Pilgrim's(PPC) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For fiscal year 2025, net revenues reached $18.5 billion, a 3.5% increase from $17.9 billion in fiscal 2024, while Adjusted EBITDA rose to $2.27 billion from $2.211 billion, marking a 2.5% increase [24][25] - In Q4 2025, net revenues were $4.52 billion compared to $4.37 billion in Q4 2024, with Adjusted EBITDA of $415.1 million and a margin of 9.2%, down from $525.7 million and a 12% margin in the same quarter last year [24][25] Business Line Data and Key Metrics Changes - The U.S. business reported Adjusted EBITDA of $274.2 million in Q4 with a margin of 10.6%, while full-year net revenues were $11 billion, up from $10.6 billion in fiscal 2024 [25] - Europe’s Adjusted EBITDA in Q4 was $131.4 million, an increase from $117.1 million in 2024, with full-year EBITDA improving to $453.1 million from $406.9 million [26] - Mexico's Adjusted EBITDA fell to $9.5 million in Q4 from $36.9 million last year, with a full-year margin of 8.8%, down from 11.8% [27] Market Data and Key Metrics Changes - The USDA indicated a 2.1% year-over-year increase in ready-to-cook chicken production for 2025, with a projected 1% growth in overall chicken supply for 2026 [9][48] - Consumer sentiment remains low due to economic uncertainty, but chicken's affordability continues to drive demand across retail and food service channels [9][10] Company Strategy and Development Direction - The company is focusing on diversifying its portfolio and enhancing operational efficiencies, with significant investments in fresh and prepared foods to drive profitable growth [5][21] - Plans include converting a Big Bird plant to a case-ready facility and expanding prepared foods capacity in Georgia, with expectations for increased production in 2026 [22][31] Management's Comments on Operating Environment and Future Outlook - Management noted that while commodity pricing headwinds impacted profitability, the U.S. business maintained its margin profile through increased sales volumes and operational efficiency [25] - The company anticipates continued strong demand for chicken driven by affordability and consumer preferences, despite challenges in the beef market [48][66] Other Important Information - The company reported a strong balance sheet with net debt of approximately $2.45 billion and over $1.8 billion in total cash and available credit [30] - Sustainability efforts have led to significant reductions in carbon emissions, with recognition from external agencies for progress in environmental and social matters [22][23] Q&A Session Summary Question: Current growing conditions and market dynamics - Management indicated a 1.9% year-over-year decline in the breeding flock, with hatchability issues affecting supply growth projections for Q1 2026 [34][35] Question: Capital allocation and future CapEx - The company plans to increase CapEx to $900 million-$950 million in 2026, focusing on growth projects in Mexico and prepared foods [39][41] Question: Mexico's supply-demand situation - Management explained that increased imports and favorable growing conditions led to a weaker Q4 in Mexico, but they expect stabilization moving forward [54][56] Question: Trends in the EU and UK business - The company noted strong performance in the EU driven by chicken demand, with expectations for continued growth despite seasonal effects [81][82] Question: Impact of disease pressure in Spain - Management acknowledged challenges from ASF in Spain affecting pork supply, but they expect resilience in their branded business [68][69]