Q1 2024 Pilgrim's Pride Corp Earnings Call

Good morning, and welcome to the first quarter of 'twenty 'twenty four Pilgrim's Pride earnings conference call and webcast all participants will be in a listen only mode.

Operator: Good morning, and welcome to the first quarter of 2024 Pilgrims Pride Earnings Conference Call and Webcast. Today, all participants will be in a listen-only mode.

Operator: Should you need assistance during today's call, please signal for 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 your questions. I would now like to turn the conference over to Mr. Andrew Rojeski, Head of Strategy, Investor Relations, and Sustainability for Pilgrims. You may proceed, sir.

If you need assistance during todays call. Please signal for a conference specialist by pressing the star followed by zero.

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 investors section of the company's website at Www Dot Pilgrim's dotcom. After today's presentation, there will be an opportunity to ask your questions.

I would like to turn the conference over to Mr. Andrew <unk> head of strategy Investor Relations interesting ability for Pilgrim's you May proceed sir.

Andrew: Good morning, and thank you for joining us today as we review our operating and financial results for the first quarter ended on March 31, 2024 yesterday afternoon, we issued a press release, providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAAP measures, we may discuss our cause.

Andrew Rojeski: Good morning, and thank you for joining us today as we review our operating and financial results for the first quarter ended on March 31st, 2024. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter, 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 scc.gov.

Andrew: The release is available on our website at IR <unk> com along with slides for reference these.

Andrew: These items have also been filed its form eight Ks and are available online at SEC Dot Gov, Fabio Sandri, President and Chief Executive Officer, and Matt Galvin Oni, Chief Financial Officer will present on today's call.

Andrew Rojeski: 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. However, other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. Further information concerning these factors has been provided in this morning's press release, our Form 10-K, and our regular filings with the SEC. I would now like to turn the call over to Fabio Sandri.

Speaker Change: Before we begin our prepared remarks, I would like to remind everyone of our safe Harbor disclaimer.

Andrew: Today's call may contain certain forward looking statements that represent our outlook and current expectations as of the date of this release.

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

Andrew: Further information concerning these factors have been provided in this morning's press release, our Form 10-K, and our 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 first quarter of 2024, we reported net revenues of $4.4 billion, a 4.7% increase over the same quarter last year. Our adjusted EBITDA was $372 million, up 145% versus Q1 of 2022. Our adjusted EBITDA margin was 8.5% compared to 3.6% last year. Our Q1 demonstrates the results of consistent execution of our strategy. Over the past quarters, we experienced significant volatility in commodity cut-out values, persistent inflation, and challenging labor markets.

Fabio Sandri: Thank you Andy and good morning, everyone and thank you for joining us today.

Fabio Sandri: For the first quarter of 2024, we reported net revenues of $4 4 billion, a four 7% increase over the same quarter last year. Our adjusted EBITDA was 372 million up 145% versus Q1 of 'twenty to 'twenty three our adjusted EBITDA margin was eight 5% compared.

Fabio Sandri: Two to three 6% last year.

Fabio Sandri: Our Q1 demonstrates the results of consistent execution of our strategies over the past quarters, we experienced significant volatility in the commodity cutout values persistent inflation and challenging labor markets. Nonetheless, we maintain our focus on the key customer partnerships portfolio diversification.

Fabio Sandri: Nonetheless, we maintain a focus on key customers' partnerships, portfolio diversification, growth of value-added offerings, and a relentless pursuit of operational excellence. While these efforts reduce outside risk, they are also further strengthening our competitive advantage. As a result, our business became increasingly well-positioned to realize potential upside as enhanced market fundamentals emerge. In the U.S., Case Ready increased its marketplace presence, giving key customer growth supported by our differentiated offerings, whereas Big Bird improved profitability through continued progress in operational excellence and stronger commodity cut-out value.

Fabio Sandri: The value added offerings and our relentless pursuit of operational excellence, while these efforts reduced downside risks. They also further strengthening our competitive advantage as a result, our business became increasingly well positioned to realize potential upside hasnt enhanced market fundamentals emerge in.

Fabio Sandri: In U S. T has already increased its marketplace presence given key customer growth supported by our differentiated offerings, whereas big bird improve profitability through continued progress in operational excellence and stronger commodity cutout values smell.

Fabio Sandri: Small Bird remains strong, giving significant growth in the daily and steady performance by QSR; prepared foods further diversify our portfolio as our brands grow across retail and food service. Our European business continues to make progress on its profitability journey. During the quarter, the team secured additional business with several key customers in retail. Efforts to further diversify our portfolio continued to gain traction as our brand grew faster than the category average. These efforts were augmented through the optimization of our manufacturing network and integration of corporate support activities.

Fabio Sandri: Small bird remains strong given the significant growth in the deli and steady performance by <unk> prepared foods further diversify our portfolio as our brands grew across retail and foodservice.

Fabio Sandri: Our European business continued to make progress on its profitability journey.

Fabio Sandri: During the quarter the team secure additional business with several key customers in retail.

Fabio Sandri: First to further diversify our portfolio continued to gain traction as our brands grew faster than category averages. These efforts were augment that through the optimization of our manufacturing network and integration of corporate support activities met.

Fabio Sandri: Mexico's results improved through a combination of enhanced commodity fundamentals, exchange rate favorability, and consistent execution of our strategy. Led by key customer partnerships, the business continued to grow across both retail and food service. Branded offerings rose double digits compared to the same period last year, further diversifying our portfolio. Operational excellence efforts to enhance production efficiencies and reduce biosecurity risks remain on track. We also continue to drive sustainability efforts. During the quarter, a third party conducted a limited assurance audit of our GHG emissions related to our Sustainable Link Bond.

Fabio Sandri: Mexico's results improved through a combination of enhanced commodity fundamentals exchange rate favorability and consistent execution of our strategies led by key customer partnerships. The business continued to grow across both retail and foodservice branded offerings rose double digits compared to the same period last year further.

Fabio Sandri: Finally, our portfolio.

Fabio Sandri: Operational excellence efforts to enhance production efficiencies and reduced by a security risks remain on track.

Fabio Sandri: We also continue to drive sustainability efforts during the quarter a third party conducted a limited assurance audit of our GH Jeep emission related to our sustainable linked bond based on this work our emissions intensity declined by 15, 6% from 2018 to 2022 moving forward.

Fabio Sandri: Based on this work, our emissions intensity declined by 15.6% from 2019 to 2022. Moving forward, we will continue to invest in infrastructure, operating procedures, and training that can reduce our emissions intensity. Also, our investments in organic growth continue to progress, as we initiated start-up and production at our protein conversion facility in South Georgia. Similarly, our expansion efforts in Mexico to drive profitable growth and access new geographies remain on track, as our new projects have progressed as scheduled. Looking at feed inputs, global corn prices fell as additional demand for U.S. corn did not emerge in export markets and South America's growing season experienced suitable growing conditions.

Fabio Sandri: We'll continue to invest in infrastructure operating procedures and training that can reduce their emissions intensity.

Fabio Sandri: Also our investments in organic growth continued to progress as we initiated startup and production at our protein conversion facility in South, Georgia. Similarly are especially efforts in Mexico to drive profitable growth and access new geographies remains as our new projects in progress as scheduled.

Fabio Sandri: Looking at feed inputs global corn prices fell as additional demand for U S corn northern March in export markets and South American growing season experienced suitable growing conditions.

Fabio Sandri: As for the U.S., a normal growing season for corn should enable a build on the 2024-2025 ending stocks, above the less crops already comfortable levels. Like corn, U.S. and world soybean stocks are set to build in both the 2023-2024 and the 2024-2025 crops, reaching historical comfortable levels. The South American soybean crop achieved record production, limiting U.S. export demand.

Fabio Sandri: As for the U S. A normal growing season for corn should enable for a build on the 'twenty four 'twenty five ending stocks above less crops already comfortable levels like corn U S and world soybean stocks are set to building both the 'twenty three 'twenty four and the 'twenty four 'twenty five crop years, reaching.

Fabio Sandri: Nickel comfortable levels, the south American soybean crop achieved record production limiting U S export demand.

Fabio Sandri: As for the U.S., soybean acreage is expected to increase in this crop year, further increasing supply. Additionally, additional soybean crushing capacity is also expected to emerge, which may also lower the value of soybean meal. On wheat, balance sheets are somewhat more sensitive, given the overall increase in demand and slight decrease in production in the last crop year. However, the increasing global stocks of all grains may serve as a counterbalance. Moving forward, weather and crop conditions also suggest an increase in yield versus last year, despite lower planted acreage potentially increasing the supply.

Fabio Sandri: As for the U S. Soybean acreage is expected to increase in this crop year further increasing supply additional soybean crushing capacity is also expected to March which may also lowered the value of soybean meal.

Fabio Sandri: Weak balance sheets are somewhat more sensitive given the overall increase in demand and slight decrease in production in last crop year. However, the increasing global stocks of all grades may serve as a counterbalance moving forward weather and crop conditions also suggests an increase in yields.

Fabio Sandri: Versus last year, despite lower planted acreage potentially increasing the supply.

Fabio Sandri: In the first three months of 2024 and the USDA estimates.

Fabio Sandri: In the first three months of 2024, the USDA estimates indicated ready-to-cook production for U.S. chicken decreased 1 percent relative to the first quarter of 2023, impacted by fewer production days than the prior year. Production was also impacted as headcounts did not pace at levels equivalent to last year, mainly driven by reductions in small bird and case-red categories.

Fabio Sandri: Indicated ready to Cook production for U S chicken decreased 1% relative to the first quarter of 2023 impacted by less production days than the prior year production was also impacted as head counts do not base at levels equivalent to last year, mainly driven by reductions of small bird and case red categories, contrary to the <unk>.

Fabio Sandri: Contrary to the other segments, the big bird segment grew production during the same period. Since early in the first semester, improved flock productivity amplify egg production, translating into increased egg sets. Even with higher flock productivity, hatchability and mortality continue to be a challenge that deserves a significant portion of increased attention. Based on recent trends in egg sets, higher average live weights, and low feed pricing, USDA data suggest a 1.5% growth in chicken for the full year, assuming normal season patterns.

Fabio Sandri: Other segments the Big Bird segment grew production during the same period.

Fabio Sandri: This early in the first semester improve at fluff productivity amplified egg production translating to increased exits even with the higher flock productivity hatch ability and mortality continues to be a challenge offsetting a significant portion of increase et cetera.

Fabio Sandri: Based on recent trends and exits higher average lightweights and low feed pricing USDA data suggest a one 5% growth in chicken for the full year, assuming normal season, filers. However continued hedge ability and visibility challenges may limit the ability of the industry to grow accordingly to the U S.

Fabio Sandri: However, continued hatchability and livability challenges may limit the ability of the industry to grow accordingly to the USDA. Concerning the cold storage supply of chicken, UFDA reported inventories indicated a 13% reduction from the end of 2023 through the end of March. Given this reduction, inventories are almost 11% below March 2023 levels. Inventory depletion came from both the front and back half, allowing the industry to enter the second quarter with significantly reduced stock levels

Fabio Sandri: <unk> estimates.

Fabio Sandri: Concerning cold storage supply of chicken USDA reported inventories indicated a 13% reduction from the end of 2023 through the end of March given this reduction inventories are almost 11% below March 2020 three levels.

Fabio Sandri: Inventory depletion came from both front and back half, allowing the industry to enter the second quarter with significantly reduced stock levels.

Fabio Sandri: As for overall protein availability, USDA anticipates limited growth, as increasing ports of beef, additional pork production, and the expected increase in chicken supply are more than offset by a significant decline in beef production given reduced herd size and increased retention. The massive volume of chicken demand shows steady growth in the first quarter of 2024. The retail channel experienced improved volumes. In the fresh department, demand has remained robust, while pricing remains stable.

Fabio Sandri: As for overall protein availability USDA anticipates limited growth as increased imports of beef additional truck production and the expected increase in chicken supply and more than offset by a significant decline in beef production given the reduced herd size.

Fabio Sandri: Sites and increase retention.

Fabio Sandri: Domestic volume of chicken demand show steady growth in the first quarter of 2034.

Fabio Sandri: The retail channel, we experienced improved volumes in the fresh department demand has remained robust while pricing remains stable.

Fabio Sandri: Volume has grown despite a lower share of chicken on promotion, suggesting consumer everyday purchases are improving year over year. Volumes rose across the category, especially in the Boneless Breast category, where the volume growth of our key customers outpaced the overall industry growth. Overall, frozen sales also experienced higher volumes. Consumers continue to favor frozen value-added over the frozen commodity category, as value-added volumes more than offset the volume declines in commodities.

Fabio Sandri: Volume has grown despite a lower share of chicken <unk> promotion, suggesting consumer everyday purchases and improving year over year.

Fabio Sandri: Volumes rose across the category, especially on the boneless breast category, where the volume growth of our key customers outpace the overall industry growth.

Fabio Sandri: Overall frozen sales also experienced higher volumes consumer continued to favor frozen value added over the frozen commodity category has value added volumes more than offset the volume declines in commodity.

Fabio Sandri: Within value-added, our key customers also outpace category growth rates, suggesting that our branded offerings are well-suited to capitalize on further growth as the consumer looks for convenience and differentiated solutions in the frozen aisle. As for the retail deli, unit and dollar growth remain robust, as the department can offer strong value to consumers who may be looking to trade out of traditional food service meals to rationalize spending without sacrificing convenience. In the food service channel, revenue and volume sales improved in both commercial and non-commercial food service distribution sub-channels.

Fabio Sandri: Within the value added our key customers also outpaced category growth rates, suggesting that our branded offerings are well suited to capitalize with further growth as the consumer looks for convenience and differentiated solutions in the frozen aisle.

Fabio Sandri: As for the retail daily unit and dollar growth remained robust at the department can offer strong value to consumers, who may be looking to trade out of traditional food service meals to rationalize spending without sacrificing convenience.

Fabio Sandri: In the foodservice channel.

Fabio Sandri: Revenue and volume sales improved in both commercial and non commercial foodservice distribution sub channels.

Fabio Sandri: The commercial distribution sub-channel experienced larger dollar growth as rising fresh wholesale prices were able to be passed through to operators. Within the sub-channel, the QSR category drove the majority of volume growth, also suggesting that consumers were looking for more affordable meals. The non-commercial distribution subchannels continue to build steadily, especially education and healthcare, adding incremental volume relative to the first quarter of 2022. In the export channel, the value of export shipments remains steady, while higher prices and Why volumes decline on a year-over-year basis. Despite the volume decrease, Black Quarter and other dark meat inventories fell more than seasonal norms and ended March significantly below the five-year average.

Fabio Sandri: The commercial distribution channel experienced larger dollar growth is rising fresh wholesale prices were able to be passed through to operators within the sub channel. The <unk> category drove the majority of volume growth also suggestive of consumers looking for more affordable meals.

Fabio Sandri: The noncommercial distributions of channels continue to build steadily, especially education health care, adding incremental volume relative to the first quarter of 2023.

In the export channel the value of export shipments remained steady while higher pricing, while volume has declined on a year over year basis.

Fabio Sandri: Despite the volume decrease linked quarter another dark meat.

Fabio Sandri: Meat inventories fell more than seasonal norms and then in March significantly below the five year average combined exports and domestic dark meat remained supportive of pricing.

Fabio Sandri: Combined exports and domestic dark meat remain supportive of prices, and USDA lag price quarter prices averaged 18% higher than the first quarter of 2022. Since combined domestic retail and food service volume sales growth outstrip the supply growth, experience in the quarter, further code storage inventories were drowned, more than the seasonal norm. As a result, the pricing for commodity chicken experienced above average seasonal improvements, along with jumbo cutouts values above the five-year average, beginning in the second quarter.

Fabio Sandri: USDA leg quarter prices averaged 18% higher than the first quarter of 2023.

Fabio Sandri: Since combined domestic retail and foodservice volume sales growth outstripped the supply growth.

Fabio Sandri: <unk> in the quarter further cold storage inventories were drawn more than the seasonal norm as a result, the pricing for commodity chicken experienced above average seasonal improvements along with jumbo cutout value above the five year average beginning in the second quarter.

Fabio Sandri: Our U.S. business experienced another strong quarter through a combination of enhanced market fundamentals and consistent execution of our strategy. Case Ready increases market presence as our key customers grow faster than the category average. Additional opportunities exist, given continued consumer interest in differentiated, higher-attribute offerings, growth in consumer-specific products, and an increase in retail spreads between chicken and other proteins. Small Bird remains strong given the robust growth by key customers in Retail Deli and QSR

Fabio Sandri: Our U S business experienced another strong quarter through a combination of enhanced market fundamentals and consistent execution of our strategy.

Fabio Sandri: Keith ready increase its market presence as our key customers grew faster than category average additional opportunities exist given continued consumer interest in differentiated higher attribute offerings growth in consumer specific products and increase in retail spreads between chicken and other proteins.

Fabio Sandri: Small bird remains strong given the robust growth by key customers in retail deli and CSR.

Fabio Sandri: The team continues to drive operational excellence and growth, especially at our recently expanded facility in Athens, Georgia, as production continues to improve and ramp-up remains on schedule. Big Bird has continuously focused on operational excellence efforts to improve plant efficiencies, upgrade product mix, and optimize live operations over the past year. When these efforts are combined with enhanced commodity cut-out values, profitability increased dramatically from the prior year. Moving forward, we will continue to invest in our operations to accelerate margin expansion.

Fabio Sandri: The team continues to drive operational excellence and growth, especially at our recent expanded facility in Athens, Georgia as production continues to improve and ramp up remains on schedule.

Fabio Sandri: <unk> has continued its focus on operational excellence efforts to improve plant efficiencies, great product mix and optimize live operations over the past year. When these efforts are combined with enhanced commodity cutout values profitability increased dramatically from prior year moving forward, we'll continue to invest in our operations to accelerate marsh.

Fabio Sandri: <unk> expansion.

Fabio Sandri: On prepared foods, it demonstrated yet another strong performance, as volume and profitability grew through increased distribution in both retail and food service. Diversification through brands remained the key driver as the JustBear and Pilgrims portfolio collectively grew 30% in retail relative to the prior year. Equally important, our efforts in digital continue to gain traction as sales increased 20% compared to last year. Turning to Europe, our diversification lineup enabled our business to meet the evolving needs of consumers and customers alike. Chicken grew more in volume and value than any other protein offering. While overall fresh pork demand fell, bacon, sausage, and gammon all increased volume throughout the quarter.

Fabio Sandri: On prepared foods demonstrated yet another strong performance as volume and profitability grew through increased distribution in both retail and foodservice.

Fabio Sandri: Our suffocation through brands remained the key driver as to just bear computers portfolio collectively grew 30% in retail relative to prior year equally important our efforts in digital continues to gain traction as sales increased 20% compared to last year.

Fabio Sandri: Turning to Europe.

Fabio Sandri: <unk> lineup enable our business to meet the evolving needs of consumers and customers alike chicken grew more in volume and value than any other protein offering while overall fresh pork demand fell bacon sausage and gamma all increased volume throughout the quarter.

Fabio Sandri: Our branded portfolio also benefited from rising consumer costs. As net sales rose 6% compared to last year, Richemont and Fridge Raiders were particularly well-received, as each grew 6.5% and 9.6% respectively. Growth with key customers continues to be a priority as the team secures multiple awards for new business in retail throughout the course. Several potential opportunities remain, and the team will continue to cultivate partnerships to drive innovation. Our operational excellence efforts are becoming increasingly durable as margins improve compared to last year.

Fabio Sandri: Our branded portfolio also benefited from rising consumer confidence as net sales rose, 6% compared to last year, Richmond, and French Raiders were particularly well received as each grew six 5% at nine 6% respectively.

Fabio Sandri: Growth with key customers continued to be a priority as the team secure multiple awards for new business in retail throughout the quarter.

Fabio Sandri: Several potential opportunities remain and the team will continue to cultivate partnerships drive to drive innovation, our operational excellence efforts are becoming increasingly durable as margin improved compared to last year, while we made progress in all areas our advancements in ready meals have been the most pronounced as our network optum.

Fabio Sandri: While we've made progress in all areas, our advancements in ready meals have been the most pronounced, as our network optimization has evolved, and the consumer starts returning to differentiate and adopt. The integration of our European business continues to progress well, as we are already realizing benefits. Moving forward, we will continue to invest in growth, develop our innovation pipeline, and evaluate opportunities to continue to optimize our network and enable a more customer-focused, nimble organization. Mexico's results also improved.

Fabio Sandri: <unk> has evolved and the consumer starts to returning to differentiate the adoptions.

Fabio Sandri: The creation of our European business continued to progress well as we are already realizing benefits.

Fabio Sandri: Moving forward, we will continue to invest in growth to develop our innovation pipeline and evaluate opportunities to continue to optimize our network and enable a more customer focused nimble organization.

Fabio Sandri: Mexico's results, giving you also improve.

Fabio Sandri: Given more balanced supply and demand fundamentals in commodity markets, favorable exchange rates, and continued execution of our strategies. Led by the retail channel, key customer partnerships grew over 13% during the quarter. Additional opportunities for growth remain in retail and food service through our continued excellence in quality and service. Our diversification efforts through brands and repair continue to make progress. Fresh branded net sales grew over 10% from last year, driven by both established offerings and recent launches.

Fabio Sandri: Give me more balanced supply and demand fundamentals in commodity markets favorable exchange rates and continued execution of our strategy led by the retail channel key customer partnerships grew over 13% during the quarter additional opportunities for growth remaining retail and foodservice throw continued excellence in quality and service.

Fabio Sandri: Our diversification efforts through brands and prepare continues to make progress fresh Brendan net sales grew over 10% from last year driven by both expect established offerings and recent launches.

Fabio Sandri: Pilgrims grew in double digits through increased investments in promotion and social media, whereas Favoritos grew over 4.5%, and Unity Text rose 59% compared to last year. Similarly, Just Bear is realizing strong traction as the lineups sold out during the quarter. The prepared food group increased by nearly 20% from last year's level, driven by success in QSR, food service, and select retail lineups. The team also further cultivated its branded portfolio of value items. Through the lens of the Principe Italiamens, both retailer and consumer acceptance has been robust to date.

Fabio Sandri: Hubris growing double digits through increased investments in promotion and social media, whereas February dose grew over four five times and unique text rose, 59% compared to last year seemingly just bear is realizing strong traction as the lineup sold up.

Fabio Sandri: During the quarter.

Fabio Sandri: The pet food grew by nearly 20% from last year's level driven by success in Kyocera foodservice and select retail lineups.

Fabio Sandri: The team also further cultivate it's branded portfolio of value added.

Fabio Sandri: Through the launch of the Principe Italian meats, both retailer and consumer acceptance.

Fabio Sandri: <unk> has been robust to date.

Fabio Sandri: Operational excellence efforts continue to drive improvements in production efficiency. To that end, the team has implemented a series of projects to optimize our manufacturing footprint in fresh and enhance production efficiencies in prepared. We continue to invest in profitable growth throughout our business. In the U.S., a recently constructed protein conversion plant in South Georgia initiated its production, further diversifying our portfolio.

Fabio Sandri: Operational excellence efforts continued to drive improvements in production efficiency.

Fabio Sandri: So that the team has implemented a series of projects to optimize our manufacturing footprint and fresh and enhanced production efficiencies and prepared.

Fabio Sandri: We continue to invest in profitable growth throughout our business in the U S. A recently constructed protein conversion plant in South Georgia initiated its production further diversifying our portfolio. We also invest in a plant specific upgrades in case ready to strengthen our relationship with key customers Europe has also implemented.

Fabio Sandri: We also invested in plant-specific upgrades in case ready to strengthen our relationship with key customers. Europe has also implemented a series of projects to improve labor efficiency, mix, and yields over the past year. All of which are progressing as planned. When these efforts are combined with our potential opportunities, we can accelerate our ability to scale our presence of differentiated offerings, especially with key customers. In Mexico, our projects to expand capacity are also on schedule. The hatchery and feed mill in the Merida region are slated for start-up during the second quarter, whereas the boiler farms are scheduled for full completion in the second half of the year.

Fabio Sandri: <unk> had a series of projects to improve labor efficiency mix and yields over the past year, all of which are progressing as planned.

Fabio Sandri: These efforts are combined with our potential opportunities, we can accelerate our ability to scale, our presence of differentiated offerings, especially with key customers.

Fabio Sandri: In Mexico, our projects to expand capacity are also on schedule the hatch and <unk> in the <unk> region are slated for startup during the second quarter, whereas the boiler farms that are scheduled for completion in the second half of the year. Similarly, new bulletin breeder farms and remain on track as production is already underway.

Fabio Sandri: Similarly, new pullet and breeder farms remain on track as production is already underway in several locations. Finally, we continue to drive sustainability in our business through enhanced operating procedures, capital investments, and improved team member training. As a result, our greenhouse emissions intensity declined by 15.6% from 2019 to 2021.

Fabio Sandri: Locations.

Fabio Sandri: Finally, we continue to drive sustainability in our business to enhance operating procedures capital investments and improved team member training.

Fabio Sandri: And these efforts are combined with improvements in energy infrastructure.

Fabio Sandri: Greenhouse emissions intensity declined by 15, 6% from 2019 to 2022 movie.

Fabio Sandri: Moving forward, we will continue to identify opportunities and implement projects to reduce our emission footprint. With that in mind, I would like to ask our CFO, Matt Galvanoni, to discuss our financial results. Thank you, Fabio.

Fabio Sandri: Moving forward, we will continue to densify opportunities and implement projects to reduce our emissions footprint.

Matthew R. Galvanoni: Good morning, everyone. For the first quarter of 2024, net revenues were $4.36 billion versus $4.17 billion a year ago, with adjusted EBITDA of $371.9 million and a margin of 8.5% compared to $151.9 million and a 3.6% margin in Q1 last year. Adjusted EBITDA margins in Q1 were 9.4% in the U.S., compared to 1.8% a year ago. For our Europe business, adjusted EBITDA margins came in at 6.4% for Q1, compared to 5.3% last year. In Mexico, the adjusted EBITDA margin in Q1 was 9.2% versus 8.5% a year ago.

Matthew R. Galvanoni: With that.

Matthew R. Galvanoni: To ask our CFO, Matt Gulf I'm wanting to discuss our financial results.

Speaker Change: Thank you Fabio good morning, everyone for the first quarter of 2024, net revenues were $4 $3 6 billion versus $4 $1 $7 billion, a year ago with adjusted EBITDA of $371 9 million and a margin of eight 5% compared to $151 $9 million into three six <unk>.

Matthew R. Galvanoni: Margin in Q1 last year adjust.

Matthew R. Galvanoni: Adjusted EBITDA margins in Q1 were nine 4% in the U S compared to one 8% a year ago for our Europe business adjusted EBITDA margins came in at six 4% for Q1 compared to five 3% last year.

Matthew R. Galvanoni: In Mexico adjusted EBITDA margin in Q1 was nine 2% versus eight 5% a year ago move.

Matthew R. Galvanoni: Moving to the overall U.S. results, our adjusted EBITDA for Q1 came in at $242.9 million, compared to $43.6 million a year ago. Recovery in the commodity chicken markets, along with continued operational improvements, drove strong year-over-year profitability improvement in our Big Bird business. As mentioned in our previous earnings call, our case-ready and prepared foods businesses have continued to increase distribution with key customers, driving both year-over-year and quarter-over-quarter profitability improvements. In Europe, coming off strong seasonal results in Q4, adjusted EBITDA in Q1 was $81.5 million versus $66.2 million in Q1 2023. As disclosed last year, included in the Q1 2023 results was approximately $10.6 million of insurance proceeds recognized in that period.

Matthew R. Galvanoni: Moving to the overall U S results, our adjusted EBITDA for Q1 came in at $242 9 million compared to $43 $6 million a year ago recovery in the commodity chicken markets along with continued operational improvements drove drove strong year over year profitability improvement in our big Bird business as mentioned in our <unk>.

Matthew R. Galvanoni: This earnings call, our case ready and prepared foods businesses have continued to increase distribution with key customers driving both year over year and quarter over quarter profitability improvement.

Matthew R. Galvanoni: In Europe coming off strong seasonal results in Q4, adjusted EBITDA in Q1 was $81 $5 million versus $66 $2 million in Q1 2023 as disclosed last year included in the Q1 2023 results was approximately $10 $6 million of insurance proceeds recognized in that.

Matthew R. Galvanoni: Period.

Matthew R. Galvanoni: The European business has shown resiliency in its profitability growth journey. The business has benefited from its continued structural reorganization, including back-office integration, and its network optimization program. We incurred approximately $14.6 million of restructuring charges during the quarter in support of its network optimization program. We anticipate that restructuring activities will continue through at least the end of the year. Mexico generated $47.5 million in adjusted EBITDA in Q1, compared to $42.1 million last year and $6.8 million in Q4.

Matthew R. Galvanoni: <unk> business has shown resiliency and its profitability growth journey.

Matthew R. Galvanoni: The business has benefited from its continued structural reorganization, including back office integration and its network optimization programs.

Matthew R. Galvanoni: We incurred approximately $14 $6 million of restructuring charges during the quarter and supported its network optimization program, we anticipate that restructuring activities will continue through at least the end of the year.

Matthew R. Galvanoni: Mexico generated $47 5 million and adjusted EBITDA in Q1, compared to $42 $1 million last year and $6 8 million in Q4 sequentially from Q4, the Mexican business profitability improved primarily due to more balanced supply demand fundamentals and reductions in SG&A costs.

Matthew R. Galvanoni: sequentially, from Q4, the Mexican business profitability improved primarily due to more balanced supply-demand fundamentals and reductions in SG&A costs. Overall, our SG&A in the quarter was lower year-over-year, primarily due to a decrease in legal defense costs and other operational efficiencies achieved in all regions, partially offset by increased incentive compensation costs recorded this quarter. We spent $108 million on CapEx in the first quarter. During the quarter, we completed construction of our new protein conversion plant in South Georgia.

Matthew R. Galvanoni: Overall, our SG&A in the quarter was lower year over year, primarily due to a decrease in legal defense costs and other operational efficiencies achieved in all regions, partially offset by increased incentive compensation costs recorded this quarter.

Matthew R. Galvanoni: We spent $108 million in capex in the first quarter during the quarter, we completed construction of our new protein conversion plant in South Georgia.

Matthew R. Galvanoni: 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 drive operational efficiencies and tailor our operations to address key customer needs to further solidify competitive advantages for Pilgrims. At this time, we are not changing our full year CapEx spend estimate of between $475 and $525 million.

Matthew R. Galvanoni: 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 our oce projects that will drive operational efficiencies and tailor operations to address key customer needs to further solidify competitive advantages.

Matthew R. Galvanoni: <unk> for Pilgrim's.

Matthew R. Galvanoni: At this time, we're not changing our full year capex spend estimate of between 475 and $525 million.

Matthew R. Galvanoni: We have a strong balance sheet and will 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 quarter, we had over $1.95 billion in total cash and available credit.

Matthew R. Galvanoni: We have a strong balance sheet and we will 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 quarter, we had over $195 billion in total cash and available credit we have no short term immediate cash requirements with our bonds.

Matthew R. Galvanoni: We have no short-term, immediate cash requirements, with our bonds maturing between 2031 and 2034 and our U.S. 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 key customers' needs. As of the end of Q1, our net debt totaled approximately $2.4 billion with a leverage ratio of slightly less than two times our last 12-month adjusted EBITDA. Net interest expense for the quarter totaled $31 million.

Matthew R. Galvanoni: Maturing between 2031 in 2034, and our U S credit facility not expiring until 2028.

Matthew R. Galvanoni: 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 customer our key customers' needs.

Matthew R. Galvanoni: As of the end of Q1, our net debt totaled approximately $2 4 billion with a leverage ratio of slightly less than two times. Our last 12 months adjusted EBITDA net interest expense for the quarter totaled $31 million, we anticipate our full year net interest expense to be between $120 million to $130 million.

Matthew R. Galvanoni: Our effective tax rate for the quarter was 22, 9% as I noted in our February call, we anticipate our full year effective tax rate to be between 23 and 25%.

Operator: We anticipate our full-year net interest expense to be between $120 and $130 million. Our effective tax rate for the quarter was 22.9%. As I noted in our February call, we anticipate our full-year effective tax rate to be between 23 and 25%. Our capital allocation approach will remain disciplined as we look to grow the company and will continue to align our 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. Thank you.

Matthew R. Galvanoni: Our capital allocation approach will remain disciplined as we look to grow the company and will continue to align our investment priorities with our overall strategy as a portfolio diversification focus on key customers operational excellence and commitment to team member health and safety.

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

Speaker Change: Thank you we will now begin the question and answer session.

Operator: We will now begin the question and answer session. As a reminder, in the interest of allowing equal access, we request that you limit your questions to two, then rejoin the queue for any follow-up. To ask a question, you may press star then 1 on your touchtone keypad.

Operator: As a reminder, in the interest of allowing equal access we request that you limit your questions to two then rejoin the queue for any follow up.

Operator: To ask a question you May Press Star then one on your Touchtone keypad.

Operator: If you are using a speakerphone, please pick up your handset before pressing the keys to minimize background noise. If you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And today's first question comes from Ben Theurer with Barclays. Please proceed. Yeah, good morning. Thank you very much for taking my question, Fabio. Matt, congratulations on a very strong first

Speaker Change: You are using a speakerphone please pick up your handset before pressing the keys to minimize background noise. If you will.

Operator: To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Operator: And today's first question comes from Ben Theurer with Barclays. Please proceed.

Speaker Change: Hi, Yes. Good morning. Thank you very much for taking my questions. Congrats on the very strong first quarter. So two questions number one just on Europe, and you talked about some of the restructuring.

Benjamin M. Theurer: So two questions. Number one, just on Europe, and you talked about some of the restructuring initiatives you've been doing, improving that roughly $15 million charge that you had in the first quarter. Just wanted to understand if you could elaborate a little more on what you expect from this going forward. How is that going to help you with profitability down the road once you've completed this program by year end? And in light of that, do you think the cost of it will be round about $14, $15 million each quarter?

Benjamin M. Theurer: Initiatives, you've been doing improving that that roughly 50 million charge that you had in the first quarter. Just wanted to understand if you could elaborate a little more detail. What you expect from this going forward how is that going to help your profitability down the road once you've completed this program by year end and it.

Benjamin M. Theurer: Light of that do you think the cost of it to be each quarter round about that $14 $50 million or is coming down over the next couple of quarters that would be like just conceptually. The first question. So that the cost and the benefits. Afterwards suggest then I have a quick question on the U S as well thank you.

Benjamin M. Theurer: Or is this coming down over the next couple of quarters? That would be, like, conceptually the first question. So the cost and the benefits afterwards for this. And then I have a quick question on the U.S. as well.

Fabio Sandri: Thanks. Good morning, Ben, and thank you for the question. Yes, looking ahead to the year when we acquired... First, the Moipark business, and then the old Tulip business, and then later on the Carry Foods business, what we found was that there was a lot of overlap.

Speaker Change: Good morning, Ben and thank you for the question, yes, looking to the Europe. When we acquire first the Moy Park business and then the old <unk> business and then later on the carry foods business. What we look was that there was a lot of overlap and so there was some competition between the three.

Fabio Sandri: And so there was some competition between the three companies, especially on the sliced cooked meat. Based on that, we identified some opportunities for optimizing our network, and what we are doing is concentrating some production in the most productive facility. So we're shutting down some very small facilities that were not competitive and putting the production into bigger facilities. Also, because of the weakness of the meals... We consolidated some sites, especially in the region around London. Through network optimization, we expect to reach leadership in terms of the bottom line in the region. I think we are also integrating our PAC office, and I think that's an implementation that has already started.

Fabio Sandri: Companies, especially on the slides.

Fabio Sandri: Based on that we identified some opportunities and optimizing our network and what we are doing is concentrated some production in the most productive facilities. So we're shutting down some very small facilities that were not competitive.

Fabio Sandri: <unk>.

Fabio Sandri: Putting the production into bigger facilities also because of the weakness of the meals business, we consolidated some sites, especially in the region around London.

Fabio Sandri: Those.

Fabio Sandri: Optimum metal work optimization, we expect to reach.

Fabio Sandri: The leadership.

Fabio Sandri: In terms of bottom line in the region.

Fabio Sandri: I think we are also integrating our back office.

Fabio Sandri: And I think that's <unk>.

Fabio Sandri: Implementation that started.

Matthew R. Galvanoni: Probably in 2020, when we started integrating the two companies that we already have, but with the further acquisition of Carry Foods, we integrated all those three entities into just one. And that's creating, like I said in my prepared remarks, a more nimble and customer-focused structure. Yeah, and Ben, you know, you talk about costs. We've incurred about $90 million in restructuring costs since the fourth quarter of 22. This quarter was 15, as I mentioned, or 14-6, which is kind of strange.

Fabio Sandri: Probably in 2020, when we started integrating the two companies that we already have but with the further acquisition of carry foods, we integrated all of those three entities into just one and that is creating a more like I said on the prepared remarks, a more nimble and customer focused structure.

Speaker Change: Yeah, and Ben talked about costs, we've incurred about $90 million of restructuring costs since fourth quarter of 'twenty two.

Matthew R. Galvanoni: But the average between the six quarters has been about 15. We have a few more activities that we're looking to do as we go forward. Fabio went through a number of them that we've already either completed or initiated.

Matthew R. Galvanoni: This quarter was 15 as you know as I mentioned, a 14, 6%.

Matthew R. Galvanoni: Which is kind of strange, but its the average between the six quarters has been about 15.

Matthew R. Galvanoni: We have a few more activities that we're looking to do as we go forward Fabio who went through a number of them that we've already either completed or initiated so I think if we assume that 15 is not a it's not a bad estimate to kind of look forward on a quarterly basis, but it's not it's not perfect math, just because of some timing that you have to do in recognition.

Matthew R. Galvanoni: So I think if we assume that, you know, 15 is not a bad estimate to kind of look forward to on a quarterly basis. But it's not perfect math just because of some timing that you have to do in recognition of costs for accounting rules and just some of the projects that we've got to accomplish may, you know, things could vary a bit. I think it's important to mention that throughout all these integrating initiatives, we are not reducing production in the region. Actually, we are being able to expand some of the larger sites, so we have more capacity now to grow. Okay, very clear. Thank you very much for that.

Matthew R. Galvanoni: <unk> of course for accounting rules and just some of the projects that we've got to to accomplish many things.

Matthew R. Galvanoni: Things could vary a bit from there.

Matthew R. Galvanoni: I think it's important to mention that with throughout all of this integrating.

Matthew R. Galvanoni: Initiatives, we are not reducing production in the region actually we are being able to expand some of the larger sites. So we have more capacity now to grow.

Speaker Change: Okay very clear. Thank you very much for that and then my second question just coming back on the U S business and you kind of alluded to it exits have obviously reacted and producers are putting trying to put out more product just given where profitability is being called about talked about the big bird being very strong but they are.

Benjamin M. Theurer: And then my second question, just coming back on the US business, and you kind of alluded to it, exits have obviously reacted, and producers are trying to put out more product just given where profitability has been, and you've called about, and talked about the Big Bird being very strong, but hegeability is still an issue. So help us understand what would be kind of like an oversupply scenario or a scenario where there might be too much coming in as some of those exits can actually be exploited as hegeability improves.

Benjamin M. Theurer: Bill is still an issue so help us understand.

Benjamin M. Theurer: But what.

Benjamin M. Theurer: Like a kind of like an oversupply scenario, a scenario, where they might be too much coming in.

Benjamin M. Theurer: Some of those exits can actually be hatched as hatch ability improves or what are the risks and how much of a risk do you see of any incremental capacity being built just given where profitability has been trending towards to sequentially and as we see these improvements.

Benjamin M. Theurer: What are the risks and how much of a risk do you see of any incremental capacity being built just given where profitability has been trending towards sequentially and as a whole? The profitability in the industry has been really strong, especially in the commodity segments over the last weeks. When we look at what's happening in terms of egg sets, it's mainly due to a more productive layer flock. As you can see, it's not the number of hatching layers that is producing more eggs.

Speaker Change: Okay, Yes, right. Okay. Thank you again, yes, the profitability and the industry has been really strong, especially in the commodity segments over the last weeks when we look at what's happening in terms of exits it's mainly due a more productive layer flock. As you look is not the number of hatching layers.

Benjamin M. Theurer: That is producing more eggs. It is a more productive layer flock and that is because it's a little bit younger than it was last year and also a little bit of a breed change. So this breed produces a little bit more eggs than the other breed, but that is counter by.

Fabio Sandri: It is a more productive layer flock. And that is because it's a little bit younger than it was last year, and also a little bit smaller. So this breed produces a little bit more eggs than the other breeds. But that is counterbalanced by lower hatchability.

Fabio Sandri: By a lower hedge ability.

Fabio Sandri: And the hatchability problem, and we've been discussing this hatchability issue for a year right now, or more than a year since the beginning of 2022, started as breeding companies reacted to the demands of the industry. And the demands of the industry, as we mentioned, are our quality. Of course, you'd remember that in 2017, 2018, we had the muscle issue that we have on the big birds producing the woody breast. So the breeding companies reacted to that with some genetic selection.

Fabio Sandri: And the hedge ability problem than we've been discussing this hatch ability issue for us for a year right now or more than a year since the beginning of 2022 started.

Fabio Sandri: As the breathing companies.

Fabio Sandri: We react to the demands of the industry and the demands of the industry. As we mentioned is our quality of course you'd remember then in 2017 2018, we have the.

Fabio Sandri: Muscle issue that we have on the big birds, producing the woody breast.

Fabio Sandri: The breeding companies reacting to that with some genetic selection, but they also try to improve both the feed conversion and the wide light production, which is the demand for the American industry I think with that we are seeing a very.

Fabio Sandri: But they also try to improve both the feed conversion and the white to live production, which is the demand for the American industry. I think with that, we are seeing a very productive breed, but it comes with a set of challenges, and you know that one is hatchability. That is the factor of managing the male. I think it is a breed that is very difficult to manage and requires constant intervention, especially with their weight.

Fabio Sandri: Productive.

Fabio Sandri: Read, but it comes with a set of challenges.

Fabio Sandri: You'll know that one is the hatch ability that is the factor of the managing of the mills.

Fabio Sandri: It is a brand that is very difficult to manage and requires a constant intervention in <unk>, especially on their weights.

Fabio Sandri: And that is something that our industry is not used to. I think we see that a lot stronger in Europe and in Brazil, where we have a lot more management of those males so they can get better hatchability. The industry in the United States is not used to that. We don't have the housing to separate the males by weight.

Fabio Sandri: And that is something that our industry is not used to I think we see that.

Fabio Sandri: A lot stronger in Europe, and in Brazil, where we have a lot more management of those mail. So they can get a better hedge ability of the industry in the United States is not used to that we don't have the housing to separate the males by weight, we don't have the labor to individually weight all those males to make sure that.

Fabio Sandri: We don't have the labor to individually weigh all those males to make sure that they are at the optimal weight for reproduction. So that's what's creating the hatchability. And of course, like I mentioned, there is a little bit of the structural hatchability of this breed. When both things are combined, we are seeing this low hatchability close to 78-79% over the last two years. I believe that with time, the industry will adjust to this breed, and we will learn how to manage it better, getting to better hatchability. But it's not something that happens in the short term.

Fabio Sandri: They are at the optimal weight for the reproduction. So that's what's creating the ability and of course like I mentioned, there is a little bit of the structural hedge ability of discrete.

Fabio Sandri: Both things are combined we are seeing this low that capability close to 70, 879% over the last two years I believe that.

Fabio Sandri: With time the industry will.

Fabio Sandri: Just two discrete.

Fabio Sandri: And we've learned how to manage that manage it better getting to better hedge ability, but it is not something that happens in the short term I think is something that is the steady improvement that we would take a long time to happen or.

Fabio Sandri: I think it's something that is a steady improvement that will take a long time to happen. Or, I think what can happen if there is a new male that comes from the breeding companies that has a different behavior in terms of hatchability, then it can improve. But to improve hatchability, once again, it requires either a change in the breed or better management. That will both, I believe, will take time. In terms of an increase in excess, that is also a possibility. It will depend on the number of bullets that we'll need.

Fabio Sandri: What can happen if there is a new mail that comes from the breeding companies that have a different behavior in terms of of ACH ability then it can improve.

Fabio Sandri: To improve hatch ability once again it requires either a change on the on the breed or better management that will both I believe will take time.

Fabio Sandri: In terms of an increasing in exits.

Fabio Sandri: That is also a possibility to do it will depend on the number of bullets that we would need and I will tell you that the hatch ability and fertility problem has also been a problem to the breeding companies. So I don't think that there is enough.

Fabio Sandri: And I'll tell you that the hatchability and fertility problem has also been a problem for the breeding companies. So I don't think that there is enough layer flock available for significant growth in the short term. Perfect. Thank you very much.

Fabio Sandri: Layer flock available for a significant growth in the short term.

Speaker Change: Okay perfect. Thank you very much.

Fabio Sandri: The next question comes from Peter Galbo with Bank of America. Please proceed.

Peter Thomas Galbo: The next question comes from Peter Galbo with Bank of America. Please proceed. Hey guys, good morning. Thanks for taking the question. Good morning, Peter.

Peter Thomas Galbo: Hey, guys. Good morning, Thanks for taking the questions.

Peter Thomas Galbo: Good morning, Peter.

Fabio Sandri: Fabio, maybe you could just key in on your comments around QSR in particular in the U.S. Obviously, I think the commentary that's come out just in the past few days from a number of the QSR guys has been a bit weaker. I think you've said you noticed more steady performance. So, maybe you could just kind of give us your latest thoughts there. And if there is any disconnect, or if Chicken is outperforming the rest of QSR, any additional detail would be very helpful. Sure, yes. Thank you, Peter.

Peter Thomas Galbo: Probably maybe maybe you could just key in on your comments around <unk> in particular in the U S. Obviously I think the commentary that's come out just in the past few days for a number of the Kyocera guys has been has been a bit weaker I think you've said you noticed more more steady performance. So maybe you could just kind of give us your latest.

Fabio Sandri: Thoughts there.

Fabio Sandri: If there is any disconnect or if chicken is outperforming the rest of <unk> or any additional detail would be very helpful.

Fabio Sandri: Sure Yes. Thank you Peter Yes, we've been seeing some data, suggesting that the whole commercial foodservice and it will be weaker based on foot traffic and I think that as being a benefit as I mentioned on the daily where do you see customers trading down from commercial foodservice to the Dallas says.

Fabio Sandri: Yes, we've been seeing some data suggesting that the whole commercial food service is a little bit weaker based on food traffic. And I think that is a benefit, as I mentioned, for the deli, where you see customers trading down from commercial food service to the deli segment, which is a great value at retail, and is a great value for families. But when we look at the chicken, specifically in the QSRs, what we saw in Q1 was an increase of 6%. So despite the lower foot traffic, we're seeing that the QSR sales of chicken increased by 6%. The segment that we are seeing that is struggling is the full service restaurant.

Fabio Sandri: <unk>, which is a great value on the retail is a great value for families, but when we look at the chicken specifically on the <unk>. What we saw in Q1 was an increase of 6%.

Fabio Sandri: Despite the lower foot traffic, we're seeing that the <unk>.

Fabio Sandri: Sales of chicken increased by 6% the segment that we are seeing that is struggling is the full service restaurants.

Fabio Sandri: And we're seeing that trade down from the food service restaurants to the QSRs. Nonetheless, in the food service restaurants, what we are seeing is a bigger penetration of chicken because I think they provide value, and they are in good supply when you compare them to other proteins when you're seeing very high prices year over year, and you're also seeing a limited supply. Got it. Okay, no, that's helpful.

Fabio Sandri: And we're seeing that trade down from the foodservice restaurants to the kyocera. Nonetheless in the foodservice restaurants, what we are seeing is a bigger penetration of the chicken offerings, because I think they provide the value and they are.

Fabio Sandri: We are in good supply when you compare to the other proteins when youre seeing very high prices year over year and Youre seeing also a limited supply.

Speaker Change: Got it okay. That's helpful. Thank you.

Matthew R. Galvanoni: Thank you. And Matt, obviously, I know you took the net interest number down, I think, a touch, but there's a lot of cash sitting on the balance sheet, you know, just kind of how you're thinking about deploying that over the rest of the year. Maybe it's you just let it earn 5% on your balance sheet, but I'm curious about how you're thinking about that. No, it's a great question.

Matt: And Matt.

Matthew R. Galvanoni: Obviously I know you took the net interest number down I think I think a touch but.

Matthew R. Galvanoni: Like a lot of cash sitting on the balance sheet.

Matthew R. Galvanoni: Just kind of how youre thinking about deploying that over the rest of the year, maybe if you could just let it around 5% on your balance sheet, but but curious kind of how youre thinking about that.

Matthew R. Galvanoni: You know, how we're thinking about this is really through the evaluation and assessment of a number of potential, you know, organic growth CapEx projects to really support our key customer strategy and their needs. You know, we haven't taken up the CapEx spend yet. And I was kind of clear on that one to say at this time, we're not changing our CapEx view for the year, but we are going through a lot of analysis to make sure we're getting the right returns.

Matthew R. Galvanoni: No. It's a great question.

Matthew R. Galvanoni: How we're thinking about this is really through the evaluation and assessment of a number of.

Matthew R. Galvanoni: Potential organic growth capex projects to really support our key customer strategy and their needs.

Matthew R. Galvanoni: We haven't taken up the capex spend yet.

Matthew R. Galvanoni: He was kind of clear and now would you say at this time, we're not changing our capex view on the year, but we're going to a lot of analysis.

Matthew R. Galvanoni: But we see a lot of opportunities to grow with our key customers, and so where we kind of see our cash use here would be for growth and growth in an organic manner with those key customers. And also, Peter, I'll just add that we're always looking for ways to increase shareholder value, right? And we're looking, and we've discussed this in the past about special dividends, share repurchase, and bond repurchases. So we're always looking for those alternatives and looking for what is the best. But at the end of the day, what we want is to continue to grow our company and create shareholder value. It was awesome.

Matthew R. Galvanoni: Make sure we're getting the right returns, but we see a lot of opportunities to grow with our key customers and so.

Matthew R. Galvanoni: Where we can see our cash use here would be for growth and growth in an organic manner with those key customers.

Matthew R. Galvanoni: And also Peter I'll, just add that we're always looking for ways to increase shareholder value and we're looking and we discussed this in the past about special dividends share repurchases and bond repurchases. So we're always looking for those alternatives and looking what is the best but at the end of the day, what we want is to continue to grow.

Matthew R. Galvanoni: Our company and create shareholder value.

Speaker Change: Awesome. Thanks, guys.

Benjamin Shelton Bienvenu: Thanks, guys. Our next question comes from Ben Bienvenu with Stephens. Please proceed. Hey, good morning, everyone.

Matthew R. Galvanoni: Our next question comes from Ben at the end of it.

Benjamin Shelton Bienvenu: Stifel. Please proceed.

Benjamin Shelton Bienvenu: Hey, good morning, everyone.

Benjamin Shelton Bienvenu: Good morning, Ben.

Benjamin Shelton Bienvenu: Morning, Ben. So I'd like to ask a little bit about the main sides of the equation in light of red meat price inflation and the prospect of that intensifying, particularly in beef, as we move forward. Do you think we've already seen the switching demand that occurred in that backdrop transpire, or is there more switching demand to come? Kind of how linear is the relationship of, you know, incremental demand for chicken relative to pricing increases for beef, say? Yeah, thank you, Ben.

Speaker Change: So I'm going to ask a little bit about that.

Benjamin Shelton Bienvenu: Great.

Benjamin Shelton Bienvenu: In light of Red meat price inflation, and the prospects of that intensified, particularly in beef as we move forward.

Benjamin Shelton Bienvenu: Do you think we are seeing the switching demand.

Benjamin Shelton Bienvenu: In that backdrop transpire or is there more switching demand to come kind of how linear.

Benjamin Shelton Bienvenu: The relationship of.

Benjamin Shelton Bienvenu: Incremental demand, particularly.

Benjamin Shelton Bienvenu: Relative to pricing increases for <unk>.

Benjamin Shelton Bienvenu: Yeah.

Fabio Sandri: I think, yeah, we've been seeing this trend, I believe, since mid-last year. I think if you look into the spread in the retail to the end user of ground beef, especially ground beef, pork shops, and boneless, Skinless Breast, it was really compressed by July 2022.

Speaker Change: Yes. Thank you Ben I think yes, we've been seeing this trend I believe since.

Fabio Sandri: Mid last year I think if you look into the spread in the retail to the end user.

Fabio Sandri: Especially the ground floor.

Fabio Sandri: Shops in boneless.

Fabio Sandri: Skinless breast it was really compressed by July 2022, we saw the retailers increasing the prices of chicken over 2022, and the prices really get to a level that will similar since then I think with the reduction in the cost of producing chicken and mono.

Fabio Sandri: We saw retailers increasing the prices of chicken in 2022, and the prices really got to a level that was similar. Since then, I think, with the reduction in the cost of producing chicken and more operational efficiencies, we have been able to support our key customers with a lower cost product. And with that, they've been passing that advantage to the end user through the reduction in prices. And today, we have a very wide spread between, especially ground beef and boneless breasts, and that is sparking some demand for our product. How much sensible that is or the sensitivity to prices is a very difficult calculation.

Fabio Sandri: Operational efficiencies, we were able to support our key customers with lower cost product and with that they've been passing that advantage to the end user to the reduction in prices and today, we have a very widespread between specialty ground beef and boneless breast and that is sparking.

Fabio Sandri: Demand for our product.

Fabio Sandri: How much sensible that is or the sensitivity to prices is a very difficult.

Fabio Sandri: Our calculation of course, we are seeing more demand for our product and we are seeing actually less.

Fabio Sandri: Of course, we are seeing more demand for our product, and we're seeing actually less promotional activity on the boneless, which is suggesting that the everyday purchase of chicken is happening more from the end user. Now, if the spreads continue to widen, I think it can help a little bit more with the demand, especially for boneless breasts. But the sensitivity is really difficult to calculate.

Fabio Sandri: Promotional activity on the boneless, which is suggesting that the everyday purchases of chicken.

Fabio Sandri: It's happening more from the end user.

Fabio Sandri: No its the spreads continued to widen.

Fabio Sandri: It can help a little bit more on the demand, especially on boneless breast.

Fabio Sandri: But the sensitivity is really difficult to calculate.

Speaker Change: Okay I appreciate that.

Fabio Sandri: I appreciate your thoughts there. Shifting gears a little bit to Mexico, a really nice bounce-back quarter, as you expected. As we look through the rest of the year, to the degree that you have visibility, what are your expectations for performance in that business? Yeah, what we're seeing in Mexico, and I've always mentioned this volatility quarter over quarter, but a steady and very healthy operating profit year over year. And I think we saw the same thing last year, and we've seen this year. I think we're seeing some significant volatility month over month, and I think that is due to exchange rates, and the price of corn.

Speaker Change: I appreciate your thoughts there.

Fabio Sandri: Shifting gears, a little bit to Mexico, a really nice bounce back quarter as you expected.

Fabio Sandri: As we look through the rest of the year to the degree that you have visibility what are your expectations for performance in that business.

Fabio Sandri: Yeah, what we're seeing in Mexico, and they are always mentioned this volatility quarter over quarter, but it's steady and very healthy.

Fabio Sandri: Operation profit from year over here and I think we saw the same thing last year and we've seen this year I think we're seeing some significant volatility month over month and I think that is the exchange rates the price of corn, but also as you remember there is a big.

Fabio Sandri: But also, as you remember, there is a big Portfolio in Mexico that is live birds, and I think what this segment creates is more volatility month over month because it's an easy operation, and you have very small players that can come and go with the changes in the price of grain and with the changes in the exchange rate and the changes in profitability, for sure. And we saw a significant change from January to March. We started January really weak in that segment.

Fabio Sandri: Portfolio in Mexico that is live births and I think the.

Fabio Sandri: What this segment.

Fabio Sandri: Creates more volatility.

Fabio Sandri: On a month over month, because it was an easy operation and you have very small players that can come and go with the changes in price of green and with the changes in the exchange rate and the change in profitability for sure and saw a significant change in from January to March we start to generate really weak.

Fabio Sandri: Segment, but we saw a steady increase in a very strong ending in March we also see a little bit of an increase in the in the consumer demand for chicken, we saw a little bit of a lull in January but we saw very strong increase during March so I think those two factors combined especially on.

Fabio Sandri: But we saw a steady increase and a very strong ending in March. We also saw a little bit of an increase in consumer demand for chicken. We saw a little bit of a low in January, but we saw a very strong increase during March. So I think those two facts combined, especially in the live segments, once again, we produced these birds, and we sold those birds live to wholesalers that slaughter those birds in smaller slaughterhouses because the Mexican consumer really values the freshness of the product.

Fabio Sandri: The lives segments.

Fabio Sandri: Once again.

Fabio Sandri: Produced disbursed and Michelle does sports live to wholesalers that slaughter dose.

Fabio Sandri: And smaller smaller slaughterhouse, because the Mexican consumer really values the freshness of the product.

Fabio Sandri: It's a very important segment, especially close to Mexico City, so we're seeing a lot of volatility in that segment. Once again, we expect strong demand for our products. I think it is a growing economy. Mexico's economy is doing well. It is election year, so there is always some expected increase in demand during election years. So we're expecting very strong results for Mexico.

Fabio Sandri: It's a very important segment, especially close to the Mexico City. So we are seeing a lot of volatility in that segment, but.

Fabio Sandri: Once again, we expect strong demand for our products I think it is a growing economy, Mexico economy is doing well. It is election year. So there is always some some expected increase in demand during an election year. So we're expecting very strong.

Fabio Sandri: Gulf for Mexico This year.

Speaker Change: Okay, great. Thanks, so much.

Fabio Sandri: The next question comes from Andrew Charles <unk> with BMO capital markets. Please proceed.

Benjamin Shelton Bienvenu: Thank you very much. The next question comes from Andrew Strelzik with BMO Capital Markets. Please proceed. Hey, guys, this is Ben on behalf of Andrew.

Benjamin Shelton Bienvenu: Hey, guys. This is Ben on for Andrew.

Andrew Strelzik: So I guess I'll start with feed cost layout. Do you expect it to get better sequentially in the second quarter? And how are you thinking about the layout of your feed costs for the balance of the year? Yeah Ben, thank you for the question.

Ben: So I guess I'll start with.

Andrew Strelzik: Feed cost lay out.

Ben: Do you expect it to get better sequentially in second quarter.

Andrew Strelzik: And how are you thinking about the layout of your feed costs for the balance of the year.

Andrew Strelzik: Okay.

Fabio Sandri: We expect the feed performance or the live cost to be better. I think what we are seeing in terms of the feed cost is that we reach a level of $4.30 a bushel for corn, and we think that is a good level of pricing. We're seeing December pricing still ahead of what we expected it to be given all the conditions that we are seeing in terms of yields and planting and supply and demand.

Speaker Change: Yes, Ben Thank you for the question. We expect the feed performance are the life Cos to be better I think but we are seeing in terms of the feed costs. We reach a level of $4 30, both show for corn and we think that that is that is a good level of pricing we are seeing the December.

Fabio Sandri: Pricing still ahead with what we expect it to be given all the conditions that we're seeing in terms of yields in planting and the supply and demand.

Fabio Sandri: So we're seeing a little bit of a higher December but and we see that there is some potential downside into the feed pricing if that happens I think we can have a little bit of improvement in terms of the ingredient pricing, but what we believe is that our performance should improve over the year.

Fabio Sandri: So we're seeing a little bit of a high in December, potential downside in feed prices. If that happens, I think we can have a little bit of improvement in terms of ingredient prices. But what we believe is that our performance should improve over the year. As we mentioned at the beginning of the year, we created action plans to improve feed conversion in all of our complexes. And we are seeing those actions happening as we speak.

Fabio Sandri: So we as we mentioned.

Fabio Sandri: At the beginning of the year, we created action plans to improve the feed conversion and all of our complexes and we have seen those actions happening as we speak and we are seeing some significant improvement in performance just to give you a color.

Fabio Sandri: And we're seeing some significant improvement in performance. Just to give you an idea of how year over year in this quarter compared to the same quarter last year, we improved our performance by 20 million dollars, not including the price of the ingredients, just performance being feed conversion, livability, and other. Indicate. I found this on the web.

Fabio Sandri: Year over year in this quarter compared to the same quarter last year, we improve our performance by $20 million not including the price of the ingredients just in performance be feed conversion live ability.

Fabio Sandri: Other indicators.

Fabio Sandri: I found this on the web.

Fabio Sandri: Great.

Fabio Sandri: Great. And then I guess my last question here is about the EU-UK business. Just like, how are you continuing to think about the progression of the margin profile there? And if you could just walk us through some of the pieces that you're currently working on to improve that, you know, could get the business back to like a mid-single digit plus margin profile over the next year or two, of course. Yeah, we have internal and external factors.

Fabio Sandri: And then I guess my last question here is about the EU UK business just.

Fabio Sandri: Like how are you continuing to think about the progression of the margin profile there and if you could just walk us through some of the pieces that you're currently working on to improve that.

Fabio Sandri: Could get the business back to life.

Fabio Sandri: Mid single digit plus.

Fabio Sandri: Margin profile over the next year or two.

Speaker Change: Of course.

Fabio Sandri: Let's start with the internal, and the internal are the ones that we already mentioned in terms of network optimization, making sure that we have the best manufacturing sites with scale, and we have all of our gap ups, meaning closing the gaps and operating at a higher standard, as I mentioned. That is internal. I think we're also coming to a more mature shared services operation. I think we have started implementing shared services in Europe just like we have in the U.S. and Mexico over the last two years.

Fabio Sandri: Yes, we have internal and external factors, so let's start with the internal and internal are the ones that we already mentioned in terms of network optimization, making sure that we have the best manufacturing sites with scale and we have all of our gap ups, meaning closing the gap in operating yet.

Fabio Sandri: Higher standard as I mentioned.

Fabio Sandri: That is internal I think we're also coming to more mature shared services operation I think we started implementing the shared services in Europe, just like we have in U S and Mexico over the last two years and I think we're coming to a more mature operation now which is way more efficient.

Fabio Sandri: And I think we're coming to a more mature operation now, which is way more efficient than we have before. And that's what we can do on the internal side. On the external side, we are seeing that one poultry has been growing faster than all other proteins because of its versatility and its affordability. And in our pork business, especially on the fresh side, we saw a little bit of lower demand during Q1 after a very strong Q4.

Fabio Sandri: And we have before.

Fabio Sandri: That's what we can do on the internal side on the external side, we're seeing that one poultry has been growing faster than all other proteins because of its versatility and its affordability.

Fabio Sandri: And our pork business, especially on the fresh side, we saw a little bit of.

Fabio Sandri: Of our lowered demand during Q1 after a very strong Q4, we saw a little bit of a lower.

Fabio Sandri: We saw a little bit of lower demand in Q1, but we are seeing that improving as we are seeing improvement in consumer confidence. As consumer confidence increases in Europe, they tend to move to high-value proteins, and that helps with our pork business and also helps with our branded business. As I mentioned on the call, we are already seeing an increase in terms of our branded portfolio, especially the Richemont brand, growing close to 7% year over year.

Fabio Sandri: The demand on the Q1, but we are seeing that improving as we are seeing the improving of the consumer confidence as the consumer confidence increases in Europe. They will tend to move to high value proteins and that helps with our pork business and also help with our branded business as I mentioned on the call we're already there.

Fabio Sandri: On the prepared remarks, we are already seeing an increase in terms of our branded portfolio, especially the <unk> brand growing close to 7% year over year.

Fabio Sandri: Over the last two years, because of all the inflation, we saw some European consumers trading down to more private label, and now, with consumer confidence, we are seeing them trading up again to more branded, higher-value products. So it's a combination of both internal initiatives that we are doing in terms of efficiency, but also an improvement on the market, especially on the pork side, on the branded side. Great. Thanks.

Fabio Sandri: Over the last two years because of all of the inflation, we saw some European consumers trading down to more private label and now with the consumer confidence we are seeing them trading up again to the more branded higher value products.

Fabio Sandri: So it's a combination of both internal.

Fabio Sandri: Initiatives that we're doing in terms of efficiency, but also an improvement on the market, especially on the pork side on the branded side.

Speaker Change: Great. Thanks, we really appreciate it.

Fabio Sandri: The next question comes from Heather Jones with Heather Jones Research LLC. Please proceed.

Fabio Sandri: We really appreciate it. The next question comes from Heather Jones with Heather Jones Research, LLC. Please proceed. Good morning, everyone. Good morning, Heather.

Heather Lynn Jones: Good morning, everyone.

Heather Lynn Jones: Good morning Heather.

Heather Lynn Jones: So, really quickly, Fabio, going back to a comment you made in your prepared comments about hatchability, possibly the limited ability of the industry to reach the USDA projected production increase this year, I was wondering if you could give us some sense of where the year could end up and how you're thinking about that in the second half versus the first half, given the disease issues that the industry has had along with the hatchability challenges. Yeah, what we're looking at are the USDA numbers. I think they are expecting an increase during the third and fourth quarters.

Heather Lynn Jones: Good morning.

Heather Lynn Jones: So we're quickly going back to a comment you made in your prepared comments about taxability, possibly limited ability.

Heather Lynn Jones: The industry to reach.

Heather Lynn Jones: The USDA projected.

Heather Lynn Jones: Production increase this year I was wondering if you could give us some sense of where.

Heather Lynn Jones: You all think it could the year could end up at.

Heather Lynn Jones: And how youre thinking about that in second half versus first half.

Heather Lynn Jones: Given the disease issues that the industry has had along with the hatch ability challenging.

Fabio Sandri: Yes, what we are looking into the USDA numbers I think they are expecting.

Heather Lynn Jones: An increase during the third and fourth quarter and once again I think that the hatch ability problems will continue to.

Heather Lynn Jones: And once again, I think that the hatchability problems will continue to be prevalent over that time. As I mentioned, I think for the hatchability to make a significant change, we will need either a breeder change, which is structural, and it takes time, and we haven't heard about a new breed coming, or on the management side. And I think the importance on the management side is that it's a cost structure. Once again, this is a very difficult animal to handle, and you need the individual, let's say, attention.

Heather Lynn Jones: To be prevalent over that time.

Heather Lynn Jones: As I mentioned I think for the hatch ability to have a significant change we would need to either a breather change, which is structural and it takes time and we haven't heard about a new breed coming or on the management side and I think the importance of the on the management side is that its cost structure.

Heather Lynn Jones: Once again this is a very difficult animal to handle and they need to individual let's say attention and to have that you need to increase the cost of your operation. So you need to have either more housing because we need to segregate those males by weight.

Fabio Sandri: And to have that, you need to increase the cost of your operation. So you need to have either more housing, because you need to segregate those males by weight and give individual feed formulations for each one, or you need to have more people managing those mails, which translates into higher costs. So I think it's an efficiency slash cost discussion because you may have more, and better hatchability, but your cost is going to be much higher as well.

Fabio Sandri: And give individual feed formulation for each one or you need to have.

Fabio Sandri: More people managing those months those males, which translate into higher cost. So I think as an as an efficiency and slash cost discussion because we may have more.

Fabio Sandri: Hatch ability, but cost is going to be much higher as well. So at the end of the day your egg cost could increase.

Fabio Sandri: So at the end of the day, your egg cost could increase. If you have all this labor and more housing involved, and that is the challenge of the industry, of course, when the profitability of the complex is really high, that increase in egg costs makes sense. But that is maybe not true during Q4 or Q1 next year or over time. So that is the biggest challenge that our industry has in terms of balancing the cost of the eggs and The Hatchip. And that's what makes you think the Q3, Q4 numbers USDA is putting out there could possibly be a challenge. Yeah, exactly.

Fabio Sandri: If you have all these labor and more housing evolves and that is the challenge of the industry of course, when the profitability of the complex is really high debt increase in egg cost makes sense, but that is maybe not true during Q4 or Q1 next year or over time.

Fabio Sandri: So that is the biggest challenge that our industry has in terms of balancing cost of the eggs and the hedge ability.

Fabio Sandri: And Thats what makes you think that Q3 Q4 numbers USDA is putting out there could possibly be a challenge.

Fabio Sandri: Exactly.

Heather Lynn Jones: Okay. Moving on to Q2. So, as you guys noted, the commodity market strengthened considerably late in the quarter, and it's started strengthening again over the past week. So, I was just wondering, and then you've had really strong retail features chicken, well, at least in the things that we're tracking. So, I was just wondering, is it feasible to think that U.S. pricing for Q2 could be materially higher than what you saw in Q1?

Fabio Sandri: Okay.

Fabio Sandri: I don't know what Q2 so.

Heather Lynn Jones: As you guys noted the commodity market strengthen considerably late in the quarter and they've started strengthening again over the past week.

Heather Lynn Jones: So I was just wondering.

Heather Lynn Jones: You've had really strong retail feature chicken.

Heather Lynn Jones: Okay.

Heather Lynn Jones: We're tracking and so I was just wondering is it feasible to think that U S pricing for.

Heather Lynn Jones: For Q2 could be materially higher than what you saw in Q1.

Heather Lynn Jones: Yeah Heather, I think when you look at the average prices during Q1, we started from a low position during January when we saw a steady increase up to maybe mid-February when we normally see a reduction in the normal seasonality, we saw steady prices, and now, as I mentioned, we are seeing prices increase. So every year we expect the grilling season to help with pricing, and as you mentioned, we tend to augment the demand on the retail side with the Big Bird, which puts a lot of, let's say, pressure on commodity prices to go up. And I think before the grilling season, we are seeing this right now, for the last three weeks, and that started really early, and that is what's putting pressure on commodity meat.

Heather Lynn Jones: Yeah, I think when you look at the average prices during Q1, we started from.

Heather Lynn Jones: Low position during January when we saw a steady increase up to maybe mid February February when we saw when we normally see a reduction in the.

Heather Lynn Jones: The normal seasonality, we saw steady prices and now as I mentioned, we are seeing the prices increasing so.

Heather Lynn Jones: Every year, we expect the grilling season.

Heather Lynn Jones: To help on the pricing and as you mentioned, we tend to augment the demand on the retail side with the big Bird with put a lot of let's say pressure on the commodity prices to go up and I think bill.

Heather Lynn Jones: Before the grilling season, we are seeing this right now over the last three weeks and that started really early and that is what play pressure on the commodity meat I think the foodservice as I mentioned continued to be strong and good demand, especially on the <unk> side, and we are expecting more promotional activity.

Fabio Sandri: The food service, as I mentioned, continues to be strong and in good demand, especially on the QSR side, and we are expecting more promotional activity in the food service as well, putting pressure on the commodity segment. I think it's interesting to see that, based on the USDA numbers, the volume in terms of chicken for Q1 was down. The volume in the Big Bird was up, so we saw very strong prices in Q1 on the commodity segment, even with an increase in production on the Big Bird complex.

Fabio Sandri: On the foodservice as well putting pressure on the commodity segment.

Fabio Sandri: I think it's interesting to see that.

Fabio Sandri: Through the USDA numbers the volume in terms of chicken for the Q1 was down but.

Fabio Sandri: The volume in the Big Bird was up so we saw a very strong pricing in Q1 on the commodity segment, even with an increase in production on the big bird complexes.

Fabio Sandri: So yes, I think we are seeing that that is the potential of course for for a great grilling season, and an increase especially on boneless breast I think <unk> continued to increase year over year for sure with the return to the menu.

Fabio Sandri: So yes, I think we are seeing that there is the potential, of course, for a great grilling season and an increase, especially for boneless breasts. I think wings continue to increase year over year, for sure, with the return to the menus of several of the food service operators.

Fabio Sandri: On the on several of the foodservice operators and leg quarters continued to be very strong given the competitiveness of the chicken meat on the international markets and the reduction in frozen inventories.

Heather Lynn Jones: The leg quarters continue to be very strong, given the competitiveness of chicken meat in international markets and the reduction in frozen inventories that we are seeing. And the tenders also continue to be really strong in the marketplace, with some tender concepts really growing. So I think the weakness has been in white meat, on the boneless breast, but to your point, the strength in retail has been what's affecting the pricing in the commodity segment.

Heather Lynn Jones: We are seeing.

Heather Lynn Jones: The tenders also continued to be really strong in the marketplace with some tender concepts really growing so I think the weakness has been on the on the white meat on the boneless breast, but to your point the strength in the retail is being what's affecting the pricing on the commodity segment.

Speaker Change: Excellent. Thank you so much I appreciate it.

Speaker Change: Thank you Kevin.

Fabio Sandri: Excellent. Thank you so much. I appreciate it. The next question comes from Priya Ohri Gupta with Barclays. Please proceed. Good morning.

Heather Lynn Jones: The next question comes from Priya <unk> Gupta with Barclays. Please proceed.

Priya Joy Ohri: Thank you so much for taking the questions. First, I was wondering if we could just touch on CapEx again. So, Matt, I know you said that you are leaving your outlook for CapEx unchanged at this point. However, there are additional projects that you're exploring, which suggests that there could be some upward pressure on that number. But as we look at where CapEx spend came in for the first quarter, it feels a little light.

Speaker Change: Good morning. Thank you so much for taking my questions first I was wondering if we could just touch on the Capex again.

Priya Joy Ohri: Jim I know you said that you are leaving your outlook for Capex unchanged at this point there are additional projects.

Priya Joy Ohri: Flooring, which suggested there could be.

Priya Joy Ohri: Upward pressure on that number but as we as we look at where.

Priya Joy Ohri: So, I was just wondering if you could touch on sort of what prompted or what led to this lower CapEx spend earlier in the year and sort of what that suggests for the pipeline. Yeah, no, thanks, Priya. I think it's really just a little bit of timing, you know, when cash is expended. You know, we're finishing up some projects, notably South Georgia, so some of those bills will be coming through here, you know, in April and May to finish and consume actual capex cash dollars out the door. But no, I think that the overall view of 475 to 525 is the best one we have right now.

Priya Joy Ohri: Capex came in for the first quarter.

Priya Joy Ohri: A little late so I was just wondering if you could touch on what.

Priya Joy Ohri: What prompted or what led to the slower capex earlier in the year.

Priya: Sort of what that suggests for the pipeline.

Priya Joy Ohri: Yes.

Speaker Change: I think it's really just a little bit on timing when when cash is expanded.

Speaker Change: We're finishing up some projects.

Speaker Change: Notably South Georgia, So some of those sales will be coming through here.

Speaker Change: In April and May to finish them consume actual capex cash dollars out the door, but.

Speaker Change: But no I think that the overall view of the $4 75 to $5 25 is the is the best one we have right now, but as you as I noted and as you just repeated we are exploring some opportunities that would that could potentially take that number up a little bit.

Matthew R. Galvanoni: But as I noted and as you just repeated, you know, we are exploring some opportunities that could potentially take that number up a little bit this year. Okay, thank you. And then just on the working capital side, that was a pretty nice source of cash year over year.

Matthew R. Galvanoni: Here.

Speaker Change: Sure well, let's see.

Speaker Change: Okay. Thank you and then working capital side.

Matthew R. Galvanoni: That was a pretty nice source of cash year over year.

Priya Joy Ohri: Is that the kind of trend that we should expect to persist for the remainder of the year, just as we think about where free cash flow generation could be by the end of 2024? I think you saw, yes, I think that generally the trend is in that direction, but we have to reconsider, though, here in the first quarter, we really saw some reductions in some of our finished goods inventories, and we've also seen that reduction in the grain costs, right, that's really started to, you know, get itself, the site, into, you know, inventory, our live inventory costs, and that, in grain right now, it's been a little flat, right, so to try to say we're going to continue that trend, yes, directionally, but probably not at the pace we've seen, just because of the live costs and the grain has been, it's sort of flattened out a little bit over the last month or so. That's helpful.

Matthew R. Galvanoni: Kind of trend that we should expect to persist.

Priya Joy Ohri: For the remainder of the year.

Priya Joy Ohri: Think about where free cash flow generation could be.

Priya Joy Ohri: 24.

Priya Joy Ohri: I think you saw.

Priya Joy Ohri: Yes, I think generally the trend is in that direction, but we have to.

Priya Joy Ohri: <unk>, though here in the first quarter, we really saw some reductions in some of our finished.

Priya Joy Ohri: Finished goods inventories and we've also seen that reduction in the grain costs right. That's really started to.

Priya Joy Ohri: Get itself the site into inventory.

Priya Joy Ohri: <unk> inventory costs and that in Green right now it's been a little flat right. So to try to see where to continue that trend.

Priya Joy Ohri: Yes, directionally, but probably not at the pace, we've seen just because of the Lai delight cost in the grain has been it's sort of flattened out a little bit over the last month or so.

Speaker Change: Alright Thats helpful. Thank you.

Priya Joy Ohri: And at this time, we're showing no further questioners in the queue and this does conclude our question and answer session I would now like to turn the conference back over to Fabio Sandri for any closing remarks.

Matthew R. Galvanoni: Thank you. And at this time, we are showing no further questioners in the queue, and this does conclude our question and answer session. I would now like to turn the conference back over to Fabio Sandri for any closing remarks. Well, thank you. Thank you, everyone, for attending the call. Over the past several years, our business has faced volatile market conditions, with changes in commodity cut-out values, persistent inflation, and changes in consumer behavior.

Matthew R. Galvanoni: Well. Thank you. Thank you everyone for attending the call over the past several years, our business has faced volatile market conditions, given changes in commodity cutout values persistent inflation and changes in consumer behavior.

Matthew R. Galvanoni: Throughout these times, our teams have continually focused on execution of our strategies to minimize downside risk while being able to capture market upside as conditions evolve. Given our approach, we can simultaneously reinforce our competitive advantage, drive profitable growth, and generate more resilient earnings. When these efforts are combined with our focus on values, along with our relentless commitment to safety and well-being, we can become the most trusted and respected company in our industry, creating opportunities for a better future for our team members.

Fabio Sandri: Throughout this time, our teams have continually focus on execution of our strategies to minimize downside risk, while being able to capture market upside as conditions evolve given our approach we can simultaneously reinforces our competitive advantage.

Matthew R. Galvanoni: Profitable growth and generate more resilient earnings.

Matthew R. Galvanoni: And these efforts are combined with our focus on values, along with a relentless commitment to safety and wellbeing, we can become the most trusted and respected company in our industry, creating opportunities for a better future for our team members. Thank you very much.

Fabio Sandri: Thank you very much. Thank you. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

Speaker Change: Thank you. The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Fabio Sandri: [music].

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