Q4 2023 Pilgrim's Pride Corporation Earnings Call

Operator: Good morning, everyone, and welcome to the fourth quarter of fiscal year 2023 Pilgrims Pride Earnings Conference Call and Webcast. All participants will be in a listen-only mode.

Good morning, everyone and welcome to the fourth quarter and fiscal year 2023, Pilgrim's Pride earnings conference call and webcast.

All participants will be in a listen only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. At the company's request, this call is being recorded. Please note that the slides referenced during today's call are available for download from the investor section of the company's website at www.pilgrims.com. After today's presentation, there will be an opportunity to ask questions. At this time, I'd like to turn the floor over to Andrew Rajewski, Head of Strategy, Investor Relations, and Net Zero Programs for Pilgrims. Good morning, and thank you for joining us today as we review our operating and financial results for the fourth quarter and fiscal year ended on December 31st, 2023. This morning, we issued a press release providing an overview of our financial performance for the quarter and the year, including a reconciliation of any non-GAAP measures we may discuss. A copy of the release is available on our website at ir.pilgrims.com, along with slides for reference. These items have also been filed as Form 8Ks and are available online at sec.gov.

Assistance. Please signal a conference specialist by pressing the star key followed by zero.

At the company's request this call is being recorded.

Note that the slides referenced during today's call are available for download from the investors section of the company's website at Www Dot Pilgrim's dotcom.

After todays presentation, there will be an opportunity to ask questions.

At this time I'd like to turn the floor over to Andrew Rachesky head of strategy Investor Relations and net zero programs for Pilgrim's.

Andrew Rachesky: Good morning, and thank you for joining us today as we review our operating and financial results for the fourth quarter and fiscal year ended on December 31, 2023. This morning, we issued a press release, providing an overview of our financial performance for the quarter and the year, including a reconciliation of any non-GAAP measures.

Andrew Rachesky: May discuss a copy of the release is available on our website at IR job total dotcom along with slides for reference. These items have also been filed in form eight Ks and are available online at SEC Gov, Fabio Sandri, President and Chief Executive Officer, and Matt Galvin, Chief Financial Officer will present on todays.

Andrew Rajewski: Fabio Sandri, President and Chief Executive Officer, and Matt Galvanoni, Chief Financial Officer, will present on today's call. Before we begin our prepared remarks, I would like to remind everyone of our safe harbor disclaimer. Today's call may contain certain forward-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these four forward-looking statements. Further information concerning these factors has been provided in this morning's press release on Form 10-K and regular filings with the SEC. I would now like to turn the call over to Fabio Sandri.

Andrew Rachesky: Paul.

Speaker Change: Before we begin our prepared remarks, I would like to remind everyone of our safe Harbor disclaimer today's call may contain certain forward looking statements that represent our outlook and current expectations as of the day of this release other.

Speaker Change: Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward looking statements.

Speaker Change: Further information concerning these factors have been provided in this morning's press release, our Form 10-K and regular filings with the SEC I would now like to turn the call over to Fabio Sandri.

Fabio Sandri: Thank you, Andy. Good morning, everyone, and thank you for joining us today. For the fourth quarter of 2023, we reported net revenues of $4.5 billion. We had adjusted EBITDA of $310 million, and our adjusted EBITDA margin was $6.8 billion. Our Q4 performance demonstrated the continued effectiveness of our strategies of portfolio diversification, key customer focus, and operational excellence to create more stable results. The U.S. portfolio improved, giving growth with key customers in case ready and enhanced production efficiencies with operational excellence in big business. Our efforts to further add value to our portfolio through Prepare Foods continue to gain momentum, given the growth of our branded offerings through retail and increased presence in food service.

Fabio Sandri: Andy Good morning, everyone and thank you for joining us today for the fourth quarter of 2023, we reported net revenues of $4 5 billion, we had adjusted EBITDA of $310 million and our adjusted EBITDA margin was six 8%.

Fabio Sandri: Our Q4 performance demonstrating the continued effectiveness of our strategies.

Fabio Sandri: Diversification key customer focus and operational excellence to create more stable results.

Portfolio improved given growth with key customers in case ready and enhanced production efficiencies with operational excellence and big Bird our efforts to further add value to our portfolio through the prepared foods continued to gain momentum given the growth of our branded offerings true retail and increased presence in food service.

Fabio Sandri: In our geographical diversification, the UK and European business continue to drive profitable growth from the impact of operational excellence efforts throughout our manufacturing network, increasing the strength of key customers, and diversification through the continued progress of our branded offering. As for Mexico, the business in the quarter was impacted by weakened supply and demand fundamentals, but our efforts to diversify our portfolio through brands continued to flourish as both new and existing offerings grew within the trade and customers alike, and we continued to grow with key customers across retail and pharma. Our investments in operational excellence efforts to expand capacity and cultivate redundancy in live operations remain on track. For the fiscal year, net revenues were $17.4 billion.

In our geographical diversification.

Fabio Sandri: And the European business continued to drive profitable growth from the impact of operational excellence efforts throughout their manufacturing network, increasing strength of key customers and diversification through continued progress of our branded offerings at Fuller, Mexico. The business in the Boston was impacted by weakening supply and demand fundamentals.

Fabio Sandri: Our efforts to diversify our portfolio two brands continue to flourish as both new and existing offerings grew within the trade and customers alike, and we continue to grow with key customers across retail and foodservice.

Fabio Sandri: Investments in operational excellence efforts to expand capacity and cultivate redundancies and live operation remains on track.

Fabio Sandri: For the fiscal year net revenues were $17 4 billion adjusted EBITDA was 1 billion with adjusted EBITDA margins of 6%.

Fabio Sandri: Adjusted EBITDA was $1 billion, with adjusted EBITDA margins of $6.5 billion. The U.S. faces depressed market conditions and elevated input costs in the first half of the year. But we maintain our leadership mindset and focus on controlling what we can control, the execution of our strategies and our relentless pursuit of operational excellence. As conditions evolved throughout the year, our business became increasingly well positioned to capture the upsides and further accelerate profitable growth. While practice has not fully recovered to five-year activity levels, we're still navigating dynamic markets; much has changed from the past. In the first half of 2023, there was substantial production growth and cold storage inventories above the long-term average. As a result, the ample chicken supply was not fully offset by domestic demand, and increases in commodity chicken values typically experienced in the spring did not match reality.

Fabio Sandri: U S face the depressed market conditions and elevated input costs in the first half of the year, but we maintained our leadership mindset and focus on controlling what they can control the execution of our strategies to our relentless pursuit of operational excellence as conditions evolve throughout the year, our business became increasingly well positioned to capture.

Fabio Sandri: Sites and further accelerate profitable growth.

Fabio Sandri: While pricing has not fully recovered to five year averages, we're still navigating dynamic markets much change through the past year in the first half of 2023, there was substantial production growth in cold storage inventories above the long term average as a result ample chicken supply was not fully offset.

Fabio Sandri: Domestic demand and increases in commodity chicken values typically experienced in the spring did not materialize as we progress throughout the year, given the breast market pricing and the elevated cost environments exits and chicks placed Phil triggering more historical seasonal sets and placement patterns when.

Fabio Sandri: As we progress throughout the year, given the depressed market pricing and elevated cost environments, ex-vets and chicks... Place Sell, triggering more historical seasonal sets and placement patterns. When paired with growth in retail and food service demand later in the year, the overall slowdown of chicken production led to balanced markets and price movements aligned with historical patterns throughout Q3 and Q4. As for U.S. chicken supply... Q4 ready-to-cook production decreased 2.1% relative to last year, driven by fewer heads despite slightly higher livestock. Starting in Q3 of 2023, we saw reduced exits on a year-over-year basis and seasonal cuts at levels in line with the five-year act. AXS continued to trend in line with the 5-year average throughout Q4 2023, and Akshay's ability was similar to last year. Taken together, Netsheak placements slated for production in Q4 declined year-over-year, reducing headroom.

Fabio Sandri: Paired with growth in retail and food service demand later in the year. The overall slowdown chicken production led to balanced markets and price movements alignment historical patterns throughout Q3 and Q4.

Fabio Sandri: For U S chicken supply.

Fabio Sandri: Q4 ready to Cook production decreased two 1% relative to last year driven by fewer heads.

Fabio Sandri: <unk> slightly higher Lightweights star.

Fabio Sandri: Starting in Q3 of 2023, we saw reduce it exits on a year over year basis and seasonal cuts at levels in line with the five year average.

Fabio Sandri: <unk> continued to trend in line with the five year average dwell Q4, 2023, and hatch ability was similar to last year. They.

Fabio Sandri: Taken together net chick placements later for production in Q4, a decline year over year, reducing headcount as indicated by set placements and production data supplying two for return to more historical levels market pricing also declined seasonally and 10 year five year average throughout the quarter, even with elevated.

Fabio Sandri: As indicated by sets, placements, and production data, supply in Q4 returned to more historical levels. However, market pricing also declined seasonally and trended near a 5-year average throughout the quarter, even with elevated production. While supply declined in the second half of calendar 2023, the USDA Browler Production Outlook suggests Q1 of 2024 to be on par with Q1 of 2023, followed by three quarters of moderate growth, resulting in a yearly slight increase of 0.8%. This slight increase in chickens is coupled with a significant decline in beef production expected in 2024, as the USDA outlook suggests a 2.9% reduction for the balance of the year, as a smaller Even with an expected increase in pork production of 2.20% and higher beef imports, US-implied net protein availability is expected to increase less than once.

Fabio Sandri: Sure.

Fabio Sandri: While supply declined in the second half of calendar 2023, USDA broiler production outlook suggest Q1 of 10 to 24 to be on par with Q1 of 23, followed by three quarters of moderate growth, resulting in a yearly slight decrease those 0.8%.

Fabio Sandri: This slight increase in chicken is coupled with a significantly planned decline in beef production expected in 2024 as the USDA flute suggests that $2 nine reduction for the balance of the year. That's a smaller herd is expected to drive fewer cattle slaughter.

Fabio Sandri: Even with an expected increase in pork production of two point Dwayne per cent and higher beef imports U S. Implied net protein availability is expected to increase less than 1%.

Fabio Sandri: On the demand side for 2023, the US retail market experienced positive pull in all categories. Fresh chicken was consistent with this overall trend as volume was 1.1 higher, but relatively flat in Q4, as white meat volume grew slowly to levels compared to 2020. This differs from the previous quarter where retail breast meat experienced large year-over-year growth. The white meat volume in Q4 was mostly impacted by an increase in dark meat offerings, especially more affordable.

Fabio Sandri: On the demand side for 'twenty to 'twenty three the U S retail market experienced positive full in all categories fresh chicken was consistent with this overall trend. That's volume was one one times, but relatively flat in Q4 as white meat volume grew slow to levels compared to 2022. This differs from <unk>.

Fabio Sandri: This quarter with retail breast meat experienced large year over year growth.

Fabio Sandri: The white meat volume in Q4, it was mostly impacted by an increase in dark meat offerings, especially more affordable cuts starting the new year demand for white meat has increased significantly and remains well positioned as a great alternative to other proteins.

Fabio Sandri: Starting the new year, demand for white meat has increased significantly and remains well-positioned as a great alternative to other products. Chicken, across other categories in the store, fared well in the quarter, as daily posted solid dollar and unit increases, while frozen value-added chicken continued to add incremental volume growth. The frozen commodity segment, which is much smaller than the value-added fresh and daily segments for chicken, continues its decline.

Fabio Sandri: Chicken across other categories in the store very well in the quarter as daily posted solid dollar and unit increases why frozen value added chicken continue to add incremental volume growth.

The frozen commodity segment, which is much smaller than the value added fresh and daily segments for chicken continued its decline nevertheless on the whole chicken.

Fabio Sandri: Nevertheless, on the whole chicken, we provide its value to customers as a center of the pamphlet statement. The Food Service Distribution Channel continues its trend of higher volume sales with lower price levels. Similar to last quarter, chicken experienced volume growth in both value-added and commodity types across most subgroups. Encouraging signs of volume growth remain within the channel as Shinko continues to serve a larger base of operators relative to prior years and realized increased buy rates, both of which contributed to substantial increases compared to Q4 of 2020. The non-commercial sub-channel maintained its trend, adding incremental volume throughout the quarter and the year. Turning to exports, global demand for chicken has been strong throughout the fourth quarter given the global higher cost of other proteins and production movement disruptions in the Middle East. These disruptions have favored the U.S. as it backs fuel products delaying transit.

Fabio Sandri: We provided value to customers at the center of the 10th fleet staple foods.

Fabio Sandri: Foodservice distribution channel continued its trend of high volume sales with lower price levels similar to last quarter chicken experienced volume growth in both value added and commodity types across most of the channels.

Fabio Sandri: <unk> signs of volume growth to remain within the channel.

Fabio Sandri: It continues to serve a larger base of operators relative to prior year and realized increased by rates both of which had added to substantially increase compared to Q4 of 2022. The noncommercial. Some channel maintained its trend any incremental volume throughout the quarter and the year.

Fabio Sandri: Turning to exports global demand for chicken has been strong throughout the fourth quarter, given the global higher cost of other proteins and produce movement disruptions in the middle East.

Fabio Sandri: This is rob since have favored the U S is it backfill products delaying transit in addition.

Fabio Sandri: In addition, high-ped avian influenza in some Southeast Asian countries is providing the U.S. additional opportunity as local supplies are tight. As for HEPAT even affecting the US, the dynamics are relatively consistent with prior quarters, as most of our trading partners have adjusted their trade restrictions to minimize impacts as much as possible. Our manufacturing network across the United States also continues to enable access and service to multiple markets, given our diversification of production facilities across several states and controls. As for China, there has been limited movement on adherence to existing trade agreements.

Fabio Sandri: IPad, even influenza and some south East Asia countries I provide in the U S additional opportunity as local supplies are tightening.

Fabio Sandri: That's for heap, but even influenza new west did that it makes a relatively consistent with prior quarters as most of our trading partners have adjusted their trade restrictions dominion's mice impacts as much as possible.

Fabio Sandri: Our manufacturing network across the United States also continues to enable axis and service to multiple markets, even though diversification of production facilities across several states and control zones.

Fabio Sandri: As for China, There has been limited movement on the adherence to existing trade agreements since the majority of our business is driven by chicken paws. There has been no mature effect on broiler meat.

Fabio Sandri: Since the majority of business is driven by chicken paws, there has been no material effect on broilers. The export market has also been impacted by an increased preference by U.S. consumers for dark meat, as freezer inventories remain low relative to historical and seasoned stores. As a result, overall stock levels remain relatively tight, providing further support for the overall market. Turning to feed grains, corn prices have eased as the supply picture in the U.S. has increased.

Fabio Sandri: The export market has also been infected but an increase evolution by U S consumers to dark meat as freezer inventories remain low relative to historical and season standards. As a result overall stock levels remain relatively tight providing further support for the overall market.

Turning to feed grains corn prices have eased as the supply picture in the U S has improved recently you'd adjustment by USDA confirmed the 'twenty three 'twenty four crop as a new record at $15 3 billion bushels, while some important weather periods life ahead.

Fabio Sandri: A recent yield adjustment by USDA confirmed the 2023-2024 crop as a new record at 15.3 billion bushels, while some important weather periods lie ahead. With current forecasts for Brazil and Argentina to have combined record production, global ending stocks for Kona are forecasted to build significantly. Like corn, soybeans follow recent adjustments to U.S. yields, which move with forecast ending stocks 19% higher. South American soy production has been the key to recent price movement, with Argentina's production forecasted to rebound to 50 million metric tons from 25 million metric tons in last year's year. USDA's Brazil forecast is currently 156 million metric tons, in line with last year's record production of 162 million metric tons. South America is continuing to price its global destination to compete with Europe.

Fabio Sandri: We couldn't forecast for Brazil, and Argentina to have a combined record production global ending stocks for corn are forecasted to be able to significantly.

Fabio Sandri: Like corn.

Fabio Sandri: Soybean solar recent adjustment U S yields, which more move it forecast ending stocks, 19% higher South American soy production has been the key to recent price movement with Argentina production forecasted to rebound to 50 million metric tons from 25 million metric tons in last year's drought.

Fabio Sandri: U S D H, Brazil forecast is currently 156 million metric tons in line with last year's record production of 462 million metric tons. South America is continued to price its global destination to compete we yes export demand.

Fabio Sandri: On top of the soybean price reduction, soybean meal prices have fallen as U.S. crush industry expansions yielded a record crush in Q4 of 2020. Argentina's rebound in soy production is playing a role in the global soy meal alternative. Soybean meal oil prices are also under pressure, as US soil oil is facing competition from substitute fats and oils in food and feed, as well as renewable fuels. In a slightly different picture, wheat production is down year over year, and global ending stocks are forecast. In the US, wheat acres for the 2024 harvest are lower. Nonetheless, prices have generally moved lower given the global feed grain supply.

Fabio Sandri: On top of soybean price reduction soybean meal prices have fallen as U S. Crush industry expansions you did a record crush in Q4 of 2023.

Fabio Sandri: Urgent demos rebound inside production is playing a role in the mobile soy meal ought to look as well.

Fabio Sandri: So I've been meal oil prices are also under pressure as U S. Soy oil is facing competition from substitute fats and oils in food and feed as well as renewable fuel channels.

Fabio Sandri: In a slightly different picture with production is down year over year and global ending stocks are forecasted to be diagnosed in the U S. Wheat acres for the 'twenty 'twenty four harvest are lower as well Nonetheless prices have generally moved lower given the global feed grain picture.

Fabio Sandri: Turning to the U.S. business, our consistent focus on execution of our strategies of key customer partnership, diversification, and operational excellence has sustained our profitability improvements despite uneven market fundamentals in the commodity segments and lingering inflation throughout the pandemic. Our case-ready business continues to grow ahead of the industry, given strong demand from key customers, enhanced promotional activity, and increased distribution throughout the world. Our offerings of differentiated, higher attributes continue to gain momentum as we add business throughout the quarter and beyond, further differentiating our... Big Bird continues to improve its operations through a combination of mixed optimization, live operation improvements, and labor efficiency. These efforts continue to drive quarter over quarter improvements in production. Moving forward, we will continue to invest in training and automation to drive further improvements in youth and line-of-training. Small Bird continues to improve both volumes and profitability, gaining robust demand from key customers in retail, daily, and QS. Performance was further aided by the successful completion and start-up of our Athens expansion project.

Fabio Sandri: Turning to the U S business, our consistent focus on execution of our strategies of key customer partnership diversification and operational excellence has sustained their profitability improvements. Despite the NIPA market fundamentals and the commodity segments and lingering inflation throughout the quarter. Our case ready business continued to grow ahead of the.

Fabio Sandri: Given the strong demand from key customers enhanced promotional activity and increased distribution to retail our offerings of differentiated high actually boot continues to gain momentum as we added business throughout the quarter and beyond further differentiating our portfolio.

Fabio Sandri: Big Bird continues to improve its operations through a combination of mix optimization live operation improvements and labor effectiveness.

Fabio Sandri: These efforts continue to drive quarter over quarter improvements in production costs moving forward, we'll continue to invest in training and automation to drive further improvements in youth and line efficiency.

Fabio Sandri: Yeah.

Fabio Sandri: Small vertical continues to improve both volumes and profitability given robust demand from key customers in retail daily in Q with ours.

Performance was further aided by successfully completing and startup of our Athens expansion products strengthening our relationship with key customers and our operational excellence reinforcing our foundation for profitable growth.

Fabio Sandri: Strengthening our relationship with key customers and our operational excellence. Reinforcing our foundation for profitable growth. Our efforts to further diversify our portfolio through value-added products continue to gain momentum, as prepared foods posted yet another strong quarter as volumes and profitability improve. Our branded offerings were exceptionally well-received as just bare, and the pilgrims' brands collectively grew 59% compared to last year.

Fabio Sandri: Our efforts to further diversify our portfolio through value added products continued to gain momentum as prepared foods posted yet another strong quarter as volumes and profitability improved our branded offerings were exceptionally well receive has just been in the big ones brands collectively grew 59% compared to.

Fabio Sandri: Last year did.

Fabio Sandri: Digital influence sales more than doubled compared to last year, and it remains a key driver of our branded growth and repeat business. This service also continues to increase marketplace traction through key customer relationships and targeted promotional activities. Moving forward, expanding distribution of our existing innovation through retail and further diversifying our portfolio in food service will be key to driving continued growth. Our investments in people over the past few years have resulted in suitable net staffing and reduced turnover levels throughout our U.S. operations. Given our sustained improvements, we were able to capture a significant portion of operational excellence initiatives throughout the year. As for the UK and Europe, consumer sentiment has steadily improved as inflation has shown signs of easing and real wages increased.

Digital only influenced sales more than double compared to last year and it remains a key driver in our branded growth in repeat business with.

Fabio Sandri: Service also continues to increase and marketplace traction through key customer relationships and targeted promotional activity.

Fabio Sandri: Moving forward expanding distribution of our existing innovation through retail and further diversifying our portfolio and food service will be key to driving continued growth.

Fabio Sandri: Our investments in people over the past few years have resulted in a suitable net staffing and reduce turnover levels throughout the rest of the cities.

Fabio Sandri: Even though our sustained improvements we were able to capture a significant portion of operational excellence initiatives throughout the plants.

Fabio Sandri: As for the U K and Europe consumer sentiment hasn't steadily improve as if inflation has shown signs of reasoning and real wages increase shoppers have also increasingly traded into chicken pork sausage and land relative to other categories.

Fabio Sandri: Shoppers have also increasingly traded in chicken, pork sausage, and lamb relative to other categories. Given our diversified portfolio across proteins, our business was well positioned to capture you on those. Within retail, key customers grew faster than others throughout the trade, and our offerings sold better than the category average. Our branded portfolio continues to be particularly successful, as net sales grew over 10% compared to the full year 2020. Richemont and Rollover brands have been especially well-received by customers throughout the sales, which have increased over 17 percent and 31 percent, as consumers become increasingly confident in the overall economic outlook. Thus, prospects to further diversify through a recently-launched brand innovation may become even more attractive. Our food service business remains relatively stable, even if consumers increase their at-home eating occasions.

Fabio Sandri: Given our diversified portfolio across proteins business was well positioned to capture those trends within.

Fabio Sandri: Within our retail customers grew faster than others. So all of the trade and our offerings so better than the category averages our branded portfolio continued to be particularly successful as net sales grew over 10% compared to the full year 2022.

Fabio Sandri: Richmond, and rollover brands have been especially when received by customers throughout the sales.

Fabio Sandri: Have increased over 17% and 31% respectively.

Fabio Sandri: As consumers became increasingly confident in the overall economic outlook prospects to further diversify true arresting police launching brand innovation may become even more attractive.

Fabio Sandri: Our foodservice business remained relatively stable, even if consumers increased their at home eating occasions, but king fever, our strong retail presence.

Fabio Sandri: What can favor our strong retail? We continue to drive operational excellence throughout all aspects of our... To that end, we havestreamlined our management and back office. Support Enduring during the quarter, given our growth aspirations and diversified productivity. Based on those efforts, we will increase our speed to market, enhance relationships with key customers, and further simplify our operations. We'll continue to explore alternatives to further drive profitable... In Mexico, throughout the quarter, the business experienced weakened supply and demand fundamentals from increased exports, imports, and lower exchange rates.

Fabio Sandri: We continued to drive operational excellence throughout all aspects of our business to that end, we streamlined our management and back office supporting during the quarter, even though our growth aspirations and diversified portfolio based on those efforts will increase our speed to market enhanced relationship with key customers and further simplify our operations.

Fabio Sandri: We will continue to explore out they don't choose to further drive profitable growth.

Fabio Sandri: In Mexico throughout the quarter, the business experienced weakened it supply and demand fundamentals from increase at the airport exports imports and lower exchange rates. Nonetheless, the team achieved positive margins during the quarter and improve profitability compared to last year through consistent execution of our strategies.

Fabio Sandri: Nonetheless, the team achieved positive margins during the quarter and improved profitability compared to last year through consistent execution of our strategy. Our presence with key customers continued to strengthen as volume increased double digits throughout the quarter. These efforts were further amplified by our efforts to diversify our portfolio through brands. Favoritos grew by 40% compared to Q3 and is up nearly four times since the beginning of the year. Similarly, Unique Taste is up close to 20% for the quarter and has nearly doubled since the start of 2021. Also, the initial results from a recently launched Just Bear Fresh offering throughout retail have been very positive.

Fabio Sandri: Our presence with key customers continued to strengthen as volume increased double digits throughout the quarter. These efforts were further amplified by our efforts to diversify our portfolio through brands from our repos grew by 40% to compared to Q3 and is nearly four times since the beginning of the year. Similarly.

Fabio Sandri: Unique taste is up close to 20% for the content. It has nearly doubled since the start of 'twenty to 'twenty. Three also the initial results from our recently launched just bare fresh offering through at retail has been very promising.

Fabio Sandri: Our operational excellence efforts to expand our capacity remain on track as we have completed construction of our hatchery and seed mill in Merida on schedule, with production expected to begin in March of 2021. Our efforts to enhance redundancy in live operations through the relocation of our breeder farms are also progressing as planned. To date, we have finished over 60% of the project and anticipate on-schedule completion during the first half of the year.

Fabio Sandri: Our operational excellence efforts to expand their capacity remain on track as we have completed the construction of our hatchery feed me we made it up on.

Fabio Sandri: On schedule with production expected to begin in March of 'twenty to 'twenty four.

Fabio Sandri: Our efforts to enhance redundant seen live operations drove a relocation of a breather farms is also progressing as planned to date. They have finished over 60% of the project unless it just based on scheduled completion. During this first half of this year.

Fabio Sandri: Our efforts to drive sustainability throughout our business continue to make progress. Throughout 2023, our teams will identify innovative ways to improve our energy efficiency through updated processing and equipment management. As a result, all regions have improved their electrical and natural gas usage intensity.

Fabio Sandri: Our efforts to drive sustainability throughout their business continued to make progress throughout 2023, our teams identifying innovative ways to improve our energy efficiency through updated processing and equipment management techniques. As a result, all regions improved their electrical and natural gas usage intense.

Fabio Sandri: City.

Fabio Sandri: We continue to make progress with our social efforts, as Newsweek recently recognized pilgrims as one of America's Greatest Places for Women and one of America's Greatest Places for Diversity. We also continue to invest in team member well-being through our Better Futures program, in which more than 490 Pilgrims team members and their children have enrolled in tuition-free higher education throughout 2020, and our Hometown Strong program, which has approved more than 150 community projects for investment, which also continues our organic growth. Our investments to support our key customer growth remain on target, as our Athens expansion was completed on time and as planned. Performance to date has met our operational excellence goals, and production has achieved or surpassed quality and service expectations. Similarly, construction of our protein conversion facility in South Georgia is progressing as scheduled and anticipates a start-up in March.

Fabio Sandri: We continue to make progress for our social efforts.

Fabio Sandri: Newsweek recently recognized as one of America's greatest places for women and one of the America great displays for diversity. We also continue to invest in team member well being through our bedroom futures program and reached more than 419, Pilgrim's team members and their children having roll into.

Fabio Sandri: You shouldn't free higher education throughout 2023 in our hometown strong program that has approved more than 150 community projects foreign investments to date.

Fabio Sandri: We'll also continue our organic growth investments to support our key customer growth remained on target as our Athens expansion was completed on time and that's planned but for US to date has meet their operational excellence goals and production has achieved or surpassed quality and service expectations.

Fabio Sandri: Similarly, construction of a protein conversion facility in South Georgia is progressing as scheduled and we anticipate startup in March we have already secured additional business with selected key customers, creating profitable growth in 2024 and beyond equally important these investments further diversifying our portfolio and grades.

Unidentified: We have already secured additional business with selected key customers, creating profitable growth in 2024. Equally important, this investment further diversifies our portfolio and creates operational redundancy to ensure sufficient service levels throughout, where there are a lot of them. Did you guys see the video of Salmeon in Saudi Arabia?

Fabio Sandri: Operationally he doesn't see to ensure sufficient service level throughout their business with that math.

Speaker Change: Can't comment on our financial results. Thank you Bobby and good morning, everyone.

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Speaker Change: The fourth quarter of 2023, net revenues were $4.53 billion versus $4.13 billion, a year ago with adjusted EBITDA of $309 $5 million and a margin of six 8% compared to $62 $9 million and a 1.5% margin in Q4 last year.

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Speaker Change: In the quarter, we reported GAAP net income of $135 million versus the GAAP net loss of $155 million in 2022.

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Speaker Change: For fiscal year 2023, net revenues were $17 $4 billion versus $17 $5 billion in fiscal 'twenty, two with adjusted EBITDA of one point over $3 billion, and a 6.0% margin compared to $165 billion in a nine 5% margin last year.

Matt Galvanoni: Good morning, everyone. For the fourth quarter of 2023, net revenues were $4.53 billion versus $4.13 billion a year ago, with adjusted EBITDA of $309.5 million at a margin of 6.8%, compared to $62.9 million at a 1.5% margin in Q4 last year. In the quarter, we reported a gap net income of $135 million versus a gap net loss of $155 million in 2022. For fiscal year 2023, net revenues were $17.4 billion versus $17.5 billion in fiscal 22, with adjusted EBITDA of $1.03 billion at a 6.0% margin compared to $1.65 billion at a 9.5% margin last year. We achieved $321.6 million of gap net income this year versus $745.9 million in 2022. Adjusted EBITDA in the U.S. for Q4 came in at $200.3 million, with adjusted EBITDA margins at $7.5 billion.

Speaker Change: We achieved $321 $6 million of GAAP net income this year versus $745 $9 million in 2022.

Speaker Change: Adjusted EBITDA in the U S for Q4 came in at $203 million with adjusted EBITDA margins at seven 5%, our big bird business profitability significantly improved year over year and throughout the second half of the year commodity market pricing rose back to more historical seasonal levels along with further operate.

Speaker Change: <unk> improvements achieved by the business.

Speaker Change: Also driving the improvement in our quarterly U S results were increases in profitability in both our case ready and small bird business.

Speaker Change: These businesses utilize key customer partnerships to increase distributions.

Speaker Change: Our prepared foods business continued its momentum of branded product sales growth with both retail and foodservice customers.

Finally in the quarter, we recorded approximately $18 million of insurance proceeds associated with the winter storm that impacted our operations in Texas and Louisiana in February 2021, whatever the impact of these proceeds were offset by year over year increase in incentive compensation and other actuarial related true up.

Matt Galvanoni: Our Big Bird business profitability significantly improved year over year, as throughout the second half of the year, commodity market pricing rose back to more historical seasonal levels, along with further operational improvements achieved by the business. Also driving the improvement in the quarterly U.S. results are increases in profitability in both our case-ready and small bird businesses, which utilize key customer partnerships to increase distribution.

Charges during the quarter.

Speaker Change: For the fiscal year, our U S. Net revenues were $10 $3 billion versus $10 $75 billion in fiscal 2022 with.

Matt Galvanoni: Our prepared foods business continues its momentum of branded product sales growth with both retail and food service customers. Finally, in the quarter, we recorded approximately $18 million of insurance proceeds associated with the winter storm that impacted our operations in Texas and Louisiana in February 2021. However, the impact of these proceeds was offset by a year-over-year increase in incentive compensation and other actuarial-related true-up charges during the fiscal year. For the fiscal year, our U.S. net revenues were $10.03 billion versus $10.75 billion in fiscal 2022, with adjusted EBITDA of $531.5 million at a 5.3% margin compared to $1.37 billion at a 12.7% margin last year. Coming out In UK-Europe, Adjusted EBITDA for Q4 was $102.5 million versus $62.9 million in 2022. The European business delivered its seventh consecutive quarterly improvement in Adjusted EBITDA. For the full year, Europe's suggested EBITDA was 317.5%.

Speaker Change: With adjusted EBITDA of $531 $5 million and a five 3% margin compared to $1.37 billion in a 12, 7% margin last year come.

Speaker Change: Coming out of a record 2022 U S portfolio provoke proved resilient in the face of depressed commodity market pricing in the first half of 2023 and recovering in the second half to post solid financial results.

Speaker Change: In U K Europe adjusted EBITDA in Q4 was $102 $5 million versus $62 $9 million in 2022 European business delivered its seventh consecutive quarterly improvement in adjusted EBITDA for the full year Europes adjusted EBITDA was $317.

Speaker Change: $317 $2 million versus $168 $7 million in 2022.

Speaker Change: During the year Europe announced a number of restructuring programs in pursuit of further operational excellence, including plant closures back office support consolidation and streamlining the management organization structure. These changes provide the foundation for further cost savings and will allow us to partner more efficiently with our key customers in the region.

We recognized approximately $44 million of restructuring charges during the year and anticipate additional charges in the first half of the years restructuring program progresses.

Speaker Change: Mexico made $6 $8 million and adjusted EBITDA in Q4, compared to losing $15 $8 million last year, when considering the full year, Mexico made a $185 $5 million and adjusted EBITDA or an eight 7% adjusted EBITDA margin Bettering last year's six 1% margin.

Matt Galvanoni: $317.2 million versus $168.7 million in 2020. During the year, Europe announced a number of restructuring programs in pursuit of further operational excellence, including plant closures, back office support consolidation, and streamlining the management organization structure. These changes provide the foundation for further cost savings and will allow us to partner more efficiently with our key customers in the region. We recognized approximately $44 million in restructuring charges during the year and anticipate additional charges in the first half of the year as the restructuring program progresses. Mexico made $6.8 million in adjusted EBITDA in Q4, compared to losing $15.8 million last year.

Speaker Change: The fourth quarter was seasonally.

Speaker Change: However, in considering the full year the supply dynamic supply demand dynamic was well balanced.

Speaker Change: Our Mexican team did an excellent job managing continually challenging live operations environment in the country.

Speaker Change: Our GAAP SG&A in the fourth quarter was lower than prior year, primarily due to reduced legal defense costs and cost efficiencies achieved in the U S and UK Europe.

Speaker Change: These reductions were partially offset by higher incentive compensation costs recorded in the quarter overall, our SG&A decreased year over year by approximately 9%.

Speaker Change: We finished the year spending $544 million in Capex. This included approximately $29 million associated with the rebuild the Mayfield, Kentucky Hatchery. Finally in December 2021 tornado in which we received insurance proceeds to come.

Matt Galvanoni: When considering the full year, Mexico made $185.5 million in adjusted EBITDA, or an 8.7% adjusted EBITDA margin, bettering last year's 6.1% margin. However, the fourth quarter was seasonally challenged. However, considering the full year, the supply-demand dynamic was well-balanced. Our Mexican team did an excellent job of managing the continually challenging live operations environment in the country. Our GAAP SG&A in the fourth quarter was lower than the prior year, primarily due to reduced legal defense costs and cost efficiencies achieved in the U.S. and U.K. Europe. These reductions were partially offset by higher incentive compensation costs recorded in the court.

Speaker Change: Also during the year, we incurred significant capex with the Athens, Georgia plant expansion, which started up in Q4 this year and with the construction of the protein conversion plant in South Georgia scheduled to start up by the end of Q1 2024.

Speaker Change: We will continue to prioritize our capital spending plans to ensure the safety of our team members optimize our product mix and strengthen our partnerships with key customers. We reiterate our commitment to investing strong our oce projects that will improve our operational efficiencies through automation and Taylor operation to address key customer needs to further solidify.

Matt Galvanoni: Overall, our SG&A decreased year-over-year by approximately 9%. We finished the year spending $544 million in CapEx. This included approximately $29 million associated with the rebuild of Mayfield, Kentucky Hatchery following the December 2021 tornado, which we received insurance proceeds to cover. Also, during the year, we incurred significant cuts with the Athens, Georgia plant expansion, which started up in Q4 this year, and with the construction of the protein conversion plant in South Georgia, scheduled to start up by the end of Q1 2021. We will continue to prioritize our capital spending plans to ensure the safety of our team members, optimize our product mix, and strengthen our partnerships with key customers. We reiterate our commitment to invest in strong ROCE projects that will improve our operational efficiencies through automation and tailor our operations to address key customer needs to further solidify competitive advantages for pilgrims.

Speaker Change: <unk> competitive advantages for Pilgrim's.

Speaker Change: We are anticipating spending between 475 and $525 million in Capex in 2024 as conditions evolve we may revise our spending outlook to accommodate our growth aspirations. However, we will remain disciplined in our capital allocation.

Speaker Change: We have a strong balance sheet and we'll continue to emphasize cash flows from operating activities management of working capital and disciplined investment in high return projects. Our liquidity position remains very strong at the end of the fiscal year, we had approximately $1 $8 billion in total cash and available credit we have no short term immediate cash requirements.

Speaker Change: With our bonds maturing between 2031 in 2034, and our U S credit facility not expiring until 2028, our liquidity position provides us flexibility during times of volatility in the U S commodity markets and allows us to explore further growth opportunities, including organic growth to meet our customers' needs.

Matt Galvanoni: We are anticipating spending between $475 million and $525 million in CapEx in 2024. As conditions evolve, we may revise our spending outlook to accommodate our growth aspirations. However, we will remain disciplined in our capital allocation. We have a strong balance sheet, and we'll continue to emphasize cash flows from operating activities, management of working capital, and disciplined investment in high-return projects. Our liquidity position remains very strong. At the end of the fiscal year, we had approximately $1.8 billion in total cash and available credit.

Speaker Change: At the end of the fiscal year, our net debt was approximately $2 6 billion with a leverage ratio of approximately two and a half times. The last 12 months adjusted EBITDA, which is right in the middle of our targeted leverage ratio range of two to three times net interest expense for the year was approximately $167 million. However, this does include approximately 20.

Speaker Change: And early extinguishment costs associated with the purchase of our 2027 notes during the fourth quarter, we anticipate our 2024 net interest expense to be between 125 and $135 million.

Speaker Change: Our full our full year effective tax rate was 11, 7%.

Matt Galvanoni: We have no short-term immediate cash requirements, with our bonds maturing between 2031 and 2034, and our US credit facility not expiring until 2028. Our liquidity position provides us with flexibility during times of volatility in the U.S. commodity markets and allows us to explore further growth opportunities, including organic growth, to meet our customers' needs. At the end of the fiscal year, our net debt was approximately $2.6 billion, with a leverage ratio of approximately 2.5 times the last 12 months' adjusted EBITDA, which is right in the middle of our targeted leverage ratio range of 2 to 3 times. Net interest expense for the year was approximately $167 million.

Speaker Change: Due to the mix of our multi jurisdictional pretax earnings routine income tax adjustments on discrete items were amplified, including the impact of changes in FX rates in certain jurisdictions.

Speaker Change: As such our effective tax rate did not fall or more normalized levels of between 23, and 25%, which we expect for 2024.

Speaker Change: We will continue to follow a disciplined approach to capital allocation as we look to profitably grow the company and will continue to align investment priorities with our overall strategies of portfolio diversification and focus on key customers operational excellence and commitment to team member health and safety.

Speaker Change: This concludes our prepared remarks, please open the call for questions.

Speaker Change: Ladies and gentlemen at this time, we'll begin today's question and answer session. We.

Speaker Change: We would like to ask a question. Please press star and then one using a touchtone telephone.

Matt Galvanoni: However, this does include approximately $20 million in early extinguishment costs associated with the purchase of our 2027 notes during the fourth quarter. We anticipate our 2024 net interest expense to be between $125 and $135 million. Our full year effective tax rate was 11.7%.

Speaker Change: Using a speaker phone, we do ask that you. Please pick up your handset prior to pressing the keys to maximize to minimize background noise.

Speaker Change: Are all of your questions you May press star two.

Speaker Change: At this time, we will pause momentarily to assemble the roster.

Barclays: Our first question today comes from there from Barclays. Please go ahead with your question.

Barclays: Hi, yes good.

Matt Galvanoni: Due to the mix of our multi-jurisdictional pre-tax earnings, routine income tax adjustments on discrete items were amplified, including the impact of changes in FX rates in certain jurisdictions. As such, our effective tax rate did not follow our more normalized levels of between 23% and 25%, which we expect for 2020. We will continue to follow our disciplined approach to capital allocation as we look to profitably grow the company and will continue to align investment priorities with our overall strategies of portfolio diversification, focus on key customers, operational excellence, and commitment to team member health and safety. Operator, this concludes our prepared remarks. Please open the call for questions. Ladies and gentlemen, at this time, we'll begin today's question and answer session. If you would like to ask a question, please press star and then one on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to maximize background noise.

Barclays: Morning, Fabio My first of all congrats on the very strong finish in 2023.

Barclays: Two quick questions. So first one probably more for you.

Barclays: As we look into 2024 and the leasing you've talked about in my prepared remarks.

Speaker Change: It relates to beef availability being tighter those prices coming up but could be more pork and.

Speaker Change: Chicken should.

Speaker Change: Keep a favorable one.

Speaker Change: Think about just the supply side and your role within that supply.

Speaker Change: What are you doing in order to to grow maybe your production within the U S. Leveraging also the fact that cost has come down so how should we think about programs.

Speaker Change: Supply situation into 24 was 23 that would be my first question Manav.

Operator: To withdraw your questions, you may press star and two. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Ben Theurer from Barclays; please go ahead with your question. Good morning, Fabio Metz.

Manav: Sure. Thank you Ben.

Manav: As we look at our portfolio, but we have a strategy of organic growth in conjunction with all key customers and I think we've been growing over the last year. As an example in Q4, we increase ahead of the industry as the needs for more key customers demand more volume from us I think part of that.

Fabio Sandri: First of all, congratulations on a very strong finish in 2023. Two quick questions. So the first one, probably more for Fabio.

Manav: Because of our project in Athens.

Fabio Sandri: As we look into 2024, and obviously you've talked about it in the prepared remarks, as it relates to just beef availability being tighter, those prices coming up, but then there should be more pork, and chicken should still be the most popular one. So as we think about just the supply side and your role within that supply, what are you doing in order to grow maybe your production within the U.S., leveraging also the fact that feed costs have come down? So how should we think about Pilgrim's specific supply situation in 2024 or 2023? That would be my first question, and I'll have a quick follow-up. Sure. Thank you, Ben.

Manav: During Q4 to supply growth for our key customers.

The pricing of grain, which is should be a benefit for the whole industry and for us overall will not change our focus on our key customers. We have a well diversified portfolio. We are well balanced between small bird tray pack and big Bucks and prepared foods and we expect it to continue.

Speaker Change: You bet.

Speaker Change: Okay perfect.

Speaker Change: And then my second question just as it relates to like the trajectory and the deliveries you had in the European results. Because obviously, we will remember that in the past you have those issues.

Fabio Sandri: As we look at our portfolio, Ben, we have a strategy of organic growth in conjunction with our key objectives, and I think we've been growing over the last year. As an example, in Q4, we grew ahead of the industry. As the needs of our key customers demand more volume, I think part of that was because of our project in Athens that started during Q4 to supply growth for our key customers. The pricing of grain, which should be a benefit for the whole industry and for us overall, will not change our focus on our... We have a well-diversified portfolio. We are well-balanced between small birds, trade pack, and big birds, and prepared foods. And we expect it to continue. Okay, perfect.

Speaker Change: Plus was more like a green plus I'm not necessarily that what would you say you stand right now in recovering all of that input cost pressure you have.

Speaker Change: From Brexit over the pandemic in Europe, and what's kind of the run rate profitability. We should assume for 2024, just given the very strong results, we already see in the fourth quarter. So how to think about European profitability and 24 that would be my second question. Thank you.

Speaker Change: Thank you once again, yeah, 2021 and 'twenty two we're very difficult for our rental business as you mentioned most of our contracts with our customers where base, what we thought was cost driven.

Fabio Sandri: And then my second question, just as it relates to, the trajectory and the delivery you had in the European results, because obviously, we remember that in the past, you had those issues where the cost-plus was more like a grain-plus and not necessarily that. Where would you say you stand right now in recovering all that input cost pressure you had from Brexit over the pandemic in Europe? And what's the kind of run rate profitability we should assume for 2024, just given the very strong results we already see in the fourth quarter? So how should we think about European profitability in 2024? That would be my second question. Thank you. Sure Ben, thank you once again.

Speaker Change: But it was only grain driven.

Speaker Change: All of the all of their costs.

Speaker Change: LIBOR packaging ingredients were expected to stay fixed but as we saw some massive.

Speaker Change: Relation in the European region, especially utilities ingredients packaging everything we saw this connection between our costing and our pricing we renegotiated all of those contracts during 2021 2022, and we're seeing some of the benefits coming through our bottom line in 2023.

Fabio Sandri: Yeah, 2021 and 2022 were very difficult for our European partners. As you mentioned, most of our contracts with customers were based on what we thought was cost-driven, but it was only grain-driven. All the other costs, like labor, packaging, ingredients, were expected to stay fixed, but we saw some massive inflation in the European region, especially utilities, ingredients, packaging, everything. We saw this connection between our costing and our price. We renegotiated all those contracts during 2021-2022, and we're seeing some of the benefits coming through our bottom line in 2023. I think combined with that, we also simplify our business. We integrated all the plants and businesses that we have in Europe.

Speaker Change: I think combined with that we also simplified our business, we integrated all of the plants and businesses that we have in Europe, we have a very diversified portfolio. There just as an example, we have the fresh pork and land business. We have ultra business, we have the meals business, we have a very.

A robust branded business, we have also up repair business and the foodservice business. So there are many segments that we serve in Europe and as the consumer who is gaining more confidence in Europe as we've seen inflation easing he is going back to the retail and to the brand at all.

Speaker Change: And we are seeing a benefit and we are capturing also that growth with our key customers in that region.

Speaker Change: As far as thank you again.

Speaker Change: So as far as the future as we structure.

Speaker Change: Structure of network and we're benefiting from our lean structure right now we expect it to see those benefits coming to the Butler and received the strengthening of the region as a whole.

Speaker Change: Okay.

Yes.

Fabio Sandri: We have a very diversified portfolio there. Just as an example, we have the fresh pork and lamb business. We have the poultry business. We have the meals. We have a very robust branded business. We also have a preparation business and a food service business.

Ben: Our next question comes from Ben <unk> problems Stephens incorporated. Please go ahead with your question.

Benjamin M. Theurer: Hi, Thanks, good morning, everybody congratulations.

Benjamin M. Theurer: I'd like to pick up where it been left off on the Europe segment.

Benjamin M. Theurer: As it relates to.

Benjamin M. Theurer: Any consideration, we should give to seasonality in the business notwithstanding the self help initiatives that you all have underway and then maybe you're reiterating a question. He asked of what is the baseline profitability off of which we should model.

Fabio Sandri: So there are many segments that we serve in Europe. And as the consumer is gaining more confidence in Europe as we see inflation easing, he's going back to retail and to branded offerings. And we're seeing a benefit, and we're also capturing that growth with our customers. S4S, thank you very much.

Benjamin M. Theurer: Third quarter earnings in this business because you ended the year just under 5% operating margins you started the year at 2% you've made fantastic progress and.

Fabio Sandri: As far as the future is concerned, as we restructure our network and we are benefiting from our lean structure right now, we expect to see those benefits coming to the bottom line, and we will see the strengthening of the region as a whole. Our next question comes from Ben Bienvenu from Stevens Incorporated. Please go ahead with your question. Hey, thanks. Good morning, everybody.

Benjamin M. Theurer: So margins went up sequentially every quarter during the year. So does that trajectory continue do we stabilize and vastly off of some new baseline help us think about the possibilities there.

Fabio Sandri: Congratulations. I'd like to pick up where Ben left off on the Europe segment as it relates to, Any consideration we should give to seasonality in the business, notwithstanding the self-help initiatives that you all have underway? And then maybe reiterating the question he asked, what is the baseline profitability off of which we should model quarterly earnings in this business? Because you ended the year just under 5% operating margin. You started the year at 2%. You've made fantastic progress.

No of course, then thank you for the question Yeah. As I mentioned, we have a very well diversified portfolio to your point that there is a little bit of seasonality in Europe, I think Q4 tends to be a strong quarter with the year end sensitivities and we have a strong business in the branded in the hands and in the.

Benjamin M. Theurer: In the in the sausage business Nonetheless, our business are growing faster than the industry. I think that's what we want to do to partnership with our key customers, creating differentiated offerings Bolton fresh repair in the retail and in the food service and we are seeing is.

Fabio Sandri: And, you know, margins went up sequentially every quarter during the year. So does that trajectory continue? Do we stabilize and vacillate off of some new baseline? Help us think about the possibilities there. Well, of course.

Benjamin M. Theurer: Thrown beginning of Q1 of course, there is a little bit of seasonality and the Q1 last year was to impacted by a very high inflationary period and now we're seeing a deflationary period, so what we expected.

Fabio Sandri: Thank you for the question. Yeah, as I mentioned, we have a very well-diversified portfolio. To your point, there is a little bit of seasonality in Europe.

Benjamin M. Theurer: Little bit of a reduction of revenues, but we expect it to continue on the are robust.

Benjamin M. Theurer: Bottom line again, there is a little bit of seasonality in Q4. So we expect Q1 to continue to be strong compared to last year, but with seasonality and not as strong as Q4, but.

Fabio Sandri: I think Q4 tends to be a strong quarter with year-end festivities, and we have a strong business in the branded, in the hams, and in the... The Bulletproof Executive 2013, Nonetheless, our businesses are growing faster than the industry. I think that's what we want to do, in partnership with our key customers, create and differentiate offerings, both in fresh, prepared, in retail, and in the food service. And we're seeing a strong beginning to Q1. Of course, there is a little bit of seasonality.

Benjamin M. Theurer: But for the year, we expect year over year growth with all the.

Benjamin M. Theurer: Operational excellence initiatives that we took during 2023 to come into the full year benefits in 2024.

Speaker Change: Okay very good.

Speaker Change: Thinking about the U S business with strong results in the fourth quarter, we've seen commodity fundamentals.

Fabio Sandri: And Q1 last year was still impacted by a very high inflationary period. And now we're seeing deflationary, So what we expected is a little bit of a reduction in revenues, but we expect it to continue on a robust basis....

Speaker Change: Improve into the early part of 2024.

Speaker Change: It looks as though that should persist as we move through 2024.

Speaker Change: How shall we be thinking about sequencing of profitability. This year and did you all have any weather disruptions or operational hiccups associated with the weather that we saw in January early February and the first quarter that we should be mindful of.

Fabio Sandri: Again, there is a little bit of seasonality in Q4, so we expect Q1 to continue to be strong compared to last year, but seasonality not as strong. But for the year, we expect year-over-year growth with all the Operational Excellence Initiatives that we took during 2023 to come into full year benefits in 2021. Okay, very good.

Speaker Change: Yeah. Thank you as I look at our U S business as I mentioned, we have a very well diversified portfolio, we are able to capture upsides in the commodity market and protect the downside with a more stable small bird tray pack and the business and the prepared foods business.

Fabio Sandri: Thinking about the U.S. business, we had strong results in the fourth quarter. We've seen commodity fundamentals improve into the early part of 2024. It looks as though that should persist as we move through 2024. How should we be thinking about the sequencing of profitability this year, and did you all have any weather disruptions or operational hiccups associated with the weather that we saw in January, early February, in the first quarter that we should be mindful of? Yeah, thank you.

Speaker Change: Looking to the drivers in terms of supply and demand and I think we are seeing.

Speaker Change: Some tail winds in terms of cost, especially on the grain as I mentioned there is some record production in U S and in South America, which will provide us a close to a $188 million in.

Fabio Sandri: As we look at our U.S. business, as I mentioned, we have a very well-diversified portfolio. We are able to capture upsides in the commodity market and protect the downsides with a more stable small bar trade pack and the business and the prepared for. Let's look into the drivers in terms of supply and demand. I think we are seeing some tailwinds in terms of cost, especially on grain. As I mentioned, there is some wreckage, production in the U.S. and in South America, which will provide us close to $188 million in funding with cost reduction during the 2024 year.

Speaker Change: Cost reduction during the 2024 years of course, not all of that will go into the bottom line is we have a lot of our pricing.

Speaker Change: On market or based on cost plus initiatives.

Speaker Change: But if you look at the supply we're expecting muted supply growth during Q1, and we're seeing some very strong demand for chicken as we mentioned I think chicken is a great value for the consumers the spread between chicken and beef and pork are close to a record.

Fabio Sandri: Of course, not all of that will go into the bottom line as we have a lot of our pricing based on market or based on cost plus. But if you look at supply, we're expecting muted supply growth during Q1, and we're seeing some very strong demand for chicken. As we mentioned, I think chicken is great value for consumers. The spread between chicken and beef and pork is close to record levels, and we're seeing a strong increase in promotional activity by retailers. If you look at what's happening in retail right now, we're seeing shoppers doing more trips and leaving money on the table every trip that they do. And that it's really important for the retailer to drive traffic. And chicken is a great way to drive traffic to the stores.

Speaker Change: <unk> and we're seeing a strong increase in the promotional activity by the retailers.

Speaker Change: If you look at what's happening in retail right now, we're seeing the shoppers doing more trips.

Speaker Change: And buying less every trip that they do and that it's really important for the retailer to drive traffic and chicken is a great way to drive traffic.

Speaker Change: Traffic for the stores, so we've seen the increasing promotional activity and an increase in the demand.

Speaker Change: Specially from our key customers on that segment on the food service.

Fabio Sandri: So we're seeing increasing promotional activity and an increase in demand, especially from our key customers, for that segment. But what we are seeing is an increase in penetration of chicken. So we're seeing strong demand both in food service and retail at the start of the year. Now, as the year progresses, we are expecting, or USDA is expecting, a little bit of an increase, close to 1% in terms of supply for Q2 and Q3, which is in line with the expected seasonality or grilling, and then a slight growth in Q4 of 0.8% for a total of 0.8%. As I mentioned as well, the net availability of protein for the U.S. is expected to be really muted with the reduction of...

Speaker Change: Seeing some lower traffic and consumer spending a little bit more at home.

Speaker Change: But what we are seeing is that an increase in penetration of the chicken offerings. So we are seeing strong demand both in the foodservice and retail starting of the year.

Speaker Change: Now as the year progresses, we are expecting or USDA is expecting a little bit of an increase close to 1% in terms of supply for Q2, and Q3, which is in line with expected seasonality or the grilling season, and then a slight growth in Q4, 0.8% for a total loss.

Speaker Change: 0.8% as I mentioned as well the net availability of proteins for the west is expected to be really muted and with the reduction of the beef prices so everything.

Fabio Sandri: So everything, on the drivers, is in line for a strong year for chicken. And Ben, to your question on disruptions so far in Q1, we've had relatively minor disruptions from the weather relative to the storms earlier in the quarter, so nothing that was very impactful. Great, thanks for taking my question. Our next question comes from Andrew Strelzick from BMO. Please go ahead with your question. Hey, good morning.

Speaker Change: On the drivers are in line for a strong year for chicken in 2024.

Speaker Change: Then to your question on disruptions in so far in Q1, we've had relatively minor disruptions from the weather relative to the storms earlier in the in the quarter. So nothing nothing that was very impactful overall.

Speaker Change: Okay, great. Thanks for taking my questions.

Speaker Change: Our next question comes from Andrew Charles from BMO. Please go ahead with your question.

Andrew Charles: Hey, good morning, Thanks for taking the question I wanted to just follow up on the prior question about the U S margin outlook.

Fabio Sandri: Thanks for taking the question. I wanted to just follow up on the prior question about the U.S. margin outlook. You know, if I think about your five-year average margin in the U.S., it's just north of 6% operating margin. And, you know, you said in the fourth quarter that the cutout was in line with the five-year average, obviously.

Andrew Charles: You know if I think about your five year average margin in the U S is just north of 6% operating margin.

Andrew Charles: And you said in the fourth quarter. They cut out was in line with the five year average obviously.

Fabio Sandri: Feed costs are heading well below the five-year average or constructive on the demand backdrop. So it seems to imply that 2024 U.S. margins could be solidly above that kind of five-year average, just north of 6% as well. Am I thinking about that correctly? Is there anything that I'm kind of missing within that picture?

Speaker Change: Feed costs were heading well below the five year average or constructive on the demand backdrop. So it seems to imply that 'twenty 'twenty four U S margins could be solidly above that kind of a five year average six not just north of 6% as well am I thinking about that correctly is there anything that I'm kind of missing within that picture.

Fabio Sandri: No, a great answer. I think it goes back to the portfolio. As I mentioned before, we have a well-balanced portfolio. I think commodity pricing and grain costs impact our portfolio only partially, as we demonstrated over 2021, 2022, and 2023. The trade back and the small bird business are more cost-driven or margin-driven, and we have a great partnership, and we continue to grow those businesses to offset the volatility of the Big Bird. So some of the benefits of the lower grain cost will go through our bottom line, especially again in the commodity segments, but only all other segments we expect to be more stable. To be fair with the last year or normal years, as we always mentioned, we want to be the best operator. We want to capture the upsides and protect the downsides, and what we can say is that we will always perform above the competition, whatever the market will allow us to do. That makes good sense.

No great Andrew I think it goes back to the portfolio as I mentioned before we have a well balanced portfolio.

The commodity pricing and the grain cost impact only partially our portfolio as we demonstrated over 2021 'twenty two and 2023.

Speaker Change: Trade back and the small bird business or more.

Speaker Change: Cost driven or a margin driven and we have a great partnership and we continue to grow in those business.

Speaker Change: To offset the volatility of the big bird.

Speaker Change: So some of the benefits of the lower grain costs will go through our bottom line, especially again on the commodity segments, but on the all other segments, we expect more stable margins.

Speaker Change: Okay Alright.

Speaker Change: Fair with.

Speaker Change: The last year or normal years, as we always mentioned, we want to be the best operator, we want to capture the upsides in protecting those sites and then what we can say is that we will always perform above the competition whatever the market will allow us to capture.

Speaker Change: That makes that makes good sense and my second question.

Fabio Sandri: My second question is on hatchability, and if I look at the slide and the data that you provided on that slide, hatchability has basically gone straight down this year. Some of that, I guess, is probably seasonal, but we're now outside, most recently, the five-year average. Can you just maybe talk about a little bit what's going on from a hatchability perspective?

Speaker Change: Hatch ability and if I look at the slide and the data that you provided on that slide you know hockey ability has basically gone straight down this year some of that I guess, it's probably seasonal but were now outside most recently the five year average can you just maybe talk about a little bit what's going on from a hatch ability perspective, I think if I rewind, we were supposed to see increases.

Fabio Sandri: I think if I rewind, we were supposed to see increases in that kind of steadily, and it hasn't really materialized. And so how are you thinking about hatchability going forward for the industry and the limitations that it creates on production growth for chicken in 24 hours? Yeah, sure, Andrew.

Speaker Change: And that kind of steadily and hasn't really materialized and so how are you thinking about how's your ability going forward for the industry and the the limited limitations that creates on production growth.

Speaker Change: For chicken in 'twenty four.

Speaker Change: Yeah sure Andrew that has being a topic that we've been discussing over the last two to three years right I think of the hatch ability issue and start that as we mentioned as we changed as the.

Fabio Sandri: That has been a topic that we've been discussing over the last two to three years, right? I think the hatchability issue started, as we mentioned, as we changed. The primary breeding companies changed their breeds to improve the quality and the yield of the breast meat. We started several years ago with the issue of the woody breast.

Speaker Change: Primary breeding companies changed their bridge to improve the quality and the yields.

Speaker Change: On the breast meat, we started several years ago with the issue of the Woody breast and the reaction from the primary breeders what she wants to change their breed to improve the quality and reduce debt issue and that impacted the hatch ability.

Fabio Sandri: And the reaction from the primary breeders was to change their breed to improve the quality and reduce that issue. And that impacted hatchability, which as well as a breed that performs better on the conversion, creates a little bit of a challenge on the life side, on the egg production, and on the... And I think that's what we saw, right, from 82% to close to 79% to 80%. The impact of that is

Speaker Change: That as well as a breed that it's performing better on the conversion create a little bit of a challenge on the life side on the egg production and on the hedge and I think that's what we saw right from them, 82% to close to 79% to 80% level.

Speaker Change: The impact of that change.

Fabio Sandri: Change in the breed, to our industry. Of course, we are improving our management of the breeder side. And I think that has improved hatchability, especially for us. We are better than the average company right now. But there are still some challenges with the hatchability that maybe with a new breed will be. We resume the prior level that we used to have in the 80s and 82s. But I think it's still a management issue on the weight of the male, especially of the male, and the overall hatchability of this new breed.

Speaker Change: Change in the breed.

Speaker Change: Two our industry of course, we are improving our management of the breeder side and I think that has improved the hatch ability, especially for US we are better than the average company right now but.

Speaker Change: But there is still some challenges on the hatch ability that maybe with the new breed will be.

Speaker Change: The the prior level that we used to have on the eighty's, 82%, but I think it's still a management issue on the weight of the main especially of the mail.

Speaker Change: And on overall etch ability of this new breed.

Fabio Sandri: So as we go throughout the years, we expect to get that better, as the number of... or the volume that we expect for the incoming months or the next years, and the expectations, and a little bit of the bottleneck that that poses. I think that's why the industry is trying to increase the number of breeders. As we see, the cooler placements were a little bit higher than year over year. But that's the reaction of the industry, expecting to improve hatchability through age. As another issue that we have, we have a little bit of an older breeder age, which is impacting hatchability once again.

Speaker Change: So as we go throughout the years, we expect to get that better.

Speaker Change: As the number of.

Speaker Change: On the volume that we expect for the.

Speaker Change: Coming months or the next years and the expectations and a little bit off the bottleneck that that poses I think that's why the industry is trying to increase the number of breeders as we see the pullet placements it was a little bit higher than the year over year, but that's the reaction of the industry expecting to improve hatch ability through age.

Speaker Change: As another issue that we have we have a little bit of an older.

Speaker Change: Breather age, which is impacting etch ability once again and the increase in the breeding flock is going to counter that with a younger.

Fabio Sandri: And the increase in the breeding flock is going to counter that with a younger flock, which should be more productive. Okay. And if I could just squeeze one quick one in here,

Speaker Change: Block would should be more productive.

Speaker Change: Okay, Okay, and if I, if I could just squeeze one quick one in here on the balance sheet and the cash balance sheets, you've talked about the strength of the balance sheet. The capex is coming in maybe a little higher than we had otherwise thought but you know your cash balance is pretty robust. Your projects generally speaking are kind of winding down how are you thinking about.

Fabio Sandri: On the balance sheet and the cash balance, you talked about the strength of the balance sheet, the capex is coming in maybe a little higher than we had otherwise thought, but your cash balance is pretty robust. Your projects, generally speaking, are kind of winding down. How are you thinking about leveraging that cash balance? You talked about some optionality for growth, but I guess when you think about the opportunity set, what's attractive, and how are you thinking about allocating the cash? Thanks. Andrew. It's Matt.

Speaker Change: Leveraging that catch that cash balance you talked about some optionality for growth, but I guess when you think about the opportunity set what's attractive and how are you thinking about allocating the cash thanks.

Speaker Change: Andrew It's Matt. Thanks for the question I think our main focus really and I mentioned it a couple of times in my prepared remarks was really on organic growth and that growth with key customers. We've had some projects that we've been.

Matt Galvanoni: Thanks for the question. I think our main focus, you know, I mentioned a couple times in my prepared remarks was really on organic growth. And that growth with key customers, we've had some projects that we've been either executing or in the process of executing, which is providing us with further production and kind of tightness with our key customers. And I think that's where we're going to probably see more of our cash from CapEx. And that's why when I gave that range, it really did put a little bit of a caveat on it that this could change with other broader, bigger, organic growth opportunities that we have for that cash at this time. So that's something we've been executing on very well over the last year to 18 months. And I think we're going to be seeing more of that as we go forward. But I don't know if Fabio wants to add any other colors to that.

Speaker Change: Either executed or in the process of executing which is providing us.

Speaker Change: Further production and in in kind of tightness with R. R.

Speaker Change: Our key customers and I think that's where we're going to probably see more of our cash from a capex and that's why when I gave that range. It really did put a little bit of a caveat on that that you know this could change with other broader bigger.

Organic growth opportunities that we have for that cash at this time. So that's something that we've been executing on very well over the last you know year to 18 months and I think we're gonna be seeing more of that as we go forward I don't know if Bob wants to add any other color to that.

Fabio Sandri: No, and again, Peter, Andrew, we're always looking at how we can create value for the shareholders. We have a lot of growth initiatives. To Matt's point, it is to grow with our key customers, but we have our targets in terms of acquisition. We will do an acquisition when we think it is accretive to us and will help us either in improving our portfolio in regions or in brands or in growing our prepared food offer. Great Thank you very much. I'll pass it on.

Bob: And again.

Bob: Andrew we are always looking to how can we create value for the shareholders. We have a lot of growth initiatives one thing too.

Bob: To Matt's point it has to grow with our key customers what do we have our targets in terms of acquisition. We will do an acquisition. When we think is accretive to us and will help us either on improving our portfolio in regions or in brands or in growing our prepared foods offerings.

Bob: Yeah.

Speaker Change: Great. Thank you very much I'll pass it on.

Fabio Sandri: Our next question comes from Peter Galbo from Bank of America. Please go ahead with your question. Hey, good morning, guys.

Our next question comes from Peter Galbo from Bank of America. Please go ahead with your question.

Peter Thomas Galbo: Hey, Good morning, guys. Just a couple of P&L questions for me you know, Matt and Fabio you talked about obviously that the deflation we've seen and in feed costs are in U S feed costs.

Matt Galvanoni: Just a couple of P&L questions for me. You know, Matt and Fabio, you talked about the obvious deflation we've seen in feed costs or in US feed costs. Matt, I was just hoping maybe you could give us an update, you know, on the other part of the cost equation. So labor and conversion, just kind of what you're expecting for 24 and then maybe a blended COGS inflation or deflation rate for the US.

Peter Thomas Galbo: I was just hoping maybe you could give us an update on the other part of the cost equation. So so labor and conversion just kind of what you're expecting for 'twenty four and then and then maybe a blended either cogs inflation or deflation rate for the U S.

Matt Galvanoni: Yeah, I think at least directionally, Peter. I think, you know, relative to labor, as Fabio mentioned in his prepared remarks, we're getting to the point of being fully staffed, which is great. So that, that does, of course, come in. Then, when you think about a per person basis, our increases in 24 will not be as high as they were, shall we say, in 22 and 20, you know, early part of 23, just the market is kind of becoming a little more stable relative to that. So we will see some levels of increase. But not to what we've seen in the past.

Speaker Change: Yeah, I think at least Directionally, Peter I think you know relative to labor as Fabio mentioned in his prepared remarks, we were getting to the point of being fully staffed which is which is great. So that that does of course come up and then when you think about that on a per per person basis. You know our increases in 24 will not be as high as they were shall we say.

Speaker Change: In 'twenty, two and 'twenty early part of 'twenty three just the market is kind of becoming a little more stable relative to that so we will see some levels of increase but not to what we've seen in the past.

Matt Galvanoni: But I think that the main driver that we're seeing, you know, from a cost perspective, that's a huge chunk of our cogs is the grain, which we are seeing the tailwinds for, which is excellent. But when I think about the other key cost drivers, labor should be relatively in check. And, you know, ingredients and other things of that nature, nothing that is causing, you know, any level of extraordinary change.

Speaker Change: But I think that the main driver that we're seeing from a from a cost perspective. That's a you know a huge chunk of our Cogs is the is the grain, which we are seeing the tailwind, which is which is excellent but when I think about the other key cost drivers labor should be relatively in check and and.

Speaker Change: Ingredients and other things of that nature, nothing that is causing you know any level of extraordinary change.

Fabio Sandri: I think, as we do every year, we started the year looking at all the efficiencies that we can capture. We call this opening the gaps, looking at all the opportunities in every single operation throughout our network. And then we created action plans to close those gaps or capture that operational excellence, as I mentioned. Every year, we expected from $100 to $200 million in operational excellence and operational effectiveness. And that is part COGS, part revenues, because we talk about improving the mix, we talk about reducing overall plant costs, and we talk about capturing improvements in yields. Of course, as Matt said, that is grain, non-impactful, but there is a little bit of inflation in terms of packaging, ingredients, and some utilities that we can count on. So we are always expecting to improve our operations year over year. And that's an exercise that we do from the bottom up from all the operations at all the plants. And we sum and add up all the way to our total.

Speaker Change: Okay, and I think as we do every year, we started the year looking at all of the efficiencies that we can capture we called this the opening the gaps looking at all the opportunities in every single operation throughout our network and then we created action plans to close those gaps or capture that operational excellence.

Speaker Change: As I mentioned every year, we expected from $100 million to $200 million in operational excellence and operational effectiveness and that is part of Cogs parts revenues, because we talk about improving the mix, we talk about reducing overall plant cost and we talk about capturing improvements in yields.

Speaker Change: Of course, as Matt said that is green.

Speaker Change: Non.

Speaker Change: But there is a little bit of inflation in terms of packaging ingredients and somewhat the utilities that we can counter.

Speaker Change: So we are always expecting to improve our operations year over year, and that's an exercise that we do bottom up from all the operations at all of the plants and we had some and add up all the way through our total P&L.

Got it.

Matt Galvanoni: Got it, that's helpful. And then just Matt, on the SG&A front, you know, I think you obviously mentioned it's down about 9% for the year in 23. Just trying to either get a sense on 24, either the dollar growth rate in SG&A or a rough range. I think you've been between, you know, 125 and 135 million a quarter, if that's still a fair range to use. Thanks very much. But yeah, no, I think it's good.

Speaker Change: It's helpful. And then just just Matt on the SG&A front, you know I think.

You, you've obviously mentioned its down about 9% for the year and twenty-three just just trying to get or get a sense on 24, either either dollar growth rate in SG&A or a rough a rough range I think you've been between 125 135 million a quarter. If that's still a fair range to use thanks very much but yeah. No I think it's good to know that that's a decent range I.

Matt Galvanoni: That's a decent range. But what I would also kind of think about it, Peter, is this year we really did see a significant decrease from 2022 in legal defense costs. You know, we certainly don't anticipate us moving up to the 2022 levels, certainly we'll have some level of increase in 2024 versus 23, because we'll get ourselves, you know, back in more of a, we believe, hopefully, in more of a stable incentive compensation cost that will kind of, you know, kind of true back up to more of a normalized level for the U.S. business. But I think if you kind I think in total SG&A, we're also benefiting from the consolidation of the back office in Europe, although there is a little bit of exchange rate impact there as well.

Speaker Change: What I would also kind of a way to think about it. Peter is you know this year, we really did see a significant decrease from 2022 and legal defense costs.

Speaker Change: You know, we I certainly don't anticipate us moving up to the 2022 levels. You know it certainly will have some level of increase in 2024 versus 23, because we'll get ourselves back in more of US we believe.

Speaker Change: Hopefully there's more of a stable incentive compensation costs that will kind of really kind of true back up to more of a normalized level for the U S business, but I think if you kind of think about this you know thinking 'twenty.

Speaker Change: For being somewhat between 2023, and 2022 is a reasonable way of thinking about it I think.

Speaker Change: Total SG&A, we're also benefiting from the consolidation of the bake off gifts in the Europe, Although there is a little bit of exchange rate impact in there as well.

Matt Galvanoni: Thanks, guys. And our next question comes from Adam Samuelson from Goldman Sachs. Please go ahead with your question. Yes, thank you. Good morning, everyone.

Speaker Change: Got it thanks guys.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Adam Samuelson from Goldman Sachs. Please go ahead with your question.

Adam Samuelson: Yes, Thank you well good morning, everyone.

Adam Samuelson: Adam Good morning, So I guess the first question just on Mexico, obviously that business is.

Fabio Sandri: Morning. So I guess the first question is just on Mexico, obviously that business, its short cycle, given the nature of that market. You alluded to a challenging October, which I think impacted the overall fourth quarter. Can you talk about the supply-demand trends as you look in the first quarter into the second, as we sit here today, and is there anything that would kind of have Mexico off the normal, a more normal seasonal cadence that you would have seen in prior years, where typically, the second quarter is the high point? Yeah, sure. Thank you, Adam.

Adam Samuelson: Short cycle, given given the nature of that market you alluded to it to a challenging October which I think impacted the overall fourth quarter can you talk about the.

Adam Samuelson: The supply demand trends as you can.

Adam Samuelson: First quarter until into the second as we sit here today and.

Speaker Change: Is there anything.

Speaker Change: That would kind of have Mexico off the normal more normal seasonal cadence that you would've seen in prior years, where typically the second quarter is the that's the high point.

Fabio Sandri: Yeah, Mexico was a little bit weaker than expected in Q4, although better than the prior year. I think the major drivers were very cheap imports coming from Brazil and also from the United States during Q4. And I think that, combined with an increase in production in the overall industry during Q4, will put some pressure, especially on the live bird market. And we know, as I mentioned, the short cycle and how that market is really volatile. As we started Q1, as we always mention, Mexico can be very volatile, quarter over quarter, but very, very strong and consistent year over year. We saw an improvement from those levels already. We're seeing the improvements right now. I think the years have still started a little bit weaker than we expected, but we're seeing improvements right now. As we see the strengthening in the pricing in the U.S., which will prevent export going there. I think there's a lot of work production also flowing from the United States to Mexico.

Speaker Change: Yeah sure. Thank you Robin Yeah, Mexico was a little bit weaker than expected in Q4, although better than the prior year I think the major drivers were very cheap imports coming from Brazil, and also from the United States and I'm doing it in Q4, and I think that combined with an increasing production and the overall industry.

Speaker Change: Great.

Speaker Change: During Q4 puts some pressure, especially on the lifeblood market and we know as I mentioned, the short cycle and how that market is really volatile as we started Q1 as we always mentioned, Mexico can be very volatile quarter over quarter, but very very strong and consistent year over year, we saw.

Speaker Change: Already an improvement from those levels, we've seen the improvements right now I think the units still started a little bit weaker than we expected, but we're seeing the improvements right now as we've seen the strengthening in the pricing in the U S, which will prevent exports going there I think there's a lot of work production also.

Speaker Change: Flowing from United States to Mexico.

Fabio Sandri: And, uh, but we are already seeing an improvement in the market right now. And as you mentioned, we expect the Q2 market to be released. Okay, that's helpful.

Speaker Change: And but we're seeing it already on the improvement in the market right now and as I mentioned, we expect the Q2 market to be really strong.

Speaker Change: Okay. That's helpful and if I could have a follow up on the U S business on on your prepared business and in the U S and I know there's been a lot of growth in the just bare brand.

Fabio Sandri: And I can just follow up on the U.S. business on your prepared business in the U.S., and I know there's been a lot of growth in the JustBear brand. Could you maybe just talk about the profitability of the prepared foods business at this point? I know historically that was a more challenging piece because of scale.

Speaker Change: Could you maybe just talk about the profitability of the prepared foods business at this point out historically that was a more challenging.

Speaker Change: Because the scale is are we getting to a point in our prepared can be a more material earnings contributor and and if so are.

Fabio Sandri: Are we getting to a point now where prepared foods can be a more material earnings contributor? And if so, or is there a thought about incremental capital and capacity needs in that unit? Sure, and that's exactly the strategy, right, Adam, to have a portfolio that can capture the upsides in the market and protect the downsides, and I think prepared foods play a significant role there.

Speaker Change: There are thought about incremental capital and capacity needs.

Speaker Change: Got it.

Speaker Change: Sure and that's exactly the Spanish right out of them to have a portfolio that can capture the upside in the market and protect the downside and I think our prepared foods play a significant role there as we have an exposure to the big bird market, we want to have the counter that volatility with the more stable repair.

Fabio Sandri: As we have an exposure to the Big Bird market, we want to counter that volatility with a more stable prepared business that can benefit from cheaper inputs in the commodity. As 2022 and 2023 move along, we saw that... strong growth on our brand. I think not only are we benefiting from lower commodity prices, but we're also capturing signs because it's a differentiated product that really resonates with consumers. And that's what we are seeing, that strong demand.

Speaker Change: Business that can benefit from cheap cheaper inputs in the commodity.

Speaker Change: 2022, and 'twenty three move along we saw that.

Speaker Change: Strong growth on our brand I think not only we are benefiting from lower commodity prices, but we're also capturing upsides because it's a differentiated product that really resonated with consumers and that's what we are seeing that strong demand and we are helping our key customer.

Fabio Sandri: And we are helping our key customers with driving not only profits but also traction, as we see the commodity market increase. Proofing, we can see a little bit of a reduction and a squeeze on the margins of that business again. We expect it to be more stable, But we are seeing double-digit profitability in that business. 3, and we don't expect that to be different in 2020.

Speaker Change: We are driving not only with profits, but also driving traffic as we see the commodity market.

Speaker Change: Proving we can see a little bit of a reduction and a squeeze on the margins on that business again, we expect it to be more stable.

Speaker Change: But we are seeing double digit profitability in that business in 'twenty, three and we're doing it and don't expect that to be different in 2024 X. Four girls, who you are correct. When you talk about the growth with our key customers and we are reaching the the.

Fabio Sandri: As for growth, you are correct. We talk about growth with our key customers, and we are reaching 100% capacity, especially on the fully cooked, with the Just Pair brand and also with the Pilgrims brand, where we do a relaunch during the Christmas period. I really, I appreciate that caller. I'll pass it on.

Speaker Change: 100% capacity, especially in the fully cooked business with.

Speaker Change: With the just bare brand and also with a few minutes brand, where we dwell relaunched during the Q2.

Speaker Change: I really I appreciate that color I'll pass it on thanks.

Fabio Sandri: Thanks. And ladies and gentlemen, our next question comes from... Priya Oryukta from Barclays. Please go ahead with your question. Great, thank you so much for taking the question. Andy, maybe just one to start with for you, or sorry, excuse me, Matt.

Speaker Change: And ladies and gentlemen, our next question comes from.

Barclays: Oh regrouped out from Barclays. Please go ahead with your question.

Barclays: Great. Thank you so much for taking my question.

Thank you.

One.

Barclays: To start with for you Oh, sorry.

Matt Galvanoni: Can we talk a little bit about working capital just with some of the relief that you're seeing on the green side? Is there scope for working capital to potentially be even a benefit this year as we think about your receivables flow composition? My initial reaction is, yeah, I mean, I think we should be able to see some working capital benefits going forward, especially with where grain is going. It may take a bit of time to let that kind of fully get itself through inventory as such. But we are seeing that is definitely the direction we're taking, and we've seen that a little bit here in the fourth quarter.

Barclays: But.

Barclays: Can we talk a little bit about working capital just with some of the release that you're seeing on.

Barclays: Green side is there scope for working capital.

Barclays: Yeah.

Barclays: This year as we think about your free cash flow composition.

Barclays: My initial reaction is yeah, I mean, I think we should be able to see some working capital benefits going forward, especially with where grain is going it may take a bit of time to let that totally.

Get itself through inventory as such but we are seeing that as a is definitely the direction.

Barclays: Taking and we've seen that a little bit here in the fourth quarter, but its greatest started to hit these kind of low four areas in corn that is something that we are we're seeing that also Korea. I think also in terms of inventories for you we've been pushing a lot of reduction in our inventory, especially for frozen.

Matt Galvanoni: But as grain is starting to hit these kind of low four areas in corn, that is something that we are seeing. I think also in terms of inventories, Priya. We've been pushing for a lot of reduction in our inventories, especially for frozen, category, and we're seeing the overall inventories in the market also going down, especially for dark. That has helped the whole industry and helped our work. That's helpful.

Category and we're seeing the overall inventories in the market also going down, especially on the dark meat and and that has helped our the whole industry and help our working capital.

Speaker Change: Okay. That's helpful. So I guess, that's a fall.

Matt Galvanoni: So I guess as a follow-on and maybe building on one of the prior questions, that sort of puts you guys in a little bit more of an enviable position when it comes to your cash flow generation and your existing cash. You've already sort of outlined the CapEx guidance. As we think about that cash that's building, would you be able to maybe talk us through the scope of potentially increasing some of those organic projects versus looking a bit more aggressively at inorganic opportunities, and how high of a cash balance would you be comfortable sitting on? You know, I think when you talk about inorganic versus organic, Fabio mentioned on the inorganic side, look, we want to grow our company, but we want to be very prudent relative to any type of acquisition that we do to make sure it's completely in line with our strategy and we're paying a right and fair price for any type of acquisition that way.

Speaker Change: One maybe just building on one of the prior questions.

Speaker Change: You guys in a little bit more of an enviable position when it comes to your cash flow generation or existing cash.

You've already sort of outlined the capex guidance.

Speaker Change: Guidance.

Speaker Change: So that cash that's building.

Speaker Change: Would you be able to.

Speaker Change: Talk us through.

Speaker Change: The skull potentially increased somewhat.

Speaker Change: Projects are also looking a bit more.

Speaker Change: Aggressively organic opportunity.

Speaker Change: Hi, the cash balance would you be comfortable saying.

Speaker Change: And I think when you talk about the inorganic versus organic you know Bob you had mentioned on the inorganic side look we want to grow our company, but we wanted to be very prudent relative to any type of acquisition that we do to make sure. It's completely on strategy and we're paying the right and fair price.

Speaker Change: For any type of acquisition that way. So we're not certainly not excluding any opportunities for inorganic, but it's something that's got to be the right fit for us at the right price.

Matt Galvanoni: So we're not, certainly not excluding any opportunities for inorganic growth, but it's something that's got to be the right fit for us at the right time. Relative to organic growth, you know, we have some capital needs that are out there. We've got opportunities to grow with our key customers. We are not going to, you know, we're going to be very, one thing I'll use the word prudent again on those types of investments, but we have opportunities to be more on the organic side relative to that growth. I don't think there's anything that we look at as a cash limit, you know, as it relates to, you know, how high it can go.

Speaker Change: Relative to organic we have some sort of capital needs that are out there we've got opportunities to grow with our key customers. We are not going to you know we're gonna be very one thing I'll use the word prudent again on those types of those types of investments, but we have opportunities to be more on the organic side relative.

Speaker Change: To that growth I don't think there is something that we look at it as a cash limits you know as it relates to how high. It can go if there is a reason to do with some type of buyback we would consider that but that is not number one on the list as I've mentioned before.

Fabio Sandri: If there is a reason to do some type of buyback, we would consider that, but that is not number one on the list, as I've mentioned. Great, thank you so much. And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I would like to turn the floor back over to Fabio for any closing remarks. Yes, thank you everyone for attending our call. Our team faced exceptionally volatile market conditions throughout 2023.

Speaker Change: Okay.

Speaker Change: And ladies and gentlemen, with that we'll be concluding today today's question and answer session.

Speaker Change: I'd like to turn the floor back over to Fabio for any closing remarks.

Fabio Sandri: Yes. Thank you everyone for attending our call our team faced exceptionally volatile market conditions throughout 2023. Nonetheless, we maintained focus on strategies of key customer partnership portfolio diversification and operational excellence and these efforts when combined with the leadership mindset and commitment to our values, we elevated our performance.

Fabio Sandri: Nonetheless, they maintained focus on the strategies of good customer partnership, portfolio diversification, and operational equity. And these efforts were combined with a leadership mindset and commitment to our values; we elevated our performance and demonstrated our ability to drive profitable growth despite... Moving forward, we will continue to drive our strategies along with an unwavering commitment to team member safety, as well as with an unyielding attention to quality, service, and sustainability. Given our progress and efforts, we can continue to cultivate a better future for our team members and achieve our aspiration of becoming the best and most respected company in 2021. Thank you. And ladies and gentlemen, that concludes today's conference call. We thank you for attending today's presentation. You may now disconnect your lines.

Fabio Sandri: And demonstrated an ability to drive profitable growth. Despite circumstances moving forward, we will continue to drive our strategies along with an unwavering commitment to team member safety.

Fabio Sandri: As well being alone with an unyielding attention to quality service and sustainability, even though our progress in efforts. We can continue to cultivate a better future for our team members and achieve our aspiration of becoming the best and most respected company in 'twenty to 'twenty four and beyond Thank you everyone.

And ladies and gentlemen that concludes today's conference call. We thank you for attending today's presentation.

Speaker Change: You may now disconnect your lines.

Speaker Change: Yes.