Earnings call transcript: Pilgrim’s Pride beats Q2 2025 earnings expectations

Pilgrim’s Pride Corp (PPC) reported its second-quarter 2025 financial results, surpassing market expectations with an earnings per share (EPS) of $1.70 against a forecast of $1.59. This positive surprise of 6.92% was accompanied by actual revenues of $4.8 billion, beating the anticipated $4.62 billion. The company, currently valued at $11.29 billion, trades at an attractive P/E ratio of 9.3x. Despite the earnings beat, the stock experienced a slight decline of 0.4% in regular trading, closing at $47.70, although it showed a modest pre-market increase of 0.34%. According to InvestingPro, the company’s overall financial health score is rated as GREAT, with particularly strong profitability metrics.

Key Takeaways

• Pilgrim’s Pride outperformed earnings expectations with a 6.92% EPS surprise.
• Revenues reached $4.8 billion, a 4.3% increase year-over-year.
• Stock showed mixed reactions, with a slight decline in regular trading.
• The company announced a $400 million investment in a new prepared foods plant.
• Strong performance in U.S. and international markets boosted results.

Company Performance

Pilgrim’s Pride demonstrated robust performance in Q2 2025, with net revenues increasing by 4.3% year-over-year to $4.8 billion. The company saw notable growth in its U.S. segment, with net revenues climbing nearly 6% to $2.82 billion. The European and Mexican markets also contributed positively, with adjusted EBITDA figures of $111.8 million and $92.3 million, respectively. The company’s strategic focus on product innovation and expansion in prepared foods helped drive these results. InvestingPro analysis shows the company maintains a strong return on equity of 37% and an impressive free cash flow yield of 12%, indicating efficient capital management.

Financial Highlights

• Revenue: $4.8 billion, up 4.3% year-over-year
• Earnings per share: $1.70, exceeding the forecast of $1.59
• Adjusted EBITDA: $687 million, up 4.7%
• Adjusted EBITDA margin: 14.4%

Earnings vs. Forecast

Pilgrim’s Pride exceeded market expectations with an EPS of $1.70, compared to the forecast of $1.59, marking a 6.92% surprise. This performance reflects the company’s ability to capitalize on market opportunities and manage operational efficiencies effectively. The revenue beat of $4.8 billion against the forecasted $4.62 billion underscores strong demand and successful execution of growth strategies.

Market Reaction

Despite the earnings beat, Pilgrim’s Pride’s stock closed down 0.4% at $47.70. However, it showed a slight pre-market uptick of 0.34%, indicating mixed investor sentiment. The stock’s movement is within its 52-week range of $40.00 to $57.16, suggesting that while the earnings report was positive, broader market factors or profit-taking may have influenced the day’s trading. InvestingPro analysis indicates the stock is currently undervalued, with additional ProTips and detailed valuation metrics available for subscribers. The company’s strong financial health score and attractive valuation metrics suggest potential upside opportunity.

Outlook & Guidance

Looking forward, Pilgrim’s Pride anticipates a total capital expenditure of $650-$700 million for 2025, with significant investments in expanding its operations in Mexico and the U.S. The company expects its new prepared foods plant in Georgia to boost net sales by 40%. Additionally, the effective tax rate for the full year is projected to be around 25%.

Executive Commentary

"We are always looking to create shareholder value," stated CEO Fabio Sandri, emphasizing the company’s strategic focus on growth and innovation. Sandri also highlighted the proactive approach to labor market challenges by overstaffing plants, stating, "Our strategy has been to overstaff our plants during Q2 to prepare for those potential impacts in the labor market."

Risks and Challenges

• Supply chain disruptions could impact production schedules.
• Labor market volatility may affect staffing and operational costs.
• Fluctuations in commodity prices could pressure margins.
• Increased competition in the chicken market may challenge market share.

Q&A

During the earnings call, analysts inquired about the company’s strategies for managing hatchery capacity and chicken production. Executives detailed their approach to capital allocation, including potential special dividends, and addressed questions on the expansion plans in Mexico and the U.S. The discussions highlighted the company’s commitment to maintaining a competitive edge while navigating industry challenges.

Full transcript - Pilgrims Pride Corp (PPC) Q2 2025:

Conference Operator: Good morning, and welcome to the 2025 Pilgrim’s Pride earnings conference call and webcast. All participants will be in a listen only mode. At the company’s request, this call is being recorded. Please note that the slides refer referenced during the today’s call are available for download from investor section of the company’s website at www.pilgrims.com. After today’s presentation, there will be an opportunity to ask questions.

I would now like to turn the conference call over to Andrew Rozewski, Head of Strategy, Investor Relations and Sustainability for Pilbins Bank. Please go ahead.

Andrew Rozewski, Head of Strategy, Investor Relations and Sustainability, Pilgrim’s Pride: Good morning, and thank you for joining us today as we review our operating and financial results for the second quarter ended on 06/29/2025. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter, including a reconciliation of any non GAAP measures we may discuss. A copy of the release is available on our website at ir.pilgrims.com along with slides for reference. These items also have been filed as Form eight ks and are available online at sec dot gov. Bobby Ossandre, President and Chief Executive Officer and Matt Calvignoni, Chief Financial Officer, will present on today’s call.

Before we begin our prepared remarks, I would like to remind everyone of our safe harbor disclaimer. Today’s call may contain certain forward looking statements that represent our outlook and current expectations as of the date of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward looking statements. Further information concerning these factors have been provided in yesterday’s press release, our Form 10 k, and our regular filings with the SEC. I would now like to turn the call over to Fabio Sandri.

Fabio Sandri, President and CEO, Pilgrim’s Pride: Thank you, Andy. Good morning, everyone, and thank you for joining us today. For the 2025, we reported net revenues of 4,800,000,000.0, a 4.3 percent increase over the same quarter last year. Our adjusted EBITDA was 687,000,000, up 4.7% versus 2024. Our adjusted EBITDA margin was 14.4% in line with last year.

Our performance reflects our commitment to our values, disciplined execution of our strategies, and extensive application of our management metrics. In The US, our diversified fresh portfolio across segments benefited from favorable commodity cloud values, continued affordability of chicken compared to other proteins, strong key customer demand, and sustained progress in operational excellence. Diversification efforts through prepared accelerated as our branded offerings continue to drive growth across retail and foodservice. Our Europe business drove margin expansion through realization of cost efficiencies in manufacturing and optimization of product mix. Sales to key customers rose faster than channel averages, and our branded offerings in free traders and rollover continue to grow further diversifying our portfolio.

Mexico drove strong results given attractive fundamentals in the commodity market, extensive growth with key customers, and continued momentum of branded offerings in fresh and prepared. Given the strong demand, along with our vision of becoming the best and most respected, we are pleased to announce the initial wave of investments to further unlock our growth potential. We have also announced a special dividend of approximately $500,000,000 As a result, we can continue to create better future for our team members, bolster our competitive advantages, and further unlock value for shareholders. Turning to supply in US. The USDA indicated ready to cook production for The US chicken that grew 1.9% compared to the 2024 from increased headcount and higher than average driveways.

Despite an increase in egg sets with a more productive layer flock, chip placements continue to be challenged as hatchability remained at historical low levels and hatchery utilization continued at record rates. As such, production grew growth was driven by increased lightweight and improved leaflability during the later half of the quarter, expanding production by the 1.9. Considering the most recent sets and placement data, the USDA estimates growth of 1.5% in 2025, suggesting sufficient supply to meet strong chicken demand experienced in recent quarters. As for overall protein availability, the USDA anticipates 1.3% for 2025 growth as increased chicken and pork production offset significant declines in beef production. As for demand, the cost of eating out continues to increase more rapidly than eating at home.

As such, retail propel further growth for chicken. In fresh, both tenders and wings gained traction, whereas boneless boneless skinless dress continued to grow given continued record spreads against ground beef. Momentum for boneless thighs continue as it grew faster than all cuts compared to prior year. Similar to fresh, both the deli and frozen departments also added demand at a sustainable rate. Frozen fully cooked led chicken growth across all of retail primarily through increased velocity, whereas deli benefited from increased distribution and demand for wings.

In food service, the increase in the cost of eating out impacted restaurant traffic, especially for food service restaurants. However, chicken demand grew as operators strategically lean into value offerings, limited type productions, promotions, and many revisions to either trigger or maintain momentum. Value added chicken focused QSR continue to leverage the affordability of chicken, outperforming the broader dining sector and capturing traffic and share. In exports, broiler volume continues to lag previous years. Nonetheless, pricing remained resilient as domestic demand for dark meat continues to be healthy.

Given the relatively minimal outbreaks of high fat avian influenza, many of our trading partners continue to ease or remove trading restrictions on several major poultry producing subpets, increase increasing the access. While opportunities arise from trade restrictions from the outbreak of high fat AI in Brazil, the overall impact was muted as export markets quickly adjusted to different policies and restrictions across countries. Our trading partners continue to navigate tariffs. To date, there have been no significant disruptions other than China. We anticipate potential benefits to US chicken when a trade agreement is reached within these countries.

Turning to feed. Corn pricing moved lower throughout the quarter as US saw a large rebound in planted acreage. As a result, the USDA forecasted a record high in US corn production along with the rebuild in domestic stocks. When combined with increased production from Brazil, USDA expects global corn stocks to be relatively flat year on year over year. Soybean meal pricing also moved lower as record South American production drove a sharp rise in global soybean stocks.

When combined with increased soybean processing capacity for biofuels worldwide, new prices have become further depressed. In wheat, global stocks, including China, are expecting a slight rebuild this crop year as production was close to or above initial expectations in all major northern hemispheres. In The UK alone, output increased by 12% compared to prior year. As a result, increased production is expected to offset slightly lower beginning stocks. Since ample supply exists and is more readily available at the point of origin, risks related to physical supply of wheat has been reduced.

Throughout the remainder of the year, grain and oilseed markets will take direction based on US weather and its impact on corn and soy crop yields along with any possible disruptions related to ongoing trade negotiations. In The US, consumers continue to seek value in their eating occasions. As such, the relative affordability, availability, and flexibility of chicken compared to the other proteins continue to resonate across both retail and food service channels. Given the environment, kids ready experienced strong demand as consumers increasingly migrated towards retail to stretch their budgets. This trend was amplified by record spreads between boneless, skinless breast and ground beef pricing.

Nonetheless, our differentiated portfolio continued to gain traction as our sales to key customers grew significantly higher than industry averages. The performance of our branded Just Bare of fresh offering was particularly strong as net sales rose nearly 20% compared to prior year. In small birds, overall margins remained strong as our business benefited from extensive demand from key customers in QSR. In Delhi, wing velocity improved, but we experienced some reduction in the growth of rotisserie birds, impacting prices to a lower level than 2025 2024, but still close to the historical five year average. We are working in new innovation to help growth with our key customers on this category.

In Big Bird, jumbo cutout values remained favorable despite volatility in the quarter. During the first two months, value were second highest on record. After a rapid decline in June, values returned to normalized levels consistent with the five year averages. Nevertheless, our team remained focused on operational excellence as yields and labor efficiency both improved. Given our progress in constructive market conditions, profitability increased significantly compared to prior year.

Prepared continued to realize significant growth as net sales increased by 20% compared to last year. In retail, Just Bare recently achieved over 10% market share given incremental distribution and category leading velocity. Favorite momentum also continues to build as trial and velocity increased throughout the quarter. Both brands continue to receive industry recognition for innovation and consumer preference. Just BARE achieved the number one ranking in Surcana’s twenty twenty four product space setters list, where Steelers received the People Magazine’s twenty twenty five food award for best chicken nuggets for our cheesy jalapeno offering.

Prepared foods also continues to drive profitable growth through incremental distribution, portfolio expansion, and branded offerings in Pilgrims and Gold Case brands. As such, sales grew over 25% compared to last year. More importantly, substantial opportunities remain with leading distributors, selected QSRs, and schools. Commerce also continues to be a growth driver as digitally enabled sales rose over 26% compared to last year through continued expansion and efficiency of leading investments with leading retailers, food service providers, and various online platforms. Turning to Europe.

The environment improved as consumer sentiment grew as wage outpaced inflation. Within retail, overall demand remained steady across the proteins with poultry and chilled meals experienced the highest growth, while lamb and pork were the most challenged. Given this environment, our team continued to drive profitable growth through our strategies. As such, we are strengthening key customer relationships through incremental distributions and new product development, generating sales growth that outpaced the overall groceries channel. Our diversification through key brands in retail also continues to progress.

Rollover grew over 10% compared to last year from additional distribution and new offerings. Frigidaire also continued its marketplace momentum as net sales growth surpassed the category average. Innovation remains a key pillar to drive growth. During the quarter, our higher attributes differentiated chicken offerings developed for a key customer was recognized as the best new poultry products by food management today. We continue to cultivate our new product pipeline.

As such, we’ve expanded our rollover portfolio into chicken, created additional eating occasions for fried fridge raisers through packaging and working close collaboration with the key customers to create a series of premium new epic meal offerings. These items and several others are slated for launch in Q3 and will be supported by investment in media and promotion to foster growth. Foodservice remained challenging as total visits fell compared to prior year. We additionally secured awards from our customers, increasing our sales in the channel by 10% versus last year. Moving forward, we will look to further cultivate our presence with food operators within the pubs and bars category.

Our integration of corporate support activities and optimization of our manufacturing network are nearing completion. Based on these efforts, we have improved production efficiencies and created a more agile key customer focused organization. These are enhancing foundation, we will look to accelerate opportunities to drive profitable growth. Mexico experienced another strong quarter as commodity fundamentals in the live and retail market remain attractive given seasonality, reduced availability of imports and volume growth. In fresh, key customer relationships strengthened as net sales increased double digits, driven by the food service rotisserie channel.

Our retail fresh branded portfolio also continues to drive diversification and sales have increased over 6% compared to last year, led by Just DARE, which is over up 2.5 times. Our diversification efforts through value added has experienced similar success as Prepares continue to grow. In retail, premium spend increased double digits compared to last year. Growth in the food service was driven by QSR, which were up nearly 10% versus prior year. During our Investor Day in March, we highlighted a variety of projects to reinforce our strategies and enhance our competitive advantage.

As part of this, we announced an investment of $400,000,000 last week to build a new fully cooked prepared food plant in Walker County, Georgia. Given this investment, we can further capitalize on long term growth trends for chicken in retail and food service. Prepare is a large category with an estimated size of $14,000,000,000. An attractive growth profile also exists as net sales have grown annually by 6% since 02/2019. Furthermore, consumer interest appears to be accelerating as sales have risen by 7% between the 2024 and 2025.

During the same period, our net sales have grown 21%. Momentum for our retail brands has also been remarkably strong. Over the past five years, household penetration has increased from 2.4 to 10%. Similar momentum may exist in food service for our brands as Gold Kits volume has risen 15% annually since 2021. When our growth prospects are combined with strong consumer enthusiasm for our brands, we have a remarkable opportunity to accelerate the expansion of our prepared food system.

This investment will further diversify our portfolio, reduce reliance on outside suppliers and leverage our fresh production capabilities. As a result, we can drive growth, enhance margins and reduce volatility across our entire US business. In the meantime, we will expand fully cooked production in our existing prepared facilities at Morfield and Waco. Given these investments, we’ll still expect to have sufficient capacity to meet our growing demand across retail and food service. Within retail, over one third of fresh chicken is sold as antibiotic free or organic chicken.

Given extensive consumer interest, our case ready business has become the leading provider of these higher attributed differentiated offerings. To further strengthen our competitive advantage and reinforce our leadership position, we have announced the conversion of a big bird plant to support key customer growth to an NAE and veg fed program in the case ready segment. We remain committed to diversification across bird sizes and our ability to capture market upside in the big bird commodity market. As such, we view the manufacturing footprint and identify the opportunity to enhance our mix and unlock additional capacity to meet our growth in demand in that segment. Based on these efforts, we can maintain our current portfolio across all bird sizes, further increasing our upside potential while limiting downside risk.

Equally important, we can generate higher, more consistent margins in the low to mid double digits for US fresh business. In Mexico, our capacity expansion efforts also continue. Our projects in Veracruz and Merida remain on schedule, and we still anticipate it will become operational in the 2026. Similarly, our prepared expansion continue to proceed as planned, and initial production is slated for the 2026. Given this work, we can continue to drive sales growth and reduce volatility of results.

When all these projects are at full capacity, we’ll increase our the size of our business in Mexico by 20%. We remain committed to the other key projects and potential strategic acquisitions as discussed during our Investor Day. As such, we will continue to evaluate various alternatives and provide updates when available. With that, I would like to ask our CFO, Marcelo Galvanoni, to discuss our financial results. Thank you, Fabio.

Good morning, everyone. For the 2025, net revenues were 4,760,000,000 versus $4,560,000,000 a year ago, with adjusted EBITDA of $686,900,000 and a margin of 14.4% compared to $656,900,000 and a 14.4 margin as well in Q2 last year. Adjusted EBITDA margins in Q2 were 17.1% in The U. S. Compared to 16.7% a year ago.

For our Europe business, adjusted EBITDA margins came in at 8.2% for Q2 compared to 7.4% last year. In Mexico, adjusted EBITDA margin in Q2 was 16.3% versus 19.4% a year ago. U. S. Net revenues were $2,820,000,000 versus $2,660,000,000 a year ago, a nearly 6% increase.

Adjusted EBITDA in The U. S. For Q2 came in at $482,700,000 compared to $444,600,000 a year ago. Strength in the commodity chicken markets along with moderate grain input costs and continued operational improvements drove strong year over year profitability improvement in our Big Bird business. Our Cake Ready and Prepared Foods businesses have continued their momentum with increased distribution of key customers.

Cake Ready’s profitability improved year over year. However, even with increased sales volumes, higher commodity chicken input costs was a headwind to Prepared Foods profitability. Small bird performance in QSR remained very strong, offsetting the more challenging pricing environment in deli walks. In our U. S.

GAAP results, we did incur legal settlement expenses of 58,000,000 the quarter, primarily due to reaching settlements with certain parties associated with the ongoing Boilers litigation. In Europe, adjusted EBITDA in Q2 was $111,800,000 versus $96,200,000 last year. The business has benefited from its continued structural reorganization, including integration of support functions and manufacturing optimization programs, while cultivating key customer partnerships with continued innovative offerings. As we begin to wind down our reorganization efforts, restructuring charges trended lower to $3,500,000 during the quarter. Mexico generated $92,300,000 in adjusted EBITDA in Q2 compared to $115,100,000 last year.

The Mexican business continued to demonstrate strength with adjusted EBITDA margins greater than 16%, even though facing year over year FX headwinds of 13% in bird disease challenges during the quarter. SG and A costs in the quarter were lower year over year, primarily due to a decrease in the previously mentioned legal settlement costs. Also in the quarter, we incurred marketing investment costs and additional incentive compensation expense based on the progress of our year to date results. Our effective tax rate for the quarter was 25.1%. We continue to anticipate that the full year effective tax rate will approximate 25%.

We have a strong balance sheet, and we continue to emphasize cash flows from operating activities, management of working capital and disciplined investment in high return projects. During Q2, we reduced our gross leverage by 90,000,000 through open market purchases of our own debt. Even with the attainment of the $1,500,000,000 special dividend in April, our net debt totaled less than $2,300,000,000 with a leverage ratio of less than 1x our last twelve months adjusted EBITDA at the end of the quarter. Following the April dividend payment and debt repurchases during the period, we had over $1,900,000,000 in total cash and available credit at the end of the quarter. We have no short term immediate cash requirements with our bonds maturing through 2031 and 02/1934, and our U.

S. Credit facility does not expire until 2028. With the strength of our liquidity position, the Pilgrim’s Board yesterday declared a special dividend of $2.1 per share or approximately $500,000,000 The record date for the dividend will be 08/20/2025, with a payment date of 09/03/2025. When adjusting for this dividend, our net leverage ratio would be 1.15 times adjusted EBITDA, still well below our target of between two to three times. Net interest expense for the quarter totaled $31,500,000 With the announcement of the upcoming dividend, we anticipate our full year net interest expense to be between $115,000,000 and $125,000,000 this year.

As discussed at Investor Day in March and demonstrated by announcement last week of our new U. S. Prepared Foods plant in Walker County, Georgia, we will continue to invest in growth. We are very excited to move forward in Georgia and with this project, will create over six thirty jobs and will expand our branded prepared food capacity beginning in the 2027. Upon reaching full capacity at this new plant, we estimate that the U.

S. Prepared foods business will increase its net sales by over 40% from its current levels. We spent $161,000,000 of CapEx in the second quarter, an increase of $63,000,000 from the first quarter. In The U. S, we made progress towards the conversion of our Russellville plant to support a retail key customer in the 2026.

Also, in Mexico, our investments in fresh and prepared continue to progress and remain on schedule. Once these projects finalize and are at full utilization, we estimate the Mexican business will increase its net sales by approximately 20% from its current levels. These projects in Prepared Foods, Case Ready and Mexico, taken together, require approximately $650,000,000 of incremental growth capital. We will continue to ramp up capital spending throughout this year to support these various projects. However, we anticipate total CapEx spending in 2025 to be slightly less than our original estimate of $750,000,000 likely closer to $650,000,000 to $700,000,000 These near term growth projects align to our overall strategy to portfolio diversification, focus on key customers, operational excellence and our commitment to team member health and safety.

Operator, this concludes our prepared remarks. Please open the call for questions.

Conference Operator: Thank you. We will now begin the question and answer session. In the interest of allowing equal access, request that you limit your questions to two, then rejoin the queue for any follow-up. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys to minimize background noise.

To withdraw your question, please press star then 2. The first question comes from Ben Thurler from Barclays. Please go ahead.

Fabio Sandri, President and CEO, Pilgrim’s Pride: Yeah. Good morning, Fabio and Matt. Thanks for taking my question. Congrats on another very strong quarter. So first one, actually, just following up on some of your closing comments right now, Matt, in terms of like the CapEx, I would say, and so on.

Wanted to clarify the investment in Georgia that you’ve announced last week. So how should we think about the the spend of the 400,000,000? You said it’s gonna ramp up in somewhat in the second half and then probably gonna go hiring in 2027. So the bulk of it, I guess, will be in 2026 CapEx. But just to understand a little bit the cadence of of those 400,000,000 and associated to this to this investment, is that using chicken that you already produced?

Or does it include additional chicken slaughter capacity? Just on that one. And then I have a quick follow-up question. Sure. Thanks, Glenn.

Good morning. You know, I think when you think about that $400,000,000 that we announced last week, think think this year kind of in that, you know, 50,000,000 to $70,000,000 range, next year to that $250,000,000 to 300,000,000 to $350,000,000 in 2027. It’s always timing can fluctuate a little bit. The vast majority of the spend will be in 2026 because we anticipate this becoming up and running in the 2027. So I give you that as my kind of basics.

And then, Bob, do you want to talk about the chicken side of it? Yes. Ben, thank you for the question. As we mentioned, we want to improve our portfolio by increasing our presence in the prepared foods and branded arena. And I think this point is is, you know, in time for us to support us in the growth of our Just brand.

The Just BARE brand is a differentiated brand. It is no antibiotics ever, minimally processed. And as we mentioned, it has experienced phenomenal growth. And since it’s used no antibiotics ever meat, and we are the largest producer of no antibiotics ever meat in The United States, it will be normal for us to support these prepared foods with our internal production. But, of course, in all of our prepared foods, we operate as an independent business.

We have independent p and l’s. We actually have independent p and l’s by by plant, but the prepared food business is operated as an independent businesses, and it can source meat from any supplier as long as it is in line with our superior quality standards. K. Got it. And then, I mean, in general, you’ve you’ve highlighted in your prepared remarks that that some of the production data is I mean, visibility is getting better.

We’re we’re seeing more supply. It it seems like that particularly the the big bird weight, the birds with big birds. The big birds are gaining a lot of share. So obviously, there there’s another boost to to the supply side here. So if you look at the supply versus demand situation and maybe putting that beef shortage aside for a moment, Are we getting to the point that there is coming too much supply on because now all these experts as of a sudden do turn into into chicken placement, plus we have that weight gain and and we’re getting a little bit of an oversupply situation here or or just not yet because of the demand for chicken being so soft?

Yeah. I I think that’s that’s that’s a great point, Ben. I think when we go and step back and and look at the expectations for supply of chicken in q three. I think we continue to see the same structure as as we saw last year and this year. So we have a lower layer flock, but it’s more productive because it’s younger.

So we’re seeing more egg sets, and we’ve been seeing this throughout 2024 and 2025. But we’re still with the hashability issue, and 2025 has actually been lower than 2024. We always have an improvement because of seasonality and the weather pattern, and we have an improved hatchability, but for as we had last year. But it’s still below the twenty twenty four levels that were already record low. So because of that, even with an increase in the asset, the cheap placement has not followed.

But as we mentioned, we always have also an improvement in visibility in in this period of the year because, once again, of the weather, which translated to close to 1% increase in headcounts. I think because of the profitability of the segments, we are seeing an increase, especially in the big bird segment. And that increase in that segment accounted for 1% in increase in live waste. So that’s why we saw 2% increase, close to 2% increase in the overall availability of midterm for for the domestic market. If you look at the demand and you look at what’s happening in both retail that is gaining market share because of the leading increases in inflation and the concerns of the consumers about spending.

Retail was increasing by 2.4%. And on the food service, despite the reduction in the traffic, we’re seeing chicken gain market share and increasing many penetration to the accounts that we increased the sales of chicken in the food service by 2.7%. So when you look at that increase in demand and, as I mentioned, all the challenges in pricing and availability of the other proteins, I think the expectation increase of USDA of close to 1.5% for the year, it’s in line with the demand. And I think that’s being what we’ve seen lately on the prices of boneless breast meat. K.

Perfect. Thank you very much, Ravi. I’ll pass it on.

Conference Operator: The next question comes from Andrew Shalvec from b f BMO Capital. Please go ahead.

Andrew Rozewski, Head of Strategy, Investor Relations and Sustainability, Pilgrim’s Pride: Hey. Good morning. Thanks for taking the questions. You know, I I wanted to ask another US chicken supply chain question. We’ve seen pullets placed are down year over year three in the last four months, and that comes on the heels of what was an extended period of pretty consistent increases.

So is there something changing there? Or what is driving the reversal? Maybe you can kind of talk through what the dynamics are at play there? And and more broadly, can you give us an update on the industry production constraints and where the industry stands with those now versus maybe a year ago or so? Thanks.

Fabio Sandri, President and CEO, Pilgrim’s Pride: Yeah. Thank you, Andrew. Yeah. On like I mentioned, on the on the structure of the industry and and you’re right on bullet placements, I think what the industry is trying to have is a more productive clock. I think the hatchability issue has been very impactful.

If you look at the hatchery utilization, we have the highest level ever. And I think we’re we’ll probably test the capacity. Think all the hatcheries are operating more days than they than they should, reducing a little bit of maintenance. So if you have eggs that will not hatch or a lower productive layer, you you were in trouble because you’re compromising the bottleneck, which is the the hatchery. So that’s why the industry is trying to get a more productive and younger layer flock.

And it’s all from from there in terms of the capacity of the industry to increase production. And I think what the industry is trying is to gain production through the live rates, and I think that is what creating this higher growth on the big bird segment. It is all our industry way of trying to expand production without being able to expand the number of heads that we are producing. And I think on the overall, it’s also matching with the demand for chicken. When you look at by segment as well, we’re seeing the bone in category being more challenged in growth than the big bird category.

I think we always mention about the versatility of chicken, both in retail and in food service. It’s not only the center of the plate, but it’s also as an ingredient. And I think the bird big bird breast meat is a perfect match to to as an ingredient. At the same time, we’re also seeing more deboning of the dark meat. I think we’ve been talking for this for for many years about the change in demographics and the change in facing in the in the domestic market, US market.

We used to be in the past white only white meat only market exporting the leg quarters. But over the last five to ten years, we saw significant growth in the dark meat consumption. Today, at retail, boneless ties are at the same price as boneless breast. So you you can see that there is a strong demand for the boneless thighs in the retail. And and that is helping the big bird category as well as we are being able to debone the the leg quarters and gaining a a better value than exporting leg quarters.

Andrew Rozewski, Head of Strategy, Investor Relations and Sustainability, Pilgrim’s Pride: Okay. That’s super helpful. And then switching gears to Europe. I’m curious how you’re thinking about the margin progression from here. You had been expecting a slower pace of year over year margin expansion, and we did see that this quarter.

But sequentially, it was only a very slightly. And so I guess what caused that slower pace of sequential margin improvement? And are you expecting to see that reaccelerate over the rest of the year sequentially to get to kind of a steady year over year improvement? I know I’m mixing sequential and year over year, but I’m trying to get a sense for for how to think about the improvement in in in EU margins from here over the back half of the year. Thanks.

Fabio Sandri, President and CEO, Pilgrim’s Pride: Yeah. We always have a little bit more seasonality in Europe, and, typically, the second semester is better with q four being much stronger than the first semester. What’s happening in Europe is that we saw the consumer sentiment improved a little, but it’s still at a lower level. And we saw the growth at grocery really limited in this quarter. There was a significant increase in the cost of living in in Europe because of the increase in the national security cost for companies, and that impacted a little bit to the both the both the consumer sentiment and the and the demand.

But nonetheless, we saw chicken continue to be the the fastest growing category in there. We saw a little bit of reduced demand in the land and pork categories, which are more expensive than than chicken. But going forward, we continue to see the improvement of our operations with the consolidation of our back office and our operational network, and we are continuing to see more innovation. And I think that’s the most important point for Europe. We will continue to innovate to help our key customers to grow faster than category average.

But to your point, there is always a seasonality in Europe, and q two typically is superior or better than the first semester with q four being the strongest of all.

Andrew Rozewski, Head of Strategy, Investor Relations and Sustainability, Pilgrim’s Pride: Got it. Okay. Thank you very much.

Conference Operator: The next question comes from Purnal Sharma from Stephens. Please go ahead.

Andrew Rozewski, Head of Strategy, Investor Relations and Sustainability, Pilgrim’s Pride: Congrats on the quarter. I appreciate the questions here. Just wanted to first start out, and and sorry to belabor the point on the egg set here. But, you know, you you mentioned earlier on that we we’re maxed out in egg sets. And just looking at the data, there was a pretty big jump from the start of 2024 to 2025.

I think we went from, like, 240,000,000 a week to about 250,000,000 a week. So I just wanted to get a sense of, you know, how how much more growth do you think we can see in excess without seeing any major investment in any any sort

Fabio Sandri, President and CEO, Pilgrim’s Pride: of hatchery capacity? Yeah. I think you you’re absolutely right, Philip. It is really going to be really hard for us to get any more excess if or or chicks placed, right, if we don’t have investments in in hatchery capacity. And as I mentioned, the what the industry is trying to to have is a is a younger layer flock that is also more productive but have better hatchability.

Because to my point, this is the bottleneck in in our industry, is the the the hatch. We were not being able to capture all the all the demand upside that we are seeing with production. When when you look into to the numbers, in q three, we are seeing we’re expected from USDA close to 1.9% as well together with what we have as of today. So I think we’ll be pretty much in balance in terms of supply and demand. But you’re The the issue for us continue.

I think we always have this question when you have the hatchability back. Right? And I think what we are seeing year over year, it is that the hatchability has not improved. There there is some seasonality, so we always see some improvements during the summertime. And I think it continues to be the challenge that we have dealing with this new breed.

And as we mentioned, until a new breed comes, and we haven’t seen any any evidence of a new breed breed breed coming, this this is the best breed in terms of performance, in terms of feed conversion, and in terms of yields. So there is actually no intention on our industry to to go back to older breeds that are less productive just to get a better hedge. So I think we will continue to reduce shortly with this. We’re we’re learning how to manage better, especially the male. It is, once again, an animal that gains weight, and then managing the live part is very difficult.

But I think you’ll get some improvements and you’ll get hatchability, a little improvements here and there over time, which will allow our industry to get in line with the strong demand that we are seeing.

Andrew Rozewski, Head of Strategy, Investor Relations and Sustainability, Pilgrim’s Pride: Appreciate the color there. Just as a follow-up and on that, the egg set and just the supply. I think fall to wintertime is when you typically see seasonal production cuts by the industry. But in your comments earlier, when you talked about USDA being up their their estimates being up 1.5%, that, you know, being an adequate level of demand. I was wondering if you think that the industry will need to see deeper production cuts than they than they enacted last year, or do you think production cuts will be at a similar pace to to what we saw last year?

Would love to get your thoughts around the seasonal production cuts.

Conference Operator: Yeah. I think it’s it’s the

Fabio Sandri, President and CEO, Pilgrim’s Pride: normal seasonality of our industry, right, to have seasonal cuts for the q four. As we know, there is Thanksgiving, which is and Christmas, which we see a lot of demand for turkey, for hens, for other types of meat, and we see a decrease in the promotional activity of chicken, which will lead to lower demand as as expected. I think it’s the normal seasonality year over year, and there is a normal seasonal cuts from our industry. We will always match our production to the demand of our key customers. And as we saw the the numbers that we discussed with them, what are their promotional activity, we will support that those those those plans as we do every year.

I think during q three and q four, we are also seeing that will be even higher challenges on beef and pork. I think we’re expecting or USDA is expecting a sharp reduction in production of beef beef for q four. And there is being some some issues with the live operation of pork where we’re seeing the PV virus impacting some of the operations. There’s a discussion about weights and heads in in the pork, but we’re seeing that q four in terms of availability of total meat for The United States will be close to 1%, which is one of the lowest numbers we’ve we’ve we’ve seen, which tends to benefit the demand for chicken. But as I mentioned, it is normal to see a reduction in the demand for chicken during q four.

Appreciate the color.

Conference Operator: The next question comes from Guilherme Polaris from Santander. Please go ahead.

Fabio Sandri, President and CEO, Pilgrim’s Pride: Hello. Thank you for taking the the question.

Conference Operator: That’s quick one. You reported a 5% growth in the cost in The US. We got 1% growth in volume. Right? So if you could go through a bit of the main drivers here and going forward, looking at all the discussions that we’re having about visas and the situation of labor in The US, what could you expect going forward in terms of wage inflation on the sector in the first and some of that already or not?

Fabio Sandri, President and CEO, Pilgrim’s Pride: Yeah. I think that’s something that we’ve been looking closely, right, on the labor market in The United States. Our strategy has been to to follow, of course, all the all the policies from United States. We saw some humanitarian visits being relocated in United States, especially for Nicaragua, Venezuela, Cuba, Haiti. We have some employees with those visas and because of the revocation, we will need to we we had change from from those team members.

Our strategy has been to overstaff our plants during q two to prepare for those potential impacts in the labor market, and that’s how we’ve been operating. In in q two, despite one of the best turnovers we we ever had. I think we always have a a policy of being competitive in the marketplace. We are in certain. We have a process where we look plant by plant and region by region, and we are competitively wages in those regions.

We’ve been able to fully staff our plants actually during q two to prepare for those actions by the government. We were overstaffing our plants. So we run as a number at 105% staff. We we we control the staffing in every single plant. We have great methods to to staff to perfectly to the mix that we are running.

And during q two, we were 105% staff, especially to prepare for for those impacts. So far, we’ve been able to fully staff our clients. Like I mentioned, we are running the the best mix that we can, and that’s what we saw in in the performance during this quarter. As far as going cancel? Yeah.

As as far as going in the future on on labor inflation, I think what the numbers we are seeing for the entire United States is that that has not been a significant issue. Of course, we we need to wait and see how the the economy continues to to to go. We are seeing some some reduction in labor in the food service arena, and we’ve been benefiting from that. Like I mentioned, we are very competitive where we are we have our plans.

Conference Operator: That’s super clear, Fabo. Thank you. The next question comes from Heather Jones from Heather Jones Research. Please go ahead.

Heather Jones, Research Analyst, Heather Jones Research: Good morning. Thanks for the question. I want to go back to the Walker plant and how how y’all are gonna be supplying that. And it looks like the majority of your slaughter plants that are located around that area are are small bird, but then there’s some larger ones, I guess, in Alabama. So I guess my question is, are you planning on converting maybe some small bird capacity, particularly given the demand dynamics in that segment?

Are you planning on converting to capacity? Or would you pull it from plants that are further away? Just hoping wondering if you could give us more insight on that.

Fabio Sandri, President and CEO, Pilgrim’s Pride: Yeah. I think we’re always looking for the portfolio like Heather. What what is the segment that is growing? What is the segment that is more challenging? As as I mentioned, I think the bone in category has been the one that has been challenged over the last period of time.

We are the leader in that category. We have great key customers. We saw some of these key customers in the food service arena growing much faster than the category averages. So we’re seeing great profitability in those plans. Nonetheless, we see that the the market that is going is more for us, the case ready and the big bird segments.

And as as always, we will adjust our portfolio to what we look and not only the right now impact, but also looking going forward. I think when we look at where we are growing, we are growing in in retail ahead of the category in the fresh more than five times what the industry grew, we we actually improved way ahead of the the the category average once again because of the differentiated offerings that we have. So it’s not only the region, it it is about the offerings that we have. We have the non antibiotic flavor offerings. We have the veggie fed offerings.

We have the also the organic offerings. So it’s more about where you are rather than just the region. And I think, Heather, Claudia was mentioning before relative to our prepared foods business, they really do look and source from multiple places. They’ll source both internally from our own plants, but they also source quite a bit outside of programs facilities too. So it really is making sure that they have the best cost profile and some sourcing of the of the clients in in Walker County will come from a variety of different places.

Heather Jones, Research Analyst, Heather Jones Research: Okay. But y’all are the you said that that’s

Priya Origipta, Analyst, Barclays: gonna be NAE, and y’all are

Heather Jones, Research Analyst, Heather Jones Research: the largest supplier of NAE, largest producer of NAE in The US?

Fabio Sandri, President and CEO, Pilgrim’s Pride: Correct. That is correct.

Heather Jones, Research Analyst, Heather Jones Research: Okay. And as for years, you guys had said in The US, your target was a third, a third, a third. And, clearly, there’s some changes going on, pretty big changes. So I was wondering if you could, maybe not definitively, but sort of qualitatively give us an updated thoughts on what does that ideal mix look like now for you guys in The US.

Conference Operator: Yeah. I think, like I mentioned,

Fabio Sandri, President and CEO, Pilgrim’s Pride: we’re always looking at at at at what you mentioned on in terms of the portfolio. Right? And when you look at the market, it is kind of a third a third a third with the big bird growing faster than the other segments. On the small birds, as I mentioned, the the challenges on the bone in category, but we are also seeing the food service for small birds, especially on the QSR, we talk about the sandwich wars, right, for many years. We saw some growth in that category, and that is another thing that we can do, increase a little bit the live weight on the small bird category to support the growth in the food service, both distribution and QSR on the small bird.

So we still believe that being a balanced approach, it is the the the right approach. As we mentioned, we are growing faster in retail because of our differentiated offerings and because of our key customers growing faster than the categories, and we will need to convert from Big plant to a case ready plant. But we are finding bottlenecks in all of our big board plans so we can continue to have the best this balanced approach without losing our exposure to the commodity markets that we know are very strong right now.

Heather Jones, Research Analyst, Heather Jones Research: Thank you so much.

Conference Operator: The next question comes from Peter Galbo from Bank of America. Please go ahead.

Peter Galbo, Analyst, Bank of America: Hey, guys. Good morning. Question for you on Mexico specifically in the quarter and then as we kind of bridge to the second half. Just want to understand how we should kind of think about the profitability there. It seems like at least in 2Q, FX, obviously, was a pretty material drag on the revenue side, but you also got a pretty sizable benefit on the cost side.

So just now that the currency is going the other way, how we should think about the impact that could have on on profitability amongst, you know, market dynamics in Mexico for for two h?

Fabio Sandri, President and CEO, Pilgrim’s Pride: Sure. Thank you, Peter. Yes. As as we mentioned, Mexico is is a volatile market quarter over quarter. But year over year, when we look, it’s pretty stable and it’s a double digit market because of the growing economy.

And as the consumers get more available income, they improve their diets, and chicken is the most affordable way of increasing the the the protein diet. We we we saw some volatility in the live markets in Mexico during the quarter, and I think not only on the demand side, but on the supply side. We saw some increase in the users during this quarter in in the live market. And we have these small operators that will come and go as the live market is strong or weak, which we always mentioned, amplify the volatility in the live market in Mexico. Because of the business impacted the companies with lower, let’s say, biosecurity.

These small players were impacted, and and that created a small reduction in the supply during the this quarter, which increased prices in in the live market. So the live market was actually the most profitable segment in Mexico during this quarter. Going forward, again, we continue to execute our strategy of growing in Mexico. As I mentioned, we are expanding our Merida production or expanding our production to the Peninsula in the Merida. We are expanding our production in Veracruz to support the live markets and the small bird markets.

And we’re also expanding our prepared foods operation in Mexico that is growing double digits to further diversify our portfolio and reduce a little bit the volatility of results in the region. When all those projects are at full speed, we expect our operations in Mexico to be 20% higher than what we have today. And Peter, just to complement what Bobby said, kind of relative to FX, you know, what you had mentioned, I had mentioned in my prepared remarks, the 13% kind of headwind that we saw year over year in the quarter. When we look at q three, you know, and, of course, I cannot predict where the peso will go, you know, for the rest of the quarter, kind of where it sits right now versus where the average was in q three of last year, it’s basically on par. So we really, at this point, don’t see a real big FX impact one way or the other at at this very stage for 2025.

Yeah. And and building the FX, FX also impacted a lot of the grain in Mexico is imported from The United States, so FX was was actually a benefit. But on the other hand, there is a big export of meat from The United States to Mexico. 20% of the exports of US are to Mexico. So it’s an important market for especially like quarters, but also some boneless breast.

And I think with the FX, we’ll create the the American need to be a little more expensive in Mexico, which creates the opportunity for the next our Mexican operations.

Peter Galbo, Analyst, Bank of America: Okay. Thanks for that, guys. And then maybe just to pivot, obviously, the special dividend now a second quarter in a row, which I think this one was was maybe a bit more of a surprise than than the last one. Just Fabio, like, a a change in in capital allocation philosophy, you know, like, is this is pretty abnormal, I guess, to do two in one year. It’s gonna be about $2,000,000,000 at least at this point.

So just wanna understand if there’s if there’s been a change in how the board views capital allocation, how the relationship with the parent company has has changed as you as you contemplate kind of another round of special dividend. Thanks very much.

Fabio Sandri, President and CEO, Pilgrim’s Pride: Sure, Peter. No. I don’t think that there’s been We’re always looking into create shareholder value. Right?

And as as we mentioned and as we discussed in our investment day investor day, we have several avenues of growth in in in our business. So we’re always looking for acquisitions, course. We’re looking to grow our prepared foods brand and to diversify the geographies where we’re in. I think as we’re seeing multiples and some of the acquisitions a little bit more difficult, especially in United States, we engage in in organic growth. And that’s why we announced the the new client for Prepared Foods, again, to grow and diversify our portfolio, and we are growing in Mexico.

And we are looking for opportunities in Europe as well. So I think that avenue of growth will continue. In the meantime, I think the the business has been really strong. We are discussing the results. Right?

And I think we’ve we’ve been increasing our cash, and that position is not efficient for us. Matt mentioned that we are below onetime leverage, and we always have the target of being two to three times. And with the expectations that we have for for the rest of the year and the strong cash flow generation that we had, once again, we got to to a position where our balance sheet is is out of where we think it’s optimal, and we decided to to do We will continue to do this special dividend. So then we we believe that our leverage ratio is getting to to a place that is not the optimal capital for us.

We also have share buybacks potential share buybacks that we discussed. We have bond purchases that we discussed. And I think we’re always looking for for all the alternatives to create shareholder value.

Peter Galbo, Analyst, Bank of America: Thank you.

Conference Operator: The next question comes from Priya Origipta with Barclays. Please go ahead.

Priya Origipta, Analyst, Barclays: Hey. Good morning. Thank you for squeezing me in. Actually, I would love to just follow-up on that very last point that you made. With regards to bond repurchases that, you know, we were just commenting, and and, Fabio, you mentioned as well how sort of under levered you are versus the target.

So could you walk us through why you guys have been utilizing open market bond repurchases, just given that there really isn’t any immediate need to reduce your debt balance?

Fabio Sandri, President and CEO, Pilgrim’s Pride: I think yeah. I agree with Matt. I I think really it’s just been more opportunistic. We disclosed in the 10 q that, you know, the board, when we discussed this towards the end of the first quarter, that they just gave us more of an authorization to continue to, you know, repurchase as we deem, you know, appropriate. I think at the time, we just found that there has been some availability, you know, some, you know, the market was good and we we buy when we felt it was the right price and just take more opportunistically than anything else.

Not a huge number of dollars, We’ve got authorization to do more, but with the dividend here, a little bit more of a pivot on that one, I think, going forward than what we did here in Q2.

Priya Origipta, Analyst, Barclays: Okay. That’s helpful. And then just on the interest expense guidance, is it fair to assume that the increase relative to what you talked about before is being driven by a lower cash balance? Or is there anything else going on?

Fabio Sandri, President and CEO, Pilgrim’s Pride: Absolutely correct. It’s the lower cash balance. You know, it’s just, you know, we are, you know, we’ll see our gross interest expense is actually coming down a little bit because of the the buybacks and the debt that we were just talking about, but the cash balance will be lower and that interest you know, the assumed interest income will be lower just with that with the dividend to be paid here in the September.

Heather Jones, Research Analyst, Heather Jones Research: Okay. And then just one final question on on the Mexico CapEx piece. You talked about

Priya Origipta, Analyst, Barclays: the $650,000,000 in aggregate. Can you just remind us sort of how to think about the cadence of that year by year? Sort of when are we to hit the $650,000,000 in total and what we should be thinking about for that piece for this year and next year?

Fabio Sandri, President and CEO, Pilgrim’s Pride: When we’re thinking about the the $6.50, you know, kind of in general, because, you know, it’s back to that number really included Mexico, Walker County, the the new prepared plan and also our conversion of Russellville that we’ve been talking about. You know, where where we’re at for 2025 is somewhere, you know, in that 200 ish, $2.25 range, you know, 2026 in the March and then the kind of residual in 2027. But, do you understand that Mexico and Russellville will be completed here, you know, the dates we were talking about. Russellville really be finished here in the ’6, and most of Mexico will be done in the ’26. It’s the Walker County, which we talked about opening the plant in the ’27, some of that capital will drag, of course, into that.

Conference Operator: Thank you. This concludes the question and answer session. I would like to turn the conference over to Fabio Santi for any closing comments. Yeah. Thank

Fabio Sandri, President and CEO, Pilgrim’s Pride: you, everyone, for attending today’s call. In the 2025, we achieved strong operational and financial performance. As such, I would like to thank our team members for their continued discipline and ownership of our values, strategies, and methods. Given the solid foundation, we can continue to make investments to grow our company, strengthening our competitive advantages, enhancing margins, and reducing volatility of results. These efforts must continue with a relentless focus on team member safety and well-being.

As a result, we can achieve our vision to be the best and most respected company in our industry, creating a better future for our team members. I look forward to accelerating our efforts during the 2025 and beyond. Thank you, everyone.

Conference Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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