PILGRIMS PRIDE CORP Q1 FY2025 earnings call

Management Statement and Operational Highlights

• US Operations: Focused on operational excellence in Big Bird, lower grain costs and efficiencies in Small Bird. Prepared foods grew over 20% y-o-y, branded sales rose over 50%, and commerce sales increased 35% y-o-y.
• Europe Operations: Profitability improved via business integration, mix enhancements, and innovation (over 80 new products launched). Secured long-term retail partnerships leveraging sustainability practices.
• Mexico Operations: Profitability steady, sales to key customers up 11%, with Fresh and Prepared investments on schedule. Branded and value-added offerings grew.
• Supply and Demand: USDA projects 1.7% growth in US chicken production; retail demand strong for breast and dark meat; food service adjusted with promotions.
• Feed Costs: Corn and soybean meal prices volatile; wheat pricing expected to decline.

Segment Performance

• US: Net revenues were $2.74 billion, a 6.2% increase year-over-year. Adjusted EBITDA was $392.5 million, up from $242.9 million in Q1 2024, with a margin of 14.3% (vs 9.4% last year). Driven by Big Bird recovery, Case Ready and Prepared Foods growth offsetting weather headwinds.
• Europe: Adjusted EBITDA was $99.5 million, up from $81.5 million in Q1 2024, with a margin of 8.1% (vs 6.4% last year). Benefited from business integration, mix enhancements, and innovation.
• Mexico: Adjusted EBITDA was $41.2 million, down from $47.5 million last year, with a margin of 8.4% (vs 9.2% last year). Impacted by foreign exchange and supply-demand volatility, but branded and value-added offerings grew.

Guidance

• Full year effective tax rate expected to approximate 25%, net interest expense projected between $110 million and $120 million.
• US plans to increase capacity in Small Bird, Prepared Foods, and protein conversion; completed plant conversion to air chill.
• Mexico investments in Fresh and Prepared on schedule, full year CapEx estimate at approximately $750 million.

Risks

• Volatility in Mexico's live poultry market due to disease and easy entry/exit of players.
• Potential impact of consumer softness and inflation on food service and retail demand.
• Uncertainty in permitting and site selection for greenfield plants and protein conversion.

Question and Answer

Q: Elaboration on CapEx and additional considerations?

A: Timing related to CapEx, with ramp-up expected and disciplined spending.

Q: Consumer softness impact on chicken trading?

A: Shift from food service to retail, strong retail demand for breast and dark meat, food service adjusting with promotions.

Q: EU margin expansion cadence and Europe consumer?

A: Integration benefits driving margin expansion, consumer confidence improving despite wage inflation.

Q: US volume growth and greenfield plants?

A: Expect to be ahead of market, timing affected by permitting and site negotiation.

Q: Wings and cold storage?

A: Wings weak due to food service shift, cold storage in breast due to promotional activity and inventory building.

Q: CapEx detail and mortality?

A: CapEx for 2027+ projects, mortality connected to genetics and diseases, new breed impact.

Q: Working capital and bond purchases?

A: Working capital swing due to prior anomalies, bond purchases opportunistic.