PILGRIMS PRIDE CORP Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Diversified portfolio strategy helped capture market upsides and meet consumer demand.
• U.S. Fresh portfolio improved with Big Bird expanding margins, Case Ready and Small Bird driving profitable growth.
• Europe saw margin expansion through manufacturing network optimization and support function integration.
• Mexico had a stronger Q4 with commodity market pricing increases and growth in key customer sales.
• Prepared Foods grew sales in retail and foodservice, diversifying the portfolio.
• Sustainability efforts generated commercial benefits, with awards for animal welfare standards.

Segment Performance

• U.S.: In Q4 2024, U.S. net revenues were $4.37 billion. Adjusted EBITDA in Q4 was $371.6 million with a margin of 14.2%. For fiscal year 2024, U.S. net revenues were $10.63 billion, adjusted EBITDA was $1.56 billion with a margin of 14.7%. Big Bird business profitability improved due to better commodity pricing, lower grain costs, and operational improvements. Case Ready and Small Bird also saw increased profitability.
• Europe: Q4 2024 adjusted EBITDA was $117.1 million, a 14.2% increase year-over-year. Full year 2024 adjusted EBITDA was $407 million, a 28.3% improvement from 2023, driven by manufacturing network optimization and support function integration.
• Mexico: Q4 2024 adjusted EBITDA was $36.9 million. Full year 2024 adjusted EBITDA was $248.5 million with a margin of 11.8%,受益于供需基本面改善和战略执行, 零售新鲜销量增长, 品牌产品需求增加

Guidance

• 2025 CapEx forecasted to be between $450 million and $500 million, primarily for sustaining operations and routine growth projects.
• Effective tax rate anticipated to approximate 25% in 2025.
• Strong balance sheet with net debt of approximately $1.15 billion and liquidity position very strong, allowing exploration of growth opportunities including organic growth to meet key customers' needs.

Risks

• Bird flu outbreaks impacting U.S. export partners, leading to trade flow redirection.
• Hatchability challenges in the poultry industry, limiting production realization.
• Weather disruptions affecting operations.
• Uncertainties regarding tariffs and trade dynamics, which could impact international sales and operations.

Q: Good morning, and thanks for taking my question. Fabio, congrats on the results. So, to start off, maybe just talk a little bit about the market dynamics, what happened in the fourth quarter and as we're moving into the first quarter. Clearly, 4Q was very strong. I mean it feels like there was still a little bit disruption from the hurricanes late September, early October, coupled with AI. So maybe help us understand a little bit what's been driving these very strong cutout values, particularly on the Big Bird side as you think about it throughout the fourth quarter, but also what you're showing early stage in January still being very elevated.

A: Sure. Thank you, Ben. You're right. There is always some seasonality in the chicken business. And typically, Q4 is the weaker quarter in the year. It's because of the seasonality of the consumption because of Thanksgiving and Christmas. What we saw this year was a very strong demand for chicken. I think that is because of the relative affordability of chicken and some of the menu penetration in foodservice. In Q4 and throughout the year, we saw an increase in demand in retail and foodservice for chicken. In the retail, most notably, we saw on the frozen food category and on the fresh category and also on the deli. So, we saw those three categories leading the demand in the retail. And in the foodservice, we also saw despite a reduction in the traffic that especially affected the foodservice restaurants, the QSRs continue to grow the demand for chicken. I think that's because of the chicken promotions and the menu penetration that we've been seeing. So, both the retail and the foodservice actually increased during Q4 year-over-year. At the same time, what we saw during Q4 because of some of the storms and some of the bad weather and the continued problem with hatchability and a quality. Production was up close to 1.4%, but the big bird category, which was a more commoditized one, was actually flat. So, we saw an increase in demand because of the factors that I mentioned with a flat production in the commodity category. And that sustained the prices at stable levels. And as a matter of fact, now in Q1, we typically see this, which is a rebound in the demand for chicken. We see prices actually going up almost every day in the commodity category.

Q: Good morning. Thank you for the question. Maybe to pick up just on Ben's question around the U.S., Fabio, I think a little bit of the pressure this morning is probably that the U.S. even seasonally still came in a bit below expectations relative to the Street. So just trying to get maybe a layer deeper on the underlying. I know that you have some contracts, obviously, that are more grain-based. And so, we don't have the details of the 10-K yet, but was there more of a pass-through element just in pricing on grain that maybe hit you in the fourth quarter more so than anticipated? Just any additional color maybe by subchannel would be helpful as we think about 4Q relative to your own expectations and relative to where the Street was.

A: No, sure. I think we've been always talking about our portfolio, right? And we have exposure to the commodity markets through our Big Bird operations, but that is 1/3 of our portfolio. The other 2/3 of our portfolio are more in the Small Birds and the Case Ready operations, which tend to be way more stable. And I think as we mentioned, because our contracts and pricing in those other segments are more grain-based or a negotiation that we keep the prices unless something changes, either in cost or in the supply and demand. And when you look at the comparison year-over-year, we actually improved in every single category because of our operational excellence initiatives. So, there is a lot of operational excellence that went through the bottom line. For the year, we have more than $100 million in operational improvements. But those segments are more stable. And that's why we are able to capture the upside when the market is really strong, but protecting the downside. And I think that's what makes our bottom line less volatile. And we've been working in this portfolio over time to make sure that we, again, can benefit from the commodity cycles and can capture the upside while protecting the downside. Also, on the Prepared Foods, we've been growing our brands and through distribution, and we of course, is an offset to the commodity cycle as a lot of the raw materials for this Prepared Foods is the commodity meat. So, I think that's why Q4 was not even stronger than it could be. But when you look at year-over-year, there was a significant improvement. And when we look into the yearly, I think we saw how the portfolio reacts when prices really changes. So, we are more stable, but we're able to capture those upsides