Pilgrim's(US:PPC)2023-02-09 16:58Financial Data and Key Metrics Changes - For Q4 2022, the company reported net revenues of $4.13 billion, an increase from $4.04 billion in the previous year, with adjusted EBITDA of $63 million and an adjusted EBITDA margin of 1.5%, down from $317 million and 7.8% in Q4 2021 [3][37] - For the fiscal year, net revenues were $17.5 billion, an 18.2% increase over the previous year, with adjusted EBITDA of $1.65 billion and a margin of 9.4%, compared to $1.29 billion and 8.7% in 2021 [24][66] Business Line Data and Key Metrics Changes - In the U.S., adjusted EBITDA for Q4 was $15.8 million, slightly above breakeven, while for the full year, adjusted EBITDA was $1.37 billion with a margin of 12.7%, up from $896 million and 9.8% in 2021 [38][67] - The European business saw adjusted EBITDA of $62.9 million in Q4, up from $24.7 million in 2021, and for the full year, adjusted EBITDA was $168.7 million compared to $137.8 million in 2021 [39] - Mexico reported a loss of $15.8 million in adjusted EBITDA for Q4, down from a profit of $27 million last year, but achieved $113 million in adjusted EBITDA for the full year [40] Market Data and Key Metrics Changes - The U.S. chicken supply for Q4 increased by 6% year-over-year, driven by headcount and higher average live weights, while total protein availability was much higher than anticipated [26][27] - The retail channel for chicken experienced stable volumes in Q4, with dollar sales growing at a double-digit rate, while volume sales remained relatively flat [10] - The foodservice channel grew in volume and dollar sales, with non-commercial segments posting significant year-over-year gains [11] Company Strategy and Development Direction - The company emphasized portfolio diversification, key customer focus, and operational excellence to mitigate market volatility [22] - Investments in operational excellence and automation are ongoing, with a focus on enhancing margins and scaling profitable growth [23][34] - The company is committed to capital spending plans that prioritize safety, optimize product mix, and strengthen partnerships with key customers [41] Management's Comments on Operating Environment and Future Outlook - Management noted that inflationary headwinds and market volatility were significant challenges throughout the year, but the team effectively engaged with key customers to mitigate costs [24] - The outlook for 2023 includes expectations for improved market conditions, particularly in the big bird segment, as supply-demand dynamics are anticipated to stabilize [87] - The company remains confident in the long-term prospects for both its Prepared Foods and Fresh branded business, particularly in Mexico [64] Other Important Information - The company recorded a GAAP net loss of $155 million in Q4, influenced by a discrete income tax charge related to a Mexican tax matter [66] - The company has a strong balance sheet with approximately $1.4 billion in total cash and available credit, and no immediate cash requirements [42] Q&A Session Summary Question: Supply and demand in the U.S. market - Management indicated that USDA estimates suggest a significant reduction in chicken production for the second half of the year, with expectations of demand shifting from beef to chicken due to its affordability [47][50] Question: Profitability in the non-commodity parts of the U.S. chicken segment - Management highlighted that despite challenges in the big bird market, the small bird segment continues to see stable margins due to strong partnerships with key customers [86] Question: Challenges in the Mexican market - Management acknowledged the volatility in the Mexican market but noted improvements in financial results as the market has moved towards balance [40][88] Question: Cold storage levels and inventory management - Management discussed the high levels of breast meat in cold storage and indicated that it typically takes several months to work through such inventory levels [117]