased rates have been repeatedly paused. It is impossible for us to predict whether tariff rates imposed on our products by China will increase, decrease or stay the same, or whether China will ban imports from the U.S. altogether, and we will adjust our sales strategy accordingly.

Geopolitical Conflicts and Market Volatility

Recent hostilities and geopolitical tensions in multiple regions, including the Middle East, Ukraine, and parts of Central and South America, have contributed to increased volatility in global oil, energy, commodity and transportation markets. Ongoing sanctions, export controls, and other governmental actions associated with these conflicts have impacted and may continue to impact the price and availability of oil and other key inputs. Because energy prices directly influence freight, logistics and certain raw material costs across our supply chain, sustained volatility or disruptions may increase our operating costs. In addition, these conditions may disrupt trade flows and contribute to broader macroeconomic uncertainty, which could impact demand for our products. The duration and overall impact of these conflicts remain uncertain. We will continue to monitor developments and take measures to minimize the impact on our operations.

Litigation

Like other participants in our industry, we are subject to various laws and regulations administered by federal, state and other government entities, including the EPA and corresponding state agencies, as well as the USDA, the Grain Inspection, Packers and Stockyard Administration, the FDA, OSHA, the Commodity Futures Trading Commission and similar agencies in foreign countries.

We, from time-to-time, receive notices and inquiries from regulatory authorities and others asserting that we are not in compliance with such laws and regulations. In some instances, litigation ensues. In addition, individuals may initiate litigation against us.

As of December 28, 2025 and December 29, 2024, we had contingent liabilities totaling $149 million and $141 million, respectively, in accrued expenses and other current liabilities on the consolidated balance sheets related to litigation matters. Charges totaling $80 million were recorded in fiscal year 2025 and are included in selling, general and administrative expenses (“SG&A”) in the consolidated statements of income. We did not record any significant charges for litigation matters in fiscal year 2024. These matters will not affect our profits or losses in future periods unless our accruals prove to be insufficient or excessive. It is reasonably possible that a change in

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