Pilgrim's(PPC) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, net revenues were $4.37 billion, down from$ 4.53 billion a year ago, with adjusted EBITDA of $525.7 million and a margin of 12% compared to$ 309.5 million and a 6.8% margin in Q4 2023 [46] - For the fiscal year 2024, net revenues were $17.9 billion, up from$ 17.4 billion in fiscal 2023, with adjusted EBITDA of $2.21 billion and a 12.4% margin compared to$ 1.03 billion and a 6% margin last year [46][49] - Adjusted EBITDA in the U.S. for Q4 was $371.6 million, with adjusted EBITDA margins at 14.2% [47] - In Europe, adjusted EBITDA in Q4 was$ 117.1 million, a 14.2% increase from $102.5 million in 2023 [50] Business Line Data and Key Metrics Changes - The U.S. Fresh portfolio improved, with Big Bird expanding margins due to strong commodity cutout values and operational excellence [8] - Prepared Foods grew sales as interest strengthened for brand offerings in retail and foodservice [9] - Case Ready and Small Bird also drove profitable growth, improving performance and production efficiencies [9][33] - In Mexico, adjusted EBITDA for Q4 was$ 36.9 million compared to $6.8 million last year, with an 11.8% adjusted EBITDA margin [52] Market Data and Key Metrics Changes - Overall sales remained stable in retail, with consumers migrating towards poultry and chilled meals [10] - Foodservice grew double digits due to increased distribution and traffic for away-from-home eating occasions [10] - In the U.S., ready-to-cook chicken production grew 2.5% compared to Q4 2023, with commodity market pricing improving [14] - The USDA projects overall protein availability to grow only 1.2%, supporting demand for chicken [17] Company Strategy and Development Direction - The company focuses on a diversified portfolio to capture market upsides and operational excellence [8] - Continued investment in sustainability and innovation is prioritized to drive profitable growth [39][44] - The company aims to expand its capacity in the U.S. Prepared Foods business to meet growth trajectories [59] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for chicken in both retail and foodservice, driven by affordability and menu penetration [68] - The company anticipates continued strong demand for chicken, especially during the summer, with prices expected to react accordingly [100] - Management acknowledged challenges in hatchability and production but is optimistic about improving management practices over time [124] Other Important Information - The company recorded$ 95 million in litigation-related settlement charges in Q4 [48] - The effective tax rate for the full year was 23.0%, with an anticipated rate of approximately 25% for 2025 [54] - The company has a strong balance sheet with net debt totaling approximately $1.15 billion and a leverage ratio of 0.5 times adjusted EBITDA [55] Q&A Session Summary Question: Market dynamics in Q4 and early Q1 - Management highlighted strong demand for chicken in retail and foodservice, with flat production in the Big Bird category sustaining prices [70] Question: Capital allocation and CapEx guidance - Management explained the$ 450 million to $500 million CapEx guidance focuses on sustaining operations and routine growth projects, with potential for more growth opportunities discussed at the upcoming Investor Day [73][74] Question: U.S. profitability and grain pricing - Management clarified that operational excellence initiatives improved profitability across all segments, despite some pressure from grain pricing [78][80] Question: Mexico's market dynamics and margins - Management expressed confidence in Mexico's growing economy and strong demand for chicken products, despite volatility in the live market [88][90] Question: Hatchability and production challenges - Management acknowledged ongoing hatchability issues but is optimistic about improving management practices and protocols over time [124]