Pilgrim's(US:PPC)2023-07-27 19:04Financial Data and Key Metrics Changes - For Q2 2023, the company reported net revenues of $4.3 billion, down from $4.63 billion a year ago, with adjusted EBITDA of $249 million, translating to a 5.8% margin compared to 13.5% in Q2 2022 [7][92]. - Adjusted EBITDA margins in the U.S. were 4.6%, down from 18% a year ago, while UK and Europe margins improved to 5.2% from 3.4% [93]. - In Mexico, adjusted EBITDA was 12.2%, virtually flat compared to 12.3% last year [93]. Business Line Data and Key Metrics Changes - The prepared foods segment saw a significant decline, with sales down 27% year-over-year, while branded offerings like Just BARE and Pilgrim's prepared grew 56% year-over-year [30][67]. - The U.S. ready-to-cook chicken production increased by 2.2% compared to Q2 2022, supported by increased headcounts [44]. - The Big Bird segment faced challenges with lower demand and pricing, while the Small Bird and prepared food businesses continued to perform strongly [96][67]. Market Data and Key Metrics Changes - The U.S. consumer is facing lower beef and pork availability, which may favor chicken due to its affordability and flexibility [47]. - Domestic volume growth in the retail channel was muted, but promotional activities are expected to drive sales volume more consistently [49]. - U.S. broiler exports grew at a healthy rate, with significant increases in volume to Taiwan, Mexico, and China [54]. Company Strategy and Development Direction - The company is focused on portfolio diversification, key customer partnerships, and operational excellence to navigate market challenges and drive long-term profitable growth [4][26]. - Investments in automation and operational improvements are expected to yield $100 million to $200 million in operational efficiencies annually [35][101]. - The company plans to continue launching new products and enhancing its promotional pipeline to drive growth [72][70]. Management Comments on Operating Environment and Future Outlook - Management noted that the operational environment remains challenging, but strategies have proven effective in improving margins despite market conditions [4][26]. - The company anticipates lower production year-over-year in Q3 and Q4 due to reduced chick placements and overall industry trends [12][45]. - Management remains optimistic about the potential for growth in the prepared foods segment and expects to see improvements in pricing dynamics in the coming months [67][128]. Other Important Information - The company incurred approximately $30 million in restructuring charges during the quarter as part of its network optimization efforts [99]. - The liquidity position remains strong, with approximately $1.8 billion in total cash and revolver availability as of June 25, 2023 [102]. - The effective tax rate for the quarter was significantly impacted by discrete tax items, with an expected full-year effective tax rate of approximately 10% [106]. Q&A Session Summary Question: What is the current status of restructuring in the UK? - Management indicated that there are about $3 million to $5 million left in cash costs related to restructuring, with a decent SG&A run rate expected going forward [111][113]. Question: How are pricing dynamics across different bird sizes? - Management noted that small bird pricing is stable and above the five-year average, while the Big Bird segment is facing challenges due to increased production and lower retail growth [117][126]. Question: What are the expectations for the Mexico segment in Q3? - Management expects steady growth in Mexico, with balanced supply and demand, despite the usual volatility in the market [139].