Earnings call transcript: Pilgrim’s Pride Q4 2024 misses revenue forecast

Pilgrim’s Pride reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $1.35, surpassing the forecast of $1.12. The company fell short of revenue expectations, posting $4.37 billion against a forecast of $4.58 billion. According to InvestingPro data, the stock appears slightly undervalued based on Fair Value analysis, with a strong free cash flow yield of 13%. The stock price increased by 2.23% in after-hours trading, reflecting investor optimism about the company’s future prospects and strategic initiatives.

Key Takeaways

• Pilgrim’s Pride exceeded EPS expectations but missed revenue forecasts for Q4 2024.
• The stock rose 2.23% in after-hours trading, suggesting positive market sentiment.
• Strategic initiatives in product innovation and operational excellence contributed to performance.
• The company continues to focus on expanding its branded portfolio and geographic diversification.

Company Performance

Pilgrim’s Pride demonstrated a robust performance in Q4 2024, with net revenues reaching $4.4 billion and an adjusted EBITDA of $536 million, reflecting a 12% margin. For the entire year, the company reported net revenues of $17.9 billion and an adjusted EBITDA of $2.2 billion, maintaining a margin of 12.4%. The U.S. business led with an adjusted EBITDA of $1.56 billion, while Europe and Mexico contributed $470 million and $248.5 million, respectively.

Financial Highlights

• Revenue: $4.4 billion for Q4 2024
• Full Year Revenue: $17.9 billion
• Adjusted EBITDA: $536 million for Q4 2024
• Full Year Adjusted EBITDA: $2.2 billion
• U.S. Business Adjusted EBITDA: $1.56 billion

Earnings vs. Forecast

Pilgrim’s Pride’s EPS of $1.35 exceeded the forecast of $1.12 by 20.5%, indicating a positive earnings surprise. However, the revenue of $4.37 billion was below the expected $4.58 billion, marking a shortfall of approximately 4.6%. This mixed result reflects both the company’s ability to manage expenses and challenges in achieving expected revenue growth.

Market Reaction

Following the earnings release, Pilgrim’s Pride’s stock price rose by 2.23%, closing at $51.45 from the previous close of $50.33. This upward movement suggests that investors are optimistic about the company’s strategic direction and future growth potential, despite the revenue miss. The stock remains within its 52-week range, with a high of $55.5 and a low of $27.99.

Outlook & Guidance

Looking ahead, Pilgrim’s Pride projects a capital expenditure of $450-500 million for 2025 and anticipates an effective tax rate of 25%. The company is focused on strengthening key customer relationships and exploring growth opportunities in Mexico and prepared foods. Future EPS and revenue forecasts for fiscal years 2025 and 2026 are set at $5.27 and $4.63, and $18.1 billion and $18.59 billion, respectively.

Executive Commentary

CEO Fabio Sandri emphasized the company’s commitment to being "the best and most respected company in our industry," highlighting the focus on innovation and operational excellence. CFO Matt Galvanoni noted the importance of maintaining a "strong balance sheet" and prioritizing cash flows from operating activities.

Risks and Challenges

• Supply Chain Disruptions: Potential impacts on production and distribution.
• Tariff Impacts: Possible effects on U.S.-Mexico trade relations.
• Weather-Related Disruptions: Ongoing recovery from storm damage.
• Hatchability and Bird Management: Operational challenges that could affect output.
• Macroeconomic Pressures: Broader economic factors influencing consumer demand.

Q&A

During the earnings call, analysts inquired about the challenges related to hatchability and bird management, potential tariff impacts on U.S.-Mexico trade, and the market dynamics driving chicken demand. Executives addressed these concerns, emphasizing the company’s resilience and strategic initiatives to mitigate risks.

Full transcript - Pilgrims Pride Corp (NASDAQ:PPC) Q4 2024:

Conference Operator: Good morning, and welcome to the Fourth Quarter and Fiscal Year twenty twenty four Pilgrim’s Pride Earnings Conference Call and Webcast. All participants will be in listen only mode. At the company’s request, this call is being recorded. Please note that the slides referenced during today’s call are available for download from the Investors section of the company’s Web site at www.pilgrims.com. After today’s presentation, there will be an opportunity to ask questions.

I would now like to turn the conference over to Andrew Rajeski, Head of Strategy, Investor Relations and Sustainability for Pilgrim’s Pride.

Andrew Rajeski, 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 fourth quarter and fiscal year ended 12/29/2024. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter and the year, including a reconciliation of any non GAAP measures we may disclose. A copy of the release is available on our website at ir.pilgrims.com along with slides for reference. These items have also been filed as Form eight Ks and are available online at sec.gov. Fabio Sandre, President and Chief Executive Officer and Matt Galvanoni, 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 day 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 Chief Executive Officer, Pilgrim’s Pride: Thank you, Randy. Good morning, everyone, and thank you for joining us today. I look forward to reviewing our Q4 and full year 2024 results today with you and invite everyone for our upcoming Investor Day on March 14 for a more detailed view on our long term vision, strategies and methods. For the fourth quarter of twenty twenty four, we reported net revenues of $4,400,000,000 along with adjusted EBITDA of $536,000,000 and adjusted EBITDA margin of 12%. Our Q4 performance reflects the execution of our strategy of a diversified portfolio that can capture market upside while offering differentiated products that answers to consumer demand combined with our relentless pursuit of operational excellence.

Our U. S. Fresh portfolio improved compared to last year as Big Bird expanded margins through a combination of strong, stable commodity cutout values, progress in operational excellence and enhanced mix. Tease Ready and Small Birds also drove profitable growth to improve performance and production efficiencies and increased key customer demand in retail, USR and beverage. Prepared Foods grew sales compared to last year as interest strengthened for our brand offerings in retail and food service, further diversifying our portfolio.

In Europe, margins expanded given continued optimization of our manufacturing network and integration of support activities, including our back office. Overall, sales remain stable in retail as consumers increasingly migrated across our diversified portfolio into QMAM meals, branded offerings and poultry. This service grew double digits from a combination of additional distribution and increased traffic for away from home eating occasions. Mexico experienced a stronger Q4 as commodity market pricing increased throughout the quarter. In both fresh and prepared, sales to key customers continued to grow from prior year.

Similarly, momentum for our branded offerings increased throughout the marketplace, further diversifying our portfolio. For the fiscal year 2024, net revenues were $17,900,000,000 with adjusted EBITDA of $2,200,000,000 translating into an adjusted EBITDA margin of 12.4%. Throughout 2024, U. S. Experienced improved shipping demand, lower grain costs and positive commodity cutout values.

Where these factors were combined with key customer growth and progress in operational excellence, profitability increased compared to prior year. Our Europe business undertook a variety of steps to improve our manufacturing network, simplify our structure and drive innovation. Based on these efforts, we strengthened our marketplace presence and expanded margins. In Mexico, commodity sales benefited from reduced input costs and balanced supplydemand that generated more stable pricing. These factors were further amplified by growth with our key customers and increased interest of our branded offerings among consumers, improving margins compared to last year.

Turning to supply in U. S, the FDA indicated ready to cook production for The U. S. Chicken should be 2.5% compared to the fourth quarter of twenty twenty three. Increases in headcount accounted for the production growth as average livelihoods were comparable to last year.

Throughout 2024, the industry layer flock consistently declined year over year. However, sustained efficiencies, improvements in the flock, coupled with reductions in exports of eggs, trigger an increase in egg sales, resulting in record after utilization. Similar to early on year, catchability continues to be challenged even with the benefit from seasonality based on the RPA data. As a result, industry rates still trailed prior year, limiting realization of increased tariffs. FHAV continues to lag historical averages.

USDA data also suggests the industry has placed additional excess to offset the productivity challenges. Improved feed conversion, yields and live weights also further mitigate those issues. The USDA’s most recent production report indicated that ready to cook production increased by 1.3% for the year, driven by significant growth in the second half. For 03/1935, the FDA is projecting growth of 1.4% with increases in excess and placements partially compensated by continuing challenges in hatchability and mortality. USDA also reports overall protein availability to grow only 1.2% with a significant decline in overall beef availability, leading to a supportive demand environment for chicken.

As for the demand in U. S, fresh proteins in retail benefited as the cost of eating out increased more rapidly than eating at home. Bonus flow of breast pricing at retail remained very competitive, significantly lower than two years ago and stable compared to prior year, while dark meat continues to increase in domestic demand. While the entire fresh meat department experienced sales growth during the quarter, Chicken’s significant pricing advantage compared to the other proteins continue to enable growth and satisfy strong consumer demand for a healthy center of the plate option. The remainder of Chicken at Retail continue to build on the strong foundation set earlier in the year.

Growth in both the dairy and frozen value added demonstrate Chicken’s ability to meet the needs of consumers seeking to rationalize spending without sacrificing convenience. In volume sales both grew in commercial and non commercial distribution subchannels. Both were specifically bolstered by strong demand for value added products. Volume and dollar growth also indicate continued transition from full service restaurants to QSRs, suggesting consumers are favoring a relatively less expensive away from home option to stretch their dollars further. U.

S. Export volume was lower year over year, while pricing remained at parts in U. S. Domestic demand for dark liquid in U. S.

Continues to be the key for increased values and limited export availability. At the end of Q4, overall inventory decline as food storage inventory dropped 1% month over month and was 8% lower compared to last year. Both grass meat and dark meat once again fell year over year. We still anticipated export demand to remain strong despite some redirection of trade force triggered by multiple high-tech AI outbreaks in the Eastern And the Southeastern United States. Most U.

S. Trading partners southern than China and Thailand have reduced demand levels to zones and counties. As such, the geographic diversity of our production locations in U. S. Continue to provide flexibility to transition production should brakes occur.

In addition, Taiwan has recently established a release procedure to follow if disruptions emerge, which further mitigate the impact of potential benefits. Turning to feed, corn appreciated moderately in Q4 as strong U. S. Yields somewhat mitigated price gains from healthy corn export demand. In contrast, soybean meal fell as new soybean meal processing capacity increased supply for domestic consumption.

Taken together, overall feed costs slightly declined. The USDA lowered the final yields for the twenty twenty four corn and soybeans in their January crop report. Even with those changes, both corn and soy realized improved yields. Nonetheless, core stocks in U. S.

And globally are expected to contract versus the prior year. Given this contraction, the likely trading range and market volatility for corn is expected to increase during the first half of twenty twenty five. The limited demand from China for corn and potential for strong growth in U. S. Corn acreage versus last year have currently limited upsides so far.

In contrast, soybean stocks are expected to grow in both The U. S. And globally compared to last year, as Brazil increased production is expected to more than offset crop losses from dryness in Argentina. As such, soybean meal is anticipated to be well supplied across the globe. In wheat, global stocks are expected to decline slightly compared to last year.

Nonetheless, winter wheat plantings in the fall of twenty twenty four throughout The U. S. And Europe better than expected hazards in Australia and Argentina and increased acreage in UK may improve availability and pricing for next year. Moving forward, we’ll continue to monitor changes in global grain demand, planting and development of the second crop in Brazil and U. S.

Planting intentions and conditions moving forward. Turning to The U. S, our diversified portfolio across bird sizes benefited from elevated demand compared to seasonal trends. As such, commodity cutout values were notably higher than the average over the past five years. Furthermore, input costs were slightly throughout the quarter as the price in soybean meal more than offset an increasing quarter.

Given this environment, profitability in our Big Bird business improved significantly compared to last year. Our progress in operational excellence to improve yields, mix and label productivity further amplified our performance. In case ready, retail demand remains strong as consumer increasingly saw chicken given its relative affordability. Growth with our key customers continued to get forward as our sales increased significantly above the category average. When these factors are combined with a continued focus on quality and service, Clear Ready’s profitability improved considerably compared to last year.

Israelite also continues to cultivate its competitive advantage to differentiated offerings and operational capability. To that end, during the quarter, we converted one of our locations to an Air Cheer technology in partnership with a key customer. As a result, we consolidated our leadership in differentiated categories and reinforced our key customer relationship. Given these recent investments along with our leadership in the organic and the more direct Edward Chicken categories, King Ready continues to enhance its competitive advantage to higher attributes differentiated offerings. Additional growth opportunities continue to emerge as we wrap our key customers to differentiate and generate robust demand from consumers.

Malware also benefited from further demand in QSRs and Delhi as our key customers continue to increase their marketplace presence. Where combined with our advances in operational excellence, our profitability grew substantially compared to Q4 of twenty twenty three. Our diversification to prepare foods continued its momentum. In the fourth quarter, our sales to key customers significantly outpaced the category average. Brands continue to play an instrumental role as the share of Just BARE has increased by over 200 basis points compared to last year.

In addition, the recent re launch of Pilgrim’s gained traction with continued consumer affinity given its high quality and through increased distribution. Similarly, our foodservice business continues to grow through additional distribution and improved velocity through our portfolios. In In Europe, we continue to improve our business through integration of our support functions and optimization of our manufacturing network. Through this effort, we’ve consistently driven margin expansion, while cultivating a more nimble, customer focused organization to scale profitable growth in 2025 and beyond. During the quarter, the environment became increasingly attractive as consumer sentiment improved as wage growth continued to reflect inflation.

As such, our poultry and chilled meals business benefited from carry growth in both value and volume in grocery. Our brand new portfolio realized similar gains given its growth through the quarter, led by refrigerators and rollovers, as we grew faster than the category. We continue to leverage the Richmond consumer affiliation and expand its portfolio. We recently received Groceries Best New Products award for its Roast Chicken Sausage. Our foodservice business also experienced similar success as Netflix (NASDAQ:NFLX) increased double digits.

Innovation remains a priority to drive profitable growth. To that end, we strengthened our partnership with key customers through innovation with a series of investments in line extensions, new products and packaging updates. When combined with our working brands, we have launched and renewed a significant portion of our portfolio of products with several launches in this fourth quarter. Our efforts continue to be remarkably well received by customers as innovation now accounts for over six percent of our net sales. Our efforts in sustainability also have generated commercial benefits for key customers.

During the quarter, we recently awarded incremental business given our animal welfare standards. We will continue to explore opportunities throughout the trade based on our differentiated performance and standards. Turning to Mexico, margins increased from better supply demand fundamentals and continued execution of our strategies. In the live bird market, commodity values increased throughout the quarter and overall grain cost fell slightly compared to Q3 of twenty twenty four. Heat customer relationships strengthened as retail fresh volumes grew in the high single digits.

Notificently changed, the volume rose over 15% and the momentum in our fresh branded offerings continued as volumes grew nearly 10% compared to the same quarter last year. We continue to diversify our portfolio through value added offerings given the growth in our prepared food business. Our key customer volumes continue to grow in both retail and food service, and our innovation pipeline has been well received through the trade. Efforts to reduce our operational risk in live operations and extend our production capacity remain on track. Our ramp up for production in Merida is proceeding as planned and our relocation of the breeder farms remain on track.

We recently brought online additional production efforts in our Port Of Anie plant as well as we continue to explore opportunities for expansion. We also continue our journey in sustainability. To that end, we’ve driven a reduction in our scope one and two emissions intensity across all regions. In addition, we continue to explore solutions from leading industry partners that leverage our operational capabilities. As such, we’ve collaborated with Green Gas USA to transform our biogas into renewable natural gas at our SunTrust facility.

Based on this effort, we can reduce emissions while further supporting the renewable energy market. Moving forward, we continue to drive efforts to further reduce our emissions footprint. With that, I would like to ask our CFO, Marc Malvernoni, to discuss our financial results. Good morning, everyone. As I review our financial performance, please note that our fourth quarter twenty twenty three and fiscal year twenty twenty three periods were fourteen week and fifty three week periods, respectively, which will impact the period over period comparison.

For the fourth quarter of twenty twenty four, net revenues were $4,370,000,000 versus $4,530,000,000 a year ago, with adjusted EBITDA of $525,700,000 and a margin of 12% compared to $309,500,000 and a 6.8% margin in Q4 last year. For fiscal year twenty twenty four, net revenues were $17,900,000,000 versus $17,400,000,000 in fiscal twenty twenty three with adjusted EBITDA of $2,210,000,000 and 12.4% margin compared to $1,030,000,000 and a 6% margin last year. Adjusted EBITDA in The U. S. For Q4 came in at $371,600,000 with adjusted EBITDA margins at 14.2%.

Our Big Bird business profitability significantly improved year over year as commodity market pricing improved, grain costs were lower and the business achieved further operational improvement. Also driving improvement in the quarterly U. S. Results were increases in profitability in both our case ready and small bird businesses. These businesses continue to deliver high quality and strong customer service, allowing us the opportunity to increase distribution with our key customers.

Our Prepared Foods business continued its momentum of branded product sales growth with both retail and food service customers. During the quarter, within our U. S. GAAP earnings, we recorded $95,000,000 in litigation related settlement charges. Also in the quarter, we finalized The U.

S. Pension plan termination program that commenced earlier in the year and recorded $10,900,000 of pension settlement charges. This pension obligation termination is now fully complete. For the fiscal year, our U. S.

Net revenues were $10,630,000,000 versus $10,030,000,000 in fiscal twenty twenty three, with adjusted EBITDA of $1,560,000,000 and a 14.7% margin compared to $531,500,000 and a 5.3% margin last year. The U. S. Business maintained its momentum throughout the year with increased sales volumes and delivering operating efficiencies with the backdrop of supportive commodity markets and lower grade costs. In Europe, adjusted EBITDA in Q4 was $117,100,000 versus $102,500,000 in 2023, a 14.2% increase.

For the full year, Europe’s adjusted EBITDA improved 28.3% to $4.00 $7,000,000 in 2024 from $317,000,000 in 2023. Europe drove improved profitability through further operational excellence, including plant closures, consolidation of support functions, and streamlining the overall management organization structure. These efforts over the last two years have provided the foundation for further cost savings and have allowed us to partner more efficiently with our key customers in the region. We recognized approximately $93,000,000 from restructuring charges during the year. While we continue to pursue efficiency measures, we anticipate the vast majority of the charges for these programs are behind.

Mexico made $36,900,000 in adjusted EBITDA in Q4 compared to $6,800,000 last year. When considering the full year, Mexico made $248,500,000 in adjusted EBITDA or an 11.8% adjusted EBITDA margin, bettering last year’s 8.7% margin. Through the year, the supply demand fundamentals were well balanced in Mexico. Our GAAP SG and A expenses in the fourth quarter and for the full year were higher than prior periods, primarily due to increased legal settlement expenses and higher incentive compensation costs, partially offset by cost efficiencies primarily achieved in Europe. Net interest expense for the year was approximately $100,000,000 excluding the gain on the realized debt purchases we completed earlier in the year.

Currently, we forecast for 2024 net interest expense to be between $65,000,000 and $75,000,000 Our full year effective tax rate was 23%. We recorded a discrete tax planning item in the fourth quarter, which lowered our full year effective tax rate from our pace through the first three quarters of the year. For 2025, we anticipate our effective tax rate to approximate 25%. We have a strong balance sheet and we will continue to emphasize cash flows from operating activities, management of working capital and disciplined investment in high return projects. As of the end of the year, our net debt totaled approximately $1,150,000,000 with a leverage ratio of approximately 0.5 times our last twelve months adjusted EBITDA.

Our liquidity position remains very strong and at the end of the fiscal year, we had approximately $3,100,000,000 in total cash and available credit. We have no short term immediate cash requirements with our bonds maturing between 2,031 and 2,034 and our U. S. Credit facility is not expiring until 2028. Our liquidity position allows us to explore further growth opportunities, including organic growth to meet our key customers’ needs.

We finished the year spending $476,000,000 of CapEx. This included the conclusion of the construction of the protein conversion point in South Georgia and other growth projects to support differentiating product attributes for our key customers. We will continue to prioritize our capital spending plans to ensure the safety of our team members, optimize our product mix and strengthen our partnerships with key customers. Currently, we forecast spending between $450,000,000 and $500,000,000 in CapEx in 2025, primarily to sustain our operations and for other more routine growth projects. We are intently focused on growth opportunities.

First, over the last few years, we have invested in our plans to meet both growth targets and product attributes requested by our key customers, and we will continue to do so as we cultivate these relationships. Also, we foresee investments in additional protein conversion capacity to both upgrade our product mix and manage risk by reducing our exposure to outside protein conversion operators. Finally, as we’ve discussed extensively, our U. S. Prepared Foods business has grown our branded portfolio through innovative and differentiated products, and we anticipate expanding our capacity to meet the growth trajectory of this portfolio.

Finally, we have great business in Mexico and have organic growth opportunities in both fresh and prepared. These near term growth opportunities align to our overall strategies of portfolio diversification, focus on key customers, operational excellence and our commitment to team member health and safety. Please note, we may revise CapEx spending estimates to accommodate our growth aspirations. We will continue to follow our disciplined approach to capital allocation as we look to profitably grow the company and continue to align investment priorities with these overall strategies. We are looking forward to our Investor Day on March 14 to share with you our strategic outlook, more detailed views on these growth opportunities and further commentary on our capital allocation philosophy.

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, we request that you limit your questions to two, then rejoin the queue for any follow-up. Today’s first question comes from Ben Theurer with Barclays (LON:BARC). Please go ahead.

Ben Theurer, Analyst, Barclays: Yes, good morning and thanks for taking my question, Fabio. Matt, congrats on the results.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Good morning, Ben. Thank you.

Ben Theurer, Analyst, Barclays: Yes. So to start off, maybe just to 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.

So that would be my first question. And second question, that would be more for Matt in regards to the capital allocation on the guidance for the CapEx of $450,000,000 to $500,000,000 It kind of feels a little low of what you can do given the $2,000,000,000 in cash that you have available versus what tends to be long term average more like $500,000,000 So anything that you can share maybe in terms of the thoughts around dividends or any other way of cash return just given where the leverage is? Thank you very much.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: 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 delivery and on the fresh category and also on the dairy, where 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 queue as far as 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 food service actually increased during Q4 year over year. At the same time, what we saw during Q4 because of some of the storms and then some of the bad weather and the continued problem with hatchability and mortality, Production was up close to 1.4%, but the billboard category, which was the 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 the 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 price is actually going up almost every day in the commodity category. Ben, this is Matt. Thanks. It’s a completely fair question relative to where our cash position sits today and our overall leverage.

I think I’d go back to what I mentioned in the prepared remarks that right now we’re guiding at a $450,000,000 to $500,000,000 on, we’ll call it, sustaining CapEx plus more routine or smaller growth projects. As I mentioned before and in the prepared remarks, look, we are really looking at growth opportunities, organic growth opportunities to partner with our key customers to increase our protein conversion. Our prepared business needs to expand its capacity and I think we’ll be able to talk more about that at the Investor Day in about a month and we really look forward to talking about that and just kind of overall capital allocation philosophy and thoughts at that time.

Ben Theurer, Analyst, Barclays: Okay. Thank you very much. Congrats again.

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

Peter Galbo, Analyst, Bank of America: Hey guys, 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. 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 ks 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 sub channel would be helpful as we think about 4Q relative to your own expectations and relative to where the street was?

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: 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 a third of our portfolio. The other two thirds of our portfolio are more on the small bird case and the case ready operations, which tend to be way

Peter Galbo, Analyst, Bank of America: more

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: stable. And I think as we mentioned, because our contract and pricing in those other segments are more green based or a negotiation that we keep the prices unless something changes, either in cost or in the supply and demand. And when we 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 dotted line. For the year, we have more than $100,000,000 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 perfecting 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, it 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 upside.

Peter Galbo, Analyst, Bank of America: And Matt, maybe just a couple of quick ones, modeling wise for ’25. I think you said net interest expense of 65 to 75. I just wanted to make sure that I heard that correctly. And then just the two others, if you could help us with D and A and then just how you’re thinking about SG and A expense as well? Thanks very much.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Sure. From an SG and A perspective, I would kind of model us at sort of this $130,000,000 to $135,000,000 a quarter. I think that will give you a a good range there to use relative to D and A in about a $440,000,000 number annually, dollars $440,000,000. And then the interest expense the net interest expense that’s based on kind of the current guide on the capital expenditures of the $450,000,000 to $500,000,000 and just using that kind of as the baseline to kind of look at that relative to cash generation during the year and cash use based on an estimate what we can do for net interest for interest income too.

Peter Galbo, Analyst, Bank of America: Got it. Thanks very much guys.

Conference Operator: Thank you. The next question is from Andrew Strelzik with BMO. Please go ahead.

Andrew Strelzik, Analyst, BMO: Hey, good morning. Thanks for taking the questions. My first one I wanted to ask about Mexico. I just wanted to better understand, what drove the counter seasonal kind of improvement in cutout values that you talked about and kind of how to think about given that margins in Mexico into twenty twenty five or through 2025? I assume that first quarter margins are probably going to be up year over year, but just trying to better understand what’s going on in Mexico and how to think about the outlook there.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Sure. And ultimately, we’re really happy with the margins we have in Mexico. It’s a growing economy. We continue to invest there. As I mentioned, we just started a new complex in the peninsula in the Merida region.

So we’re diversifying our geographic position in Mexico and capturing those growth opportunities. I think Mexico can be very volatile quarter over quarter. But when we look at the year number, it’s typical more stable and double digits in terms of EBIT. So we, once again, really believe in the economy of Mexico and continue to invest there. I think what we saw this year was strong demand for the chicken products.

I think we saw also that with the high prices of the commodities in United States, especially in headquarters and breast meat, we saw more demand in the domestic market in Mexico. The big volatility in Mexico typically comes from the live market. I think we’ve mentioned this many times, there is still a market in Mexico where we wholesalers, that we distribute those birds to small slaughterhouses that will sell the meat to the consumers, especially around Mexico City. This live market is highly volatile because City. This live market is highly volatile because there’s a lot of small competitors that can appear and go as the profitability is strong or weak in that segment, which again, once again, calls high volatility there.

I think we’ve been able to improve our presence in that market. We continue to grow in that market as well, which is stable in Mexico. But we continue to differentiate our portfolio with the growth of prepared foods and the growth of our branded fresh offerings. I think that is the market that continues to be highly volatile. And this year, I think we saw some diseases in Mexico that impacted the live production, and that created a little bit more volatility there.

We don’t know if that is going to be the case in 2025. Of course, we follow a very strong biosecurity in Mexico, but the movement of these live birds increase the risk in terms of biosecurity. So that’s why we have a disease in Mexico, which is higher than in U. S. So that’s what creates more development in Mexico.

But once again, we continue to expect increasing demand for chicken. Chicken continues to be an affordable category for the Mexican families and we continue to invest in Mexico to grow our production there. Yes. And Andrew, it’s Matt. Just when we look back at Q1 of last year, Mexico’s adjusted EBITDA margins of 9.2%, very, very solid Q1 of last year, great year overall.

It’s just something just to consider when you think about Q1 twenty twenty five, we are lapping 9.2% margins, which were solid.

Ben Theurer, Analyst, Barclays: Got it. Okay. Okay. That’s clear

Andrew Strelzik, Analyst, BMO: and that’s helpful. My other question is going back to The U. S. Side. And if I think back to the summer, U.

S. Margins were excellent, but breast prices were basically around the five year average level and now we’re coming into this year with above average seasonal prices. So I guess I’m trying to think about given the way you’re talking about supply and demand, the right way to think about breast prices over the summer again. I mean, do you think that the setup here is to get to above normal prices or hold above normal prices as we get into the summer or the setup more similar to last year, especially in the context of feed costs, which especially on the corn side have gone up a little bit? Thanks.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Yes, I think the demand for the breast milk continues to be really strong. As you mentioned, last year we saw prices close to five year average. I think the five year average are also highly impacted, but a bit because of our very high prices during the 2022 period. So I expect the demand to continue to be strong. If you look into the supply, we are seeing with the excess and Chick fil AEs and based on what we are seeing on the Hatchability numbers and mortality numbers that demand according to The U.

S. Will be close to 1%, one point four %. And that is more in the first semester rather than the second semester. Beef, and if you look into the overall protein availability in U. S, will be close to 1% when you look at all the other proteins, especially if the beef harvest really below as the USDA is expecting.

And because of the delta and pricing, we’re seeing at retail, boneless bread compared to ground beef is what we typically compare, is at the highest level in history. So there is a strong demand in retail for the chicken products. And that goes over the supply in the case ready category because it takes big bird meat, which is the commodity meat to augment the strong demand especially during the summer. That’s what tends to increase the commodity pricing on the commodity segment. So I expect a continuing strong demand for chicken especially during the summer.

And I think the prices will react accordingly.

Conference Operator: Thank you. The next question is from Heather Jones with Heather Jones Research. Please go ahead. Good morning. Congratulations on the quarter.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Good morning, Heather.

Conference Operator: Good morning.

Heather Jones, Analyst, Heather Jones Research: I wanted to really ask for clarification because Fabio, some of your prepared comments I was had a difficulty understanding. So really quickly on bird flu, you mentioned some of The U. S. Export partners that have changed to like a county level as opposed to state level. And I know Mexico does that, but I was wondering if you could repeat those comments, which countries have switched to doing just county level?

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Yes. I think the biggest reduction in terms of exports, if you look into The United States, has been Southeast Asia, especially Taiwan. So I think Taiwan was the one that is creating a new procedure. It’s not I don’t know specific on county levels, but they are changing their protocols to take these BAN levels more into some zones.

Heather Jones, Analyst, Heather Jones Research: Okay. I

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: think that one is the change and that would be changed for this year. Again, overall, Hi Pet AI, as we mentioned many times, I think has been a big issue for Turkey and for the ag industry. For us, we have the biosecurity protocols at the maximum. We have a very widespread production footprint. We have 23 kilo plants.

And even our houses are very spread, as you guys know very well. And each farm has typically three to four houses, so we have 110,000 to $150,000 in each of one of those family forms. So I think our biosecurity and our geographic diversification helps on creating less impact on iPad AI in terms of losing birds. But as you mentioned, the export bands are the ones that are really impactful for our business. But as we are seeing a very strong demand in the external markets for the American product because of its affordability and competitiveness compared to all other proteins and even all other chicken geographies.

And we’re seeing also strong demand in here in The United States, especially for the bond that we and that is limiting the availability of exports of light quarters. So very strong pricing over the year.

Heather Jones, Analyst, Heather Jones Research: Okay. And then moving back to The U. S. Big Bird, I hate to belabor this point, but I just was wondering, so The U. S.

Profitability was a little light and I understand that you’ve got a diversified business and two thirds of the business the pricing doesn’t move around a lot. But I was wondering if also there was effect from the Douglas Complex being down because my understanding is that because of the loss of a lot of that housing that you guys might be having to buy logs on the outside to process. And so I was just wondering if you could talk qualitatively to how the Douglas Complex impacted results during the quarter and when do you all expect that complex to the housing there to be back to normal?

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Thank you for the question. Once again, yes, there was a devastating storm that we have in the Douglas. We helped the community. We invested in the community. We donated $1,000,000 to help with the efforts to improve and rebuild the community.

And we unfortunately lost a lot of housing in that region. I think we’ve been building houses. We’ve been getting houses on the market, and we’ve been increasing our production there. But what we did, we have a lot of other operations in the region. We moved some birds around and we’ve been able to operate the complex at a very satisfying operational level.

So we’re not focusing the losses of Dublin just that complex. Of course, it was more impacted than others. We also had some impact in Live Oak because of the storm. But we’re moving those around. And again, we are with a very efficient operation there, and we are with a great efficiency in all the other complexes through these movement of burns.

I think we’re also impacted a little bit in the quarter by the change in our facility that we moved to Airtel. I think we stayed down for close to a week in that facility. But I think those were not very impactful for the quarter or material things that we expect to continue to impact our operation. We expect the Douglas ramp up to be close to Q3, Q4 as building houses is not as simple as it was in the past. But we see a great level of commitment from our growers and we see a great level of commitment from the authorities also on helping on financing those houses and the permitting on those houses.

Heather Jones, Analyst, Heather Jones Research: Perfect. Thank you so much for that color.

Conference Operator: Thank you. The next question comes from Puran Sharma with Stephens. Please go ahead.

Puran Sharma, Analyst, Stephens: Thank you and congrats on the quarter.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Thank you. Yes,

Puran Sharma, Analyst, Stephens: I just wanted to focus on I think you kind of mentioned this in the prepared remarks, but wanted to dive into hatchability, livability. It looks like trends still look challenged for production. Just wondering if you could give us an update if there’s a fix on the way. Could you maybe just remind us what those fixes are and what are the potential timelines here?

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Of course. Thank you. Yes, it’s a good complement question. And we’ve seen this hatchability issue for a while now. It all started with a new breed, and this new breed has great numbers in terms of yields and in terms of conversion.

So I think what the genetic company do is that they always try to answer the questions from the industry, and that’s what we want, quality, yields and conversion costs. And this new breed answered those questions. So we have improved numbers close to 1% to 2% every year on those categories and a very good quality. Unfortunately, it is a bird that is really difficult to manage on the life side. And I think on the life side, it generates a smaller amount of eggs, but also has a very low headcount.

And as we’re looking into the numbers, actually 2025 is starting with a lower number than we saw in 2024. There is also some seasonality because of the weather, but 2025 is actually starting lower from 2024, which was the lowest on record for the hatchability. It is about animal handling on the life side. And The United States is structured to have minimal interaction with the birds. So we leave the birds in the houses to create the fertile eggs.

But because of the difficult management of these birds, we need to have individual management of these birds. We have that in Europe, in Mexico and in somewhat in Brazil. So we’re seeing better hatchability there, but it is the structure of the houses and the way we manage the birds. The change and we’ve been changing our protocols, we’re spending more time to manage these birds, specifically the weight of these birds because the weight impacts the hatchability. And we are spending more time in the houses, but we really need to change the structure of the houses.

We completely need to change the way we manage those birds. And as I mentioned, that helps in the biosecurity, we also have partner forms that do the that keep the breeders for us. And it is all scattered throughout the country. And we need to invest in those houses and change all the management. And that it takes a lot of time.

So there’s no silver bullet for the improving hatchability, but we expect to get better at managing this breed with time.

Puran Sharma, Analyst, Stephens: Okay, great. I appreciate that commentary. And I guess, just furthermore, just flushing out your commentary here. You mentioned that you had weather disruptions and we’ve seen this Arctic weather come in. So I think a lot of people are talking about that.

I think you mentioned Big Bird production may have been flat at some point. Just wondering how to think about this for 1Q given we have seen this colder weather kind of persist?

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Yes. The weather is always a challenge for us, especially because we saw some really cold weather in the South, right? At some point, we have snow in Florida. And that disrupts for a little while. But I don’t think it is a persistent or a significant event that will impact the productivity or the production or even the demand in that region for a long time.

I think we always have one or two weather events. Of course, we mentioned also the mini hurricane that we have in the Belgian region that was really impacted for that operation. But I think we’ve always have that both sides of events, and that’s why the geographic diversification that we have allowed us to keep great service levels to our key customers and didn’t disrupt a lot into our bottom line.

Puran Sharma, Analyst, Stephens: Great. I appreciate the color. Congrats again on the quarter. I’ll jump back in the queue.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Thank you.

Conference Operator: Thank you. The next question comes from Priya Ora Gupta with Barclays. Please go ahead.

Priya Ora Gupta, Analyst, Barclays: Good morning. Thank you and congrats on the quarter. Matt, I was wondering if we could start with you a little bit, really strong free cash flow performance to round out the year. As we look to ’twenty five and some of the comments around volatility on the input side, could you maybe walk us through how we should think about working capital as contributing to cash flow? How much of a drag should it be or could we see a potentially neutral outcome?

And then secondly, maybe Fabio, if you could touch on the impact that the business could potentially see with regards to some of the tariffs that are being considered, not just globally, but also with regards to Mexico? And if you could walk us through your puts and takes between U. S. And the Mexican businesses and how that dynamic could affect both of those? Thanks.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Sure. Thanks for the questions, Priya. I’ll start and then I’ll pass it over to Fabio after. When you think about our cash flows for ’twenty four, when I look at our working capital contributions were significant, right? I mean, we were in that over $300,000,000 working capital for this past year.

I don’t anticipate having that type of uplift. I think with the grains being kind of low where they were, really was provided us a nice benefit last year. Now do I I’m not necessarily predicting a major drag against this year, because I think we’ve got enough offsets with corn being a bit higher, soy being a bit lower. I just think that the working capital impact will be more flattish. We should still have very, very strong free cash flow, but I just don’t think that working capital is going to be the type of benefit that we saw in ’twenty four.

Hopefully that helps. Yes. We saw a significant reduction in our finished goods inventory as well as we all saw the frozen inventories in the whole U. S. Going down year over year.

On the tariffs side, I think there is still a lot of uncertainty about if, when and where the tariffs will be in place and also what will be the answer from the trading partners? And we mentioned Mexico, right? Mexico is our largest trading partner. What we export, and we export close to 24% of The U. S.

Exports moved to Mexico. And it’s typically headquarters, MSC and trade for prepared foods. So it’s a very important source for Mexico. I think it’s more than 70% of the Mexican imports of chicken come from The United States. So I don’t expect massive or any important reduction in that trade.

I think the Mexicans are very concerned about food inflation, and I think this is a great opportunity for Mexico to bring very competitive meat to their country. Of course, we also have a large operation in Mexico. And Mexico is a growing economy. As I mentioned, we continue to invest in growing our operation there. But there’s also other proteins that they import from The U.

S. It’s mainly pork. And I think that also, I don’t expect the impact in that trade. But if that happens, of course, we will have the benefit of having our operation in Mexico. So there’s a little bit of hedge for us if there’s any problem in trade with Mexico from having the operations there.

I think the other big part of the trade is corn that grows a lot from United States to Mexico. And I also don’t expect any disruption from in-depth trade. Once again, I think the Mexico country is very concerned about full inflation and having the access to The USA corn, which is the cheapest in the world, is very important for their economy.

Priya Ora Gupta, Analyst, Barclays: Great. Thank you so much for the color. Thank

Conference Operator: you. This concludes our question and answer session. I would like to turn the conference over to Mr. Sandri for any closing remarks.

Fabio Sandri, President and Chief Executive Officer, Pilgrim’s Pride: Well, thank you everyone for attending today’s call. 2024 was a very successful year. I’d like to thank our team members for demonstrating a leadership mindset, driving our values and elevating our performance throughout the year. Following our strategies, we captured the upside from enhanced market conditions, grew our presence with key customers, further diversify our portfolio and improve production efficiency through operational excellence. As a result, we collectively established new financial and operational milestones for our business.

Nonetheless, our vision is to be the best and most respected company in our industry, creating a better future for our team members and their families, and that remains the same. To that end, I look forward to accelerating our work throughout 2025 and beyond. Thank you, everyone.

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

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