Pilgrim's(US:PPC)2021-04-29 19:20Financial Data and Key Metrics Changes - For Q1 2021, the company reported net revenues of $3.27 billion, an increase from $3.07 billion a year ago, with adjusted EBITDA of $254 million, representing a margin of 7.8% compared to 5% the previous year [52][53] - GAAP net income was $100 million, up from $67 million in the prior year, while operating margins were 3.4% in the U.S., 19% in Mexico, and 1.2% in Europe [53] Business Line Data and Key Metrics Changes - In the U.S., adjusted EBITDA was $131 million, down from $137 million a year ago, impacted by higher operating costs due to COVID-19 mitigation and increased grain costs [53][54] - Mexico achieved adjusted EBITDA of $86 million, a significant improvement from a loss of $17 million in the prior year, driven by favorable supply-demand dynamics [55] - European operations generated approximately $37 million in adjusted EBITDA, down from $45 million last year, affected by higher feed costs and COVID-19 impacts [56] Market Data and Key Metrics Changes - The U.S. market saw a rebound in demand for large bird deboning due to improved foodservice demand, while commodity prices remained high [54][55] - In Mexico, the market remains favorable with strong results compared to a challenging Q1 of 2020, driven by balanced supply and demand [27][55] - European operations faced challenges due to higher feed costs and export constraints, but are expected to recover as costs stabilize [30][56] Company Strategy and Development Direction - The company aims to maintain a diversified portfolio and improve operational efficiencies to respond to market dynamics and achieve relative performance over competitors [11][15] - Investments in automation and strategic wage increases are part of the long-term strategy to address labor shortages and improve operational challenges [21][78] - The company is committed to achieving net zero greenhouse emissions by 2040 and has issued a $1 billion sustainable linked bond to support this initiative [48][49] Management's Comments on Operating Environment and Future Outlook - Management noted that the gradual easing of COVID-19 restrictions is leading to improved market conditions, particularly in foodservice [16][46] - The company expects continued strong demand for chicken, especially during the summer grilling season, and anticipates a significant increase in profitability compared to the previous year [72][73] - Labor availability remains a challenge, but the company is actively addressing this through wage increases and automation investments [75][78] Other Important Information - The company reported a strong liquidity position with over $1.2 billion in cash and available credit, and a net debt of $1.9 million with a leverage ratio of 2.2x [58][59] - The company is focused on optimizing its capital structure while pursuing growth strategies and maintaining shareholder value [60] Q&A Session Summary Question: Sustainability of strong performance in Mexico - Management indicated that the supply-demand balance in Mexico has been favorable, but volatility is expected as small players may return to the market [64][66] Question: Sequential profitability trends in the U.S. - Management noted a continued increase in profitability from January to March, with expectations for strong performance in Q2 due to seasonal demand [68][72] Question: Labor availability and stimulus impact - Management acknowledged labor shortages due to stimulus payments and is implementing strategies to attract and retain workers [75][78] Question: European feed cost dynamics - Management explained that while feed costs have increased, pricing models incorporate these costs, and margins are expected to recover over time [81][84] Question: Management of feed costs and purchasing strategy - Management confirmed a flexible strategy for managing feed costs, adjusting positions based on market risks [87][89] Question: Impact of foodservice recovery on retail business - Management expressed confidence in the diversified portfolio, indicating that both foodservice and retail segments can thrive simultaneously [91][92]