Q3 2024 Hormel Foods Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation third quarter earnings Conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.
If at any time during this call you required immediate assistance. Please press star zero for the operator. This call is being recorded on Wednesday September 4th 'twenty 'twenty four I would now like to turn the conference over to Justin Blumberg.
Speaker Change: Please go ahead.
Speaker Change: Good morning, welcome to the Hormel Foods conference call for our third quarter results of fiscal 'twenty 'twenty four.
Speaker Change: We released our results. This morning before the market opened a copy of the release can be found on our website Hormel foods dot com under the investors section.
Speaker Change: On our call today is Jim Snee, Chairman of the Board President and Chief Executive Officer, just since Smiley Executive Vice President and Chief Financial Officer, and Deanna Brady Executive Vice President of the retail segment.
Speaker Change: Jim will review, our third quarter results and give a perspective on the rest of fiscal 2024, just sense will provide detailed financial results and further commentary on our outlook.
Speaker Change: Deanna will join Jim and just sent for the Q&A portion of the call.
Speaker Change: The line will remain open for questions. Following just sense remarks, as a courtesy to others. Please limit yourself to one question with one follow up.
Speaker Change: If you have additional questions you are welcome to rejoin the queue.
Speaker Change: At the conclusion of this morning's call a webcast replay will be posted to our investor website and archived for one year.
Speaker Change: Before we get started this morning, I'd like to reference our Safe Harbor statement.
Speaker Change: Some of the comments, we make today will be forward looking and actual results may differ materially from those expressed in or implied by the statements we will be making.
Speaker Change: Please refer to our most recent annual report on Form 10-K, and quarterly reports on Form 10-Q, which can be accessed at Hormel foods dot com under the investors section.
Speaker Change: Also we will discuss certain non-GAAP financial results. This morning management believes that doing so provides investors with a better understanding of the company's underlying operating performance.
Speaker Change: The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.
Speaker Change: Further information about our non-GAAP financial measures, including our comparability items and reconciliations are detailed in our press release, which can be accessed from our corporate or investor website.
Speaker Change: I will now turn the call over to Jim Snee.
Jim Snee: Thank you Jess good morning, everyone.
Jim Snee: We delivered solid third quarter results and another quarter of better than expected earnings.
Jim Snee: Our core business remains healthy led by retail takeaway growth topline growth in our foodservice business.
Jim Snee: The recovery in our international business and a continued progress on our transform and modernize initiative.
Jim Snee: Specifically many of our key retail brands grew during the quarter outperforming their categories and continuing to resonate with our customers and consumers.
Jim Snee: Our foodservice business delivered another quarter of above industry sales growth highlighting the value of our solutions based portfolio direct selling team.
Jim Snee: And diverse customer and operator base.
Jim Snee: We continue to experience significant recovery in our international segment in the quarter led by our global brands.
Jim Snee: And we continue to realize growing benefits from our transform and modernize initiative.
Jim Snee: We remain on a realistic and achievable path to improve our business deliver on our commitments and execute against our long term strategic priorities.
Jim Snee: Going a bit deeper into our performance for the quarter I'll start with our foodservice segment.
Jim Snee: Our foodservice team delivered another quarter of above industry growth, marking our fifth consecutive quarter of year over year volume growth.
Jim Snee: We grew volume and net sales despite pockets of industry softness proving the effectiveness of our differentiated value proposition.
Jim Snee: As expected Foodservice segment profit was generally in line with last year. So.
Jim Snee: Foodservice segment profit remains historically strong and healthy having grown nine out of the last 11 quarters.
Jim Snee: Our balanced approach, including our portfolio direct selling team.
Jim Snee: And that diverse channels, we operate in continue to protect our foodservice segment for many macro headwinds.
Jim Snee: We continue to see strong demand for our premium and solutions based items, including premium Bacon and pepperoni premium prepared proteins and Turkey.
Jim Snee: Products, such as Bacon, one cooked bacon.
Jim Snee: I hear braised meats, Jennie O, Turkey Cafe, H globally inspired proteins and old smokehouse Bacon each delivered double digit net sales gains.
Jim Snee: Additionally, innovative offerings, such as Hormel Flash 180, <unk> style chicken breast and.
Jim Snee: Hormel ribbon pepperoni contributed growth.
Jim Snee: During the quarter.
Jim Snee: Our direct selling organization remains key and times of industry slowdown.
Speaker Change: Our team can connect directly with operators to strategically find solutions for their challenges take cost out of their system and create meaningful long lasting relationships.
Speaker Change: We were once again named to selling powers 60, best companies to sell for recognizing the direct sales teams that support each of our segments.
Speaker Change: And we believe that our diverse channel presence in foodservice enables resilience in the face of industry pressures.
We have continued to deliver steady topline growth in both our commercial and non commercial businesses.
Speaker Change: Taken together, our foodservice business continues to be exceptionally well positioned to drive innovation value and operator engagement.
Speaker Change: Transitioning to our international segment.
Speaker Change: Our performance in the quarter shows continued improvement versus the challenging environment, we experienced last year.
Speaker Change: From a profitability standpoint, the business generated impressive segment profit growth of 78% compared to prior year.
Results in the quarter were driven primarily by a greatly improved export environment.
Speaker Change: Granted exports performed well in the third quarter with spam luncheon meat, delivering a second consecutive quarter of double digit topline growth.
Speaker Change: Skippy peanut butter also had a strong quarter as we expanded distribution in the South Korean market.
Speaker Change: In addition, our branded refrigerated exports continued to perform well and global foodservice channels.
Speaker Change: Commodity exports, which have historically benefited the international segments topline, but delivered lower profitability than other elements of the portfolio were down significantly year over a year.
Speaker Change: This is a result of improved inventory management and stronger sales of value added Turkey items in the domestic U S market this year.
Speaker Change: Our China business continued to rebound in the quarter and is off to a strong start for the fourth quarter.
Speaker Change: An important part of China's improvement as our strategy within the retail space we.
Speaker Change: We saw positive results from innovation launches with our largest retail customers in the quarter, a direct result of our in country Innovation Center.
Speaker Change: Finally, we are realizing strong results from our investments in the Philippines, and Indonesia, delivering on our commitment to strategically expand our global presence and restore sustainable growth in our international business.
Speaker Change: Overall, we remain confident that we have the right strategy and a structure in place to drive growth in our international business over the long term.
Speaker Change: Shifting now to retail where our third quarter results are a bit nuanced on the top line.
Speaker Change: So I'll spend some time explaining them.
Speaker Change: First and most importantly, there is strength in the underlying core business.
Speaker Change: We were pleased with the end market performance of key brands in the quarter.
Speaker Change: According to sarcoma brands, such as Hormel Black label Bacon, Jennie O lean ground, Turkey, spam luncheon meat Skippy peanut butter, Hormel Chili Mary kitchen, hash, Lloyds barbecue applegate natural and organic means and wholly guacamole.
Speaker Change: Grew dollar sales in the third quarter.
Speaker Change: Additionally, we are outperforming in many of our categories. Our performance in key categories, such as Bacon can meets Turkey, and peanut butter demonstrates that our investments in key brands are working.
Speaker Change: We are also optimistic about the trend line, we are seeing in our convenient meals and proteins business, which has stabilized over the last quarter.
Speaker Change: We continue to support the center store with innovation, including spam Korean barbecue during the third quarter, which is the 12 permanent variety in the spam family of products. This product is garnering a lot of excitement because the flavor profile is on trend and reaching new spam.
Speaker Change: Consumers.
Speaker Change: Second.
Speaker Change: Business momentum continues in our important bacon and emerging brands verticals.
Speaker Change: The Bacon vertical again delivered strong results both in terms of shipments and consumer takeaway.
Speaker Change: Black label Raw and convenient Bacon products are resonating with consumers and showed growth in dollar sales volume and household penetration during the quarter. Okay.
According to us Arcata Black label Bacon is the leading growth brand in the Bacon category over the last 12 months.
Speaker Change: We expect these trends to continue into Q4, as we support our bacon and brands through advertising investments and introduce exciting new innovations to the marketplace, such as oven ready Bacon and black label Cinnamon Toast Crunch Bacon.
Operator: Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corp. 3rd quarter earnings conference call. At this time, all lines are in listen only mode.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call has been recorded on Wednesday, September 4th, 2024.
Speaker Change: With any emerging brands vertical applegate items grew across all major categories in the quarter, including Bacon breakfast sausage, Hotdogs Deli meats and breaded chicken.
Operator: I would now like to turn the conference over to Joseph Blomberg. Please go ahead.
Speaker Change: We also launched Applegate organic pepperoni.
Speaker Change: First and only nationally available organic pepperoni.
James Snee: Good morning, welcome to the Hormel Foods conference call for our third quarter results of fiscal 2024. We released our results this morning before the market opened. A copy of the release can be found on our website, HormelFoods.com, under the Investors section.
Speaker Change: We are excited to see their results and development for this emerging category.
Growth from our key brands are overall category performance and our innovative launches show the strength and health of our underlying core retail business.
James Snee: On our call today is Jim Snee, Chairman of the Board, President and Chief Executive Officer.
Speaker Change: However, as we discussed during our second quarter earnings call overall top line results in our retail segment remained nuanced.
James Snee: Just since Smiley, Executive Vice President and Chief Financial Officer, and Diana Brady, Executive Vice President of the Retail Segment. Jim will review our third quarter results and give a perspective on the rest of fiscal 2024. Just since will provide detailed financial results and further commentary on our outlook. Diana will join Jim and just since for the Q&A portion of the call. The line will remain open for questions following just since remarks. As a courtesy to others, please limit yourself to one question with one follow up. If you have additional questions, you are welcome to rejoin the Q.
Speaker Change: We continue to be negatively impacted by Turkey dynamics the growth in branded Jennie O items is being more than offset by whole bird commodity markets our expectations for the year have largely unfolded as discussed on our first quarter earnings call.
Speaker Change: Next as we mentioned on our second quarter earnings call, we experienced a production disruption at our planters facility in Suffolk, Virginia.
Speaker Change: Which was impactful to the third quarter.
James Snee: At the conclusion of this morning's call, a webcast replay will be posted to our investor website and archives for one year. Before we get started this morning, I'd like to reference our safe harbor statements. Some of the comments we make today will be forward-looking and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to our most recent annual report on Form 10K and Quarterly Reports on Form 10Q, which can be accessed at HormelFoods.com under the Investors section.
Production is back up and running as we have taken corrective action within the facility.
Speaker Change: As production continues to ramp up we have secured co packer partnerships to help support our snack nuts portfolio to improve fill rates, while we finish upgrades within the Suffolk plant.
Speaker Change: By the end of this fiscal year, we believe the production disruption will be largely resolved and we will be in a much better position to return that business to full service levels.
Speaker Change: <unk> will provide more color on the financial impacts during her commentary.
James Snee: Also, we will discuss certain non-gap financial results this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAP. Further information about our non-gap financial measures, including our comparability items and reconciliations are detailed in our press release, which can be accessed from our corporate or investor website.
Speaker Change: I want to thank our broader team for the work they have done to help control that disruption.
Speaker Change: Service business and protect the planters brands.
Speaker Change: Lastly, we continue to see softness in our high volume low margin contract manufacturing business.
Speaker Change: We expect continued topline headwinds in this business due to lower demand for some items.
Speaker Change: So to wrap up our retail discussion.
James Snee: I will now turn the call over to Jim Smith. Thank you, Jess.
Speaker Change: The underlying core business is healthy.
Speaker Change: We remain focused on working with our retail customers to drive category growth and create meaningful value for our end consumers.
James Snee: Good morning, everyone. We delivered solid third quarter results at another quarter of better than expected earnings. Our core business remains healthy, led by retail take-away growth, top-lying growth in our food service business, further recovery in our international business, and continued progress on our transform and modernize initiative. Specifically, many of our key retail brands grew during the quarter, outperforming their categories and continuing to resonate with our customers and consumers. Our Food Service Business delivered another quarter of above industry sales growth, highlighting the value of our solutions based portfolio, direct selling team, and diverse customer and operator base.
Moving now to our enterprise wide strategic initiatives, we are seeing a growing benefit from our transform and modernize initiative.
Speaker Change: All of our pillars plan by make move and portfolio optimization.
Speaker Change: Breast in the third quarter and the work streams continue to mature.
Speaker Change: This quarter, we are highlighting two pillars plan and make.
Speaker Change: For our planned significant work was done during the quarter on the implementation of our new end to end planning process and technology.
Speaker Change: While this upgrade will have many benefits for years to come.
Speaker Change: Our quickly generating new insights, which have helped in our focus on improved inventory management.
James Snee: We continue to experience significant recovery in our international segment in the quarter, led by our global brands, and we continue to realize growing benefits from our transform and modernize initiative. We remain on a realistic and achievable path to improve our business, deliver on our commitments, and execute against our long-term strategic priorities.
Speaker Change: For the main pillar our operational improvements have generated encouraging results, we continue to unlock additional production capacity and realize cost savings across our network.
Speaker Change: Wins as well as our ongoing focus on continuous improvement across all our facilities are resulting an impactful advancements across our vast supply chain.
James Snee: Going a bit deeper into our performance for the quarter, I'll start with our Food Service segment. Our Food Service team delivered another quarter of above industry growth, marking our fifth consecutive quarter of year over year volume growth. We grew volume and net sales despite pockets of industry softness, proving the effectiveness of our differentiated value proposition. As expected, Food Service Segment Profit was generally in line with last year. Food Service Segment Profit remains historically strong and healthy, having grown nine out of the last 11 quarters.
Speaker Change: On our fourth quarter earnings call, we look forward to providing you with a comprehensive update on our transform and modernize initiatives, including recaps from 2024, and our plans for 2025 and beyond.
Speaker Change: Shifting now to our fiscal 2020 for outlook.
Speaker Change: We are updating our net sales guidance to account for commodity market conditions impacts from the production disruption at our Suffolk facility and continued softness in our contract manufacturing business within the retail segment.
James Snee: Our balanced approach, including our portfolio, direct selling team, and the diverse channels we operate in, continue to protect our food service segment from many macro headwinds. We continue to see strong demand for our premium and solutions-based items, including premium bacon and pepperoni, premium prepared proteins, and turkey. Products such as bacon one cooked bacon, fire braised meats, chinno turkey, cafe age globally inspired proteins, and old smokehouse bacon, each delivered double-digit net sales gains.
Speaker Change: We're also narrowing our earnings guidance range as we approach the fourth quarter. This update includes an incremental impact from the production disruption at our Suffolk facility.
Speaker Change: In our retail segment, we expect continued momentum across our key brands and categories led by Bacon value added Turkey.
Speaker Change: And emerging brands we.
Speaker Change: We are also committed to supporting our brands through strategic trade and advertising investments for the remainder of the year.
We are expecting successful execution of our fourth quarter innovations.
Speaker Change: And improvements to our plant or service levels.
James Snee: Additionally, innovative offerings such as Hormel Flash 180 sous vide style chicken breast and Hormel ribbon pepperoni contributed growth during the quarter. Our direct selling organization remains key in times of industry slowdown. Our team can connect directly with operators to strategically find solutions for their challenges, take costs out of their system, and create meaningful, long-lasting relationships. We were once again named to selling powers 60 best companies to sell for, recognizing the direct sales teams that support each of our segments.
In foodservice, we expect continued broad based volume and net sales growth led by Bacon, Turkey Pizza toppings, and our line of premium prepared proteins.
Speaker Change: We expect another quarter of significant segment profit growth in the international segment.
Speaker Change: And importantly, we expect continued benefits to net earnings from our transform and modernize initiative, which is expected to deliver its strongest level of savings in our fourth quarter.
Speaker Change: Taking all these factors into account for the full year, we expect net sales in the range of $11 8 billion to $12 1 billion.
James Snee: And we believe that our diverse channel presence in food service enables resilience in the face of industry pressures. We have continued to deliver steady top line growth in both our commercial and non-commercial businesses. Taken together, our food service business continues to be exceptionally well-positioned to drive innovation, value, and operator engagement.
Speaker Change: And diluted net earnings per share in the range of $1 45 to $1 51.
Speaker Change: And adjusted diluted net earnings per share of $1 57 to $1 63.
Speaker Change: We continue to demonstrate our ability to execute our clear and achievable plan and are on track to deliver on our earnings commitments for the year.
Unknown Executive: Management.
James Snee: Transitioning to our international segment, our performance in the quarter shows continued improvement versus the challenging environment we experienced last year. From a profitability standpoint, the business generated impressive segment profit growth of 78% compared to prior year. Our results in the quarter were driven primarily by a greatly improved export environment. Our efforts performed well in the third quarter, with spam lunch and meat delivering a second consecutive quarter of double digit top line growth.
Speaker Change: In closing I'd like to take a moment to recognize the antibody <unk>.
Speaker Change: Executive Vice President of retail leader mentor advocate and a friend.
Deanna: Last month, we announced DNS decision to retire after almost three decades of service to Hormel Foods Deanna.
Deanna: Deanna has impacted almost every area of our company.
Deanna: Her leadership during Covid and the go forward reorganization was critical to our success and the culture of Accountability. She has created will last three years I wish her the best in her well deserved retirement.
James Snee: To get the peanut butter also had a strong quarter as we expanded distribution in the South Korean market. In addition, our branded refrigerated exports continued to perform well in global food service channels. Commodity exports, which have historically benefited the international segments top line, but delivered lower profitability than other elements of the portfolio were down significantly year over year. This is a result of improved inventory management and stronger sales of value added turkey items in the domestic US market this year.
Diana has ambitions passion for our business and leadership will be greatly missed.
Speaker Change: We also announced the return of John King go to Hormel foods enabled by our intentional and well developed succession process. We are fortunate to welcome John back to the organization to lead the retail group.
Speaker Change: John is a dynamic leader known for building strong teams and a strong brands. He is the ideal person to drive continued focus innovation and growth within the retail segment and our company.
Speaker Change: John has deep expertise in the consumer packaged goods space, coupled with his understanding of our business positions him perfectly for success.
James Snee: Our China business continued to rebound in the quarter and is off to a strong start for the fourth quarter. An important part of China's improvement is our strategy within the retail space. We saw positive results from innovation launches with our largest retail customers in the quarter, a direct result of our in-country innovation center. Finally, we are realizing strong results from our investments in the Philippines and Indonesia, delivering on our commitment to strategically expand our global presence and restore sustainable growth in our international business.
Josh Smiley: At this time I will turn the call over to Josh Smiley to discuss detailed financial information related to the third quarter and additional color on our outlook.
Josh Smiley: Thank you Jim.
Josh Smiley: Good morning, everyone.
Josh Smiley: As Jim noted in his opening comments, we delivered another quarter of solid results and better than expected earnings.
Josh Smiley: Volume for the third quarter was 1 billion pounds and net sales were $2 9 billion.
James Snee: Overall, we remain confident that we have the right strategy and structure in place to drive growth in our international business over the long term.
Speaker Change: Top line growth in foodservice was more than offset by declines in our international and retail segments.
Speaker Change: To provide more color on our retail segment topline result, approximately three quarters of the net sales declines were related to lower sales of whole bird turkeys.
James Snee: Gifting now to retail, where our third quarter results are a bit nuanced on the top line, so I'll spend some time explaining them. First, and most importantly, there is strength in the underlying core business. We were pleased with the in-market performance of key brands in the quarter. According to Serkana, brands such as Hormel Black Label Bacon, Jenny O'Lean Ground Turkey, Spam Lunch and Meats, Skippy Peanut Butter, Hormel Chili, Mary Kitchen Hash, Lloyd's Barbecue, Applegate Natural and Organic Meats, and Holy Guacamole grew dollar sales in the third quarter.
Speaker Change: Contract manufacturing and planters.
Speaker Change: Gross margin was comparable to the prior year period.
Speaker Change: 16, 8%.
Speaker Change: The benefits of our transform and modernize initiative.
Speaker Change: Headwinds from lower commodity to Turkey pricing and lower sales of planters snack nuts.
Speaker Change: SG&A decreased $31 million in the third quarter due to the lapping of our unfavorable arbitration ruling in the prior year.
James Snee: Additionally, we are outperforming in many of our categories. Our performance in key categories, such as bacon, canned meats, turkey, and peanut butter, demonstrates that our investments in key brands are working. We are also optimistic about the trend line we are seeing in our convenient meals and proteins. Business, which has stabilized over the last quarter. We continue to support the center store with innovation, including Spam Korean Barbecue during the third quarter, which is the 12th permanent variety in the Spam Family of Products.
Speaker Change: Adjusted SG&A increased 4% driven primarily by planned higher employee related expenses, we continue to support our leading brands in the marketplace and expect to increase advertising expenses for the fourth quarter and full year, including an advertising campaign.
Speaker Change: To support our new plant or not doing.
Speaker Change: Equity earnings for third quarter decreased due to lower results from our Mega mix joint venture, partially offset by improvements from our international investments.
James Snee: This product is garnering a lot of excitement because the flavor profile is on trend and reaching new Spam consumers. Second, business momentum continues in our important bacon and emerging brands verticals. The bacon vertical again delivered strong results both in terms of shipment and consumer takeaway. Black label raw and convenient bacon products are resonating with consumers and showed growth in dollar sales, volume, and household penetration during the quarter. According to Serkana, Black label bacon is the leading growth brand in the bacon category over the last 12 months.
Speaker Change: Metal mix was impacted by higher avocado cost.
Speaker Change: Partially resulting from the temporary suspension of USDA inspections during the quarter.
Speaker Change: Interest and investment income from the third quarter increased as interest income from favorable market rate offset higher interest expense associated with the recent debt issuance.
Speaker Change: Earnings before income taxes were $226 million.
Speaker Change: An increase of 9% compared to the prior year.
Speaker Change: On an adjusted basis earnings before income taxes for the third quarter.
James Snee: We expect these trends to continue into Q4 as we support our bacon brands through advertising investments and introduce exciting new innovations to the marketplace, such as Reddy Bacon and Black label Cinnamon Toast Crunch Bacon. Within the emerging brands vertical, Applegate items grew across all major categories in the quarter, including bacon, breakfast sausage, hot dogs, deli meats, and breaded chicken. We also launched Applegate Organic Pepperoni, the first and only nationally available organic pepperoni. We are excited to see the results and development for this emerging category. Growth from our key brands are overall category performance and our innovative launches show the strength and health of our underlying core retail business.
Speaker Change: Our $256 million.
Speaker Change: The effective tax rate was 22 one.
Speaker Change: <unk> percent for the third quarter in line with last year.
Speaker Change: We continue to expect our effective tax rate for fiscal 2024 to be between 22 and.
Speaker Change: 23%.
Speaker Change: Our third quarter performance resulted in diluted net earnings per share of 32.
Speaker Change: Third quarter adjusted diluted earnings per share was 37.
Speaker Change: We have delivered strong operating cash flow during the year.
Speaker Change: Year to date cash flow from operations was $858 million an increase of 18%.
Speaker Change: We remain committed to dividend growth investing in our business.
James Snee: However, as we discuss during our second quarter earnings call, overall top line results in our retail segment remain nuanced. We continue to be negatively impacted by turkey dynamics. The growth in branded genio items is being more than offset by whole bird commodity markets. Our expectations for the year have largely unfolded as discussed on our first quarter earnings call. Next, as we mentioned on our second quarter earnings call, we experienced a production disruption at our planters facility in Suffolk, Virginia, which was impactful to the third quarter.
Speaker Change: Maintaining an investment grade credit rating.
Speaker Change: We paid our 384th consecutive quarterly dividend effective August 15.
Speaker Change: An annual rate of $1 13 per share.
Speaker Change: This dividend marks the 96th year of uninterrupted dividends returned to our shareholders.
James Snee: Production is back up and running as we have taken corrective action within the facility. As production continues to ramp up, we have secured co-packer partnerships to help support our snack nuts portfolio to improve fill rates while we finish upgrades within the Suffolk plant. By the end of this fiscal year, we believe the production disruption will be largely resolved and we will be in a much better position to return the business to full service levels.
Speaker Change: We invested $65 million in capital projects during the third quarter.
Speaker Change: Our outlook for capital expenditures in 2024 remains at $280 million.
Speaker Change: During the quarter, we use a combination of cash on hand, and proceeds from debt issued in the second quarter to payoff and $950 million note that came due.
Speaker Change: With this debt repayment, we remain comfortably within our stated long term leverage ratio range.
Speaker Change: Shifting to our outlook, we are updating full year net sales range and narrowing our earnings expectations.
James Snee: DeSymph will provide more color on the financial impacts during her commentary. I want to thank our broader team for the work they have done to help control the disruption, service the business, and protect the planter's grant. Lastly, we continue to see softness in our high-volume, low-margin contract manufacturing business. We expect continued top-line headwinds in this business due to lower demand for some items. So to wrap up our retail discussion, the underlying core business is healthy. We remain focused on working with our retail customers to drive category growth and create meaningful value for our end consumers.
Our revised topline range encompasses the current projection for the business, including declines due to.
Speaker Change: One updated commodity to market expectations as third quarter port costs did not rise to the level as expected.
Two the impact of this suffered disruption.
Speaker Change: And three continued softness in our contract manufacturing business.
Speaker Change: We expect fourth quarter pork input cost.
Speaker Change: The decrease seasonally.
Speaker Change: We continue to assume full year pork input cost to be higher than the last year and above five year averages.
James Snee: Moving now to our enterprise-wide strategic initiatives, we are seeing a growing benefit from our transform and modernize initiative. All of our pillars plan, buy, make, move, and portfolio optimization, progress in the third quarter and the workstreams continue to mature. This quarter, we are highlighting two pillars plan and make. For plan, significant work was done during the quarter on the implementation of our new end-to-end planning process and technology. While this upgrade will have many benefits for years to come, we are quickly generating new insights which have helped in our focus on improved inventory management.
Speaker Change: In Turkey, our supply remains healthy.
Speaker Change: And we are in a strong position to service, our customers and attract new business opportunities.
Speaker Change: We are projecting growth across several parts of our Jennie O branded Turkey business, including lean ground Turkey.
Speaker Change: In retail and value added Turkey in foodservice.
Speaker Change: Lower volumes and pricing for commodity to whole turkeys are expected to continue to pressure earnings.
Speaker Change: As Jim noted this suffer production disruption impacted our third quarter earnings.
We realized a three earnings per share drag during the third quarter and are now estimating an additional three earnings per share impact in the fourth quarter.
James Snee: For the make-pillar, our operational improvements have generated encouraging results. We continue to unlock additional production capacity and realize cost savings across our network. These wins, as well as our ongoing focus on continuous improvement across all our facilities, are resulting in impactful advancements across our vast supply chain.
Jim Snee: This update accounts for a slower production restart than was originally estimated.
Jim Snee: Commercial impacts.
Jim Snee: Facility and maintenance expenses.
Jim Snee: Incremental co Packer Clos.
Jim Snee: And reduced marketing expenses.
Jim Snee: Additionally, we experienced storm damage tour Papillion, Nebraska facility.
James Snee: On our fourth quarter earnings call, we look forward to providing you with a comprehensive update on our transform and modernize initiatives, including recaps from 2024 and our plans for 2025 and beyond.
Jim Snee: Early in the fourth quarter.
Jim Snee: We are assessing the financial impact, resulting from this event.
Jim Snee: Consistent with our prior guidance.
James Snee: Shifting now to our fiscal 2024 outlook, we are updating our net sales guidance to account for commodity market conditions, impacts from the production disruption at our Suffolk facility, and continued softness in our contract manufacturing business within the retail segment. We are also narrowing our earnings guidance range as we approach the fourth quarter. This update includes an incremental impact from the production disruption at our Suffolk facility. In our retail segment, we expect continued momentum across our key brands and categories led by bacon, value added turkey, and emerging brands.
Jim Snee: Our full year outlook assumes higher salaries.
Jim Snee: Normalized employee related expenses.
Jim Snee: And the cost associated with planned investments in the business.
Jim Snee: Including higher year over year advertising investments.
Jim Snee: Finally, our earnings per share guidance assumes the strongest contribution of the year from our transform and modernize initiative in the fourth quarter.
Jim Snee: Taken together we.
Jim Snee: We are maintaining the midpoint of our EPS guidance and narrowing the range.
Jim Snee: To conclude my remarks.
James Snee: We are also committed to supporting our brands through strategic trade and advertising investments for the remainder of the We are expecting successful execution of our fourth quarter innovations and improvements to our planter service levels. In food service, we expect continued, broad-based volume and net sales growth led by bacon, turkey, pizza toppings, and our line of premium prepared proteins. We expect another quarter of significant segment profit growth in the international segment. And importantly, we expect continued benefits to net earnings from our Transform and Modernize Initiative, which is expected to deliver its strongest level of savings in our fourth quarter.
Speaker Change: I would like to highlight the release of our 2023 global impact report.
Speaker Change: Prohibitive update to our 20 by 30 challenge.
Speaker Change: The report highlights meaningful progress against our goals and I would like to mention.
Speaker Change: Four key wins.
Speaker Change: That I'm, particularly proud of.
Speaker Change: One we achieved the safest year in our company's history.
Speaker Change: Our lowest recordable incident rate ever.
Speaker Change: Two our packaging teams sustainability initiatives resulted in nearly 1.7 million pounds.
Speaker Change: In material savings.
Speaker Change: <unk> from optimized package designs and improved shifting efficiencies.
James Snee: Taking all these factors into account for the full year, we expect net sales in the range of 11.8 billion to 12.1 billion. And deluded net earnings per share in the range of $1.45 to $1.51 and adjusted deluded net earnings per share of $1.57 to $1.63. We continue to demonstrate our ability to execute our clear and achievable plan and our on track to deliver on our earnings commitments for the year.
Speaker Change: Three.
Speaker Change: More than 200 dependence of our U S team members are utilizing the opportunity for free two year College education through the company is ground breaking tuition program.
<unk> pathways.
Speaker Change: Four we continued to invest in the communities in which we operate contributing more than $12 $5 million in cash and products to uplift communities.
This includes investment in the hometown food security projects.
James Snee: In closing, I'd like to take a moment to recognize Deanna Brady's executive vice president of retail, leader, mentor, advocate, and friend. Last month, we announced Deanna's decision to retire after almost three decades of service to hormone foods. Deanna has impacted almost every area of our company. Her leadership during COVID and the Go Forward reorganization was critical to our success. And the culture of accountability she has created will last for years.
Speaker Change: Across such a coalition working to alleviate food insecurity in Marin County, Minnesota.
Speaker Change: There are many other meaningful updates featured in our global impact report and encourage you to take a look.
James Snee: I wish her the best in her well-deserved retirement. Deanna's ambition, passion for our business and leadership will be greatly missed.
Speaker Change: I would like to extend my son.
Speaker Change: Teams committed to achieving our corporate responsibility goals.
Speaker Change: And completing our 'twenty by 30 challenge.
Speaker Change: Now I will turn the call over to the operator for the question and answer section.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Do you have a question. Please press star followed by the one on your Touchtone phone, you'll hear a prompt that Johan has been raised should you wish to decline from the polling process. Please press star followed by the Q.
James Snee: We also announced the return of John Ginggo to hormone foods. Enabled by our intentional and well-developed succession process, we are fortunate to welcome John back to the organization to lead the retail group. John is a dynamic leader known for building strong teams and strong brands.
James Snee: He is the ideal person to drive continued focus, innovation, and growth within the retail segment and our company. John's deep expertise and the consumer packaged goods space coupled with his understanding of our business positions him perfectly for success.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any Keith one moment. Please for your first question.
Speaker Change: Your first question comes from Ben Theurer with Barclays. Your line is now open.
Ben Theurer: Yes. Good morning, Thanks for taking my question Jim.
Ben Theurer: So just wanted to start off maybe with the update to the guidance and if you could give us a little bit more clarity and what youre seeing in terms of like the high end versus the low end I mean, you took down sales by about $300 million, but there is still a range of about $300 million. So so what are the.
Jacinth Smiley: At this time, I will turn the call over to Jason Smiley to discuss detailed financial information related to the third quarter and additional color on our outlook. Thank you, Jim. Good morning, everyone. As Jim noted in his opening comments, we delivered another quarter of solid results and better than expected earnings. Volume for the third quarter was 1 billion pounds and net sales were 2.9 billion dollars. Top line growth in food service was more than offset by declines in our international and retail segments.
Speaker Change: Outcomes here as it relates to the top line and then if you can break this down why.
Speaker Change: The lower topline has no impact down on the on the profit line as EPS was essentially just narrow it but not changed.
Speaker Change: Yes. Good morning. Thanks. Thanks for the question, obviously, there's a lot there I think it's important for us to start with the third quarter.
Speaker Change: The performance in the third quarter.
Speaker Change: The top line.
Speaker Change: Decline really is driven by three primary things.
Jacinth Smiley: To provide more color on our retail segments top line results, approximately three quarters of the net sales declines were related to lower sales of whole bird turkeys, contract manufacturing and planters. Growth margin was comparable to the prior year period at 16.8%. The benefits of our transform and modernize initiative all set headwinds from lower commodity turkey pricing and lower sales of planters not not. S-GNA decreased 31 million dollars in the third quarter due to the lapping of our unfavorable arbitration ruling in the prior year.
Speaker Change: We talked about the three quarters of the topline being driven by Turkey contract manufacturing planters, we still have the second thing is we still have some impact.
Speaker Change: And our convenient meals and proteins pricing that we've taken we are seeing the benefit of the pricing, but that is still having some minimal impact and then.
Speaker Change: The third factor in the quarter as the comparison in our international group, where were really lapping some.
Speaker Change: Some high volume low margin commodity business from last year in the third quarter.
Speaker Change: So that's the decline in there for the third quarter and as we look forward into the fourth quarter. There's a couple of things that are similar but also some things that are different.
Jacinth Smiley: Adjusted S-GNA increased 4% driven primarily by planned higher employee related expenses. We continue to support or leading brands in the market place and expect to increase advertising expenses for the fourth quarter and full year, including an advertising campaign to support our new planters not doers. Equating earnings for third quarter decreased due to lower results from our mega-mex joint venture partially offset by improvement from our international investments. Mega-mex was impacted by higher avocado costs partially resulting from the temporary suspension of USDA inspections during the quarter.
Speaker Change: From a market perspective, they are high but they are not as high as we expected.
Speaker Change: That will continue to impact us.
Speaker Change: Just since and I, both talked about the impact of our Suffolk product or plant disruption.
Speaker Change: That has an impact in the third quarter. We will continue to have an impact in Q4, as we continue to ramp back up and we get improved fill rates.
Continued headwind of our contract manufacturing and then again the lapping an HFC.
Speaker Change: I mean, you put all those things together and Thats, how we how we get to the range. When we think about what could take us one way or another and why we're able to really keep the bottom line the same.
Speaker Change: There's a lot of the declines were high volume low margins in some cases negative margins piece of the business.
Jacinth Smiley: Interest and investment income from the third quarter increased as interest income from favorable market rates offset higher interest expense associated with the recent debt issuance. Earnings before income taxes were $226 million and increase of 9% compared to the prior year. On an adjusted basis, earnings before income taxes for the third quarter were $256 million. The effective tax rate was 21.7% for the third quarter in line with last year. We continue to expect our effective tax rate for fiscal 2024 to be between 22 and 23%.
Speaker Change: And what we're talking about and in terms of improvement on the bottom line and we've got our international business, which continues to rebound and improve off of last year.
Speaker Change: Our in our retail business there is strength in the underlying core business I mean, we're seeing key retail brands Bacon Jennie O Skippy Applegate spam, all performed really really well.
Speaker Change: <unk> talked about we expect Q4 to be to continue to build in terms of our transform and modernize initiative and we'll have an opportunity to speak in more detail on the Q4 call.
Speaker Change: So so all of those things, it's a long answer, but you and you package all of those things that's what gets us to that top line guide, while still being able to maintain.
Speaker Change: The bottom line mid point and being able to narrow the range.
Jacinth Smiley: Our third quarter performance resulted in diluted net earnings per share of 32 cents. Third quarter adjusted diluted earnings per share was 37 cents. We have delivered strong operating cash flow during the year. Year-to-day cash flow from operations was $858 million and increase of 18%. We remain committed to dividend growth, investing in our business and maintaining an investment grade credit rating. We paid our 384th consecutive quarterly dividend effective August 15th at an annual rate of $1.13 cents per share.
Speaker Change: Okay, perfect and then thanks for that very clear.
Speaker Change: One quick follow up on just the foodservice dynamics I mean, we're still we're still seeing volume growth, but not as elevated as at the beginning of the year. So as you look into the fourth quarter. What are you seeing from your customers and foodservice sales, which relates to Mike's good momentum and volume.
Speaker Change: Yes, I mean, we still expect solid volume and sales growth from our foodservice business that topline growth has been really broad based which has been encouraging not only across our product categories, but the different segments within foodservice in which we compete.
Speaker Change: Foodservice is on track for a record year.
Speaker Change: So foodservice remains strong and well positioned to drive value for us.
Speaker Change: Perfect I'll pass it on thanks, Okay.
Jacinth Smiley: This dividend marks the 96th year of uninterrupted dividends returned to our shareholders. We invested $65 million in capital projects during the third quarter. Our outlook for capital expenditures in 2024 remains at $280 million. During the quarter, we use a combination of cash on hand and proceeds from debt issued in the second quarter to pay off a $950 million note that came due. With this debt repayment, we remain comfortably within our stated long-term leverage ratio range.
Speaker Change: Okay.
Speaker Change: Your next question comes from Ken Goldman with Jpmorgan. Your line is now open.
Ken Goldman: Hi, good morning, and thank you.
Ken Goldman: First question I was.
Ken Goldman: Unclear does your guidance include any potential financial impact from the storm damage and I wanted to get a sense of what maybe the range of possibilities to your bottom line was from the storm.
Speaker Change: Good morning, Ken.
Speaker Change: Yes, we did have this unfortunate damage from the storm earlier in the in the quarter and our production is fully back up and running.
Speaker Change: In addition, we also have redundant capacity as well.
Speaker Change: For our.
Speaker Change: Our planned and when we think about impact from a sales perspective, then that doesn't at all impact sales.
Jacinth Smiley: Shifting to our outlook, we're updating full-year net sales range and narrowing our earnings expectations. Our revised top-line range encompasses the current projection for the business, including the clients due to one updated commodity market expectations as third quarter forecast did not rise to the level as expected. Two, the impact of the suffered disruption and three continued softness in our contract manufacturing business.
Speaker Change: <unk> costs that we're talking about and calling out is really to repair our facility. So it has no impact at all on our topline.
Speaker Change: Okay I'll follow up on that one and then my second question.
Speaker Change: And maybe this is a little more direct than I intended to be but why are you selling product for zero or negative margin is it mainly to spread fixed overhead over a bigger revenue base and I guess the broader question. There is how do we think about the potential down the road for maybe incremental supply chain efficiencies that could allow you to.
Jacinth Smiley: We expect fourth quarter forecast to decrease seasonally. We continue to assume full-year forecast to be higher than the last year and above five-year averages. In Turkey, our supply remains healthy and we are in a strong position to service our customers and attract new business opportunities. We are projecting growth across several parts of our genuine branded Turkey business, including lean ground turkey, in retail, and value added turkey in food service. Lower volumes and pricing for commodity to hold turkeys are expected to continue to pressure earnings.
Speaker Change: Reduced your need or desire to sell product from our co man.
Speaker Change: For commodity perspective, it doesn't really help your bottom line directly.
Speaker Change: Yeah, Ken there is a couple of things there. So the first part of it is.
Speaker Change: We do have on the pork side and the Turkey side.
Ken Goldman: Live harvest and when Youre harvesting animals.
Ken Goldman: We sell everything and so our goal and we've been very successful at it is to continue to move up that value added ladder and so we feel really good about the progress we've made over the decades, but there is still always going to be elements of that.
Ken Goldman: That are more commodity driven and depending what the market conditions are.
Jacinth Smiley: As Jim noted, the suffered production disruption impacted our third quarter earnings. We realized a three-cent earnings per share drag during the third quarter under now estimating an additional three-cent earnings per share impact in the fourth quarter. This update accounts for a slower production restart than was originally estimated, commercial impacts, facility and maintenance expenses, Inclemental co-packer costs and reduced marketing expenses. Additionally, we experienced storm damage to our Papalian Nebraska facility early in the fourth quarter.
Ken Goldman: We may find ourselves in that situation and so that part isn't going to change I guess, the second part and it's an important part of the work that we're doing and transform and modernize it.
Speaker Change: Is the total portfolio optimization because it is exactly what you say is that we don't want to find ourselves in that position, where we're selling non strategic items at negative margin and so our team has been hard at work at that over this last year and we will.
Speaker Change: We'll start to see the effects of that towards the end of this year into 25 and 26 well.
Speaker Change: <unk> be able to provide more clarity on the Q4 call, but it is in our minds two distinct different areas. There is a part of the business that just naturally flows. The second part is a piece that we can and will take action on.
Jacinth Smiley: We are assessing the financial impact resulting from this event. Consistent with our prior guidance, our full-year outlook assumes higher salaries, normalize employee-related expenses and cost associated with planned investments in the business, including higher year-over-year advertising investments. Finally, our earnings per share guidance assumes the strongest contribution of the year from our Transform and Modernize Initiative in the fourth quarter. Taken together, we are maintaining the midpoint of our EPS guidance and the narrowing the range.
Speaker Change: Understood. Thank you.
Speaker Change: Okay.
Speaker Change: Your next question comes from Peter Galbo with Bank of America. Your line is now open.
Peter Galbo: Hey, guys good morning.
Peter Galbo: Maybe just wanted to start with Turkey.
Peter Galbo: I believe previously you had said it was about a <unk> 15 headwind into the earnings for fiscal 'twenty four so I just wanted to confirm that that's still.
Jim Snee: The number and then the second part of that question just Jim.
It's Turkey fundamentals just don't improve from here, let's say they don't get worse don't get better than just kind of flatline.
Jim Snee: Is there any sense of how much of that 15 cents you can recover next year simply if the supply demand situation stays the same but maybe some other inputs or supply chain to get better at this point.
Jacinth Smiley: To conclude my remarks, I would like to highlight the release of our 2023 Global Impact Report, a comprehensive update to our 20 by 30 challenge. The report highlights meaningful progress against our goals and I would like to mention four key wins that I am particularly proud of. One, we achieved the safest year in our company's history, our lowest recordable incident rate ever. Two, our packaging team's sustainability initiatives resulted in nearly 1.7 million pounds in material savings resulting from optimized package designs and improved shipping efficiencies.
Jim Snee: Yes, Peter Thanks, Thanks for the question.
Speaker Change: First part of your question really there is no change.
Speaker Change: And it goes back to what we guided on the Q1 call that Everything's played out the way we thought in that 15 cents is still the number.
Jacinth Smiley: Three, more than 200 dependents of our USD members are utilizing the opportunity for a free two-year college education through the company's groundbreaking tuition program inspired pathways. Four, we continue to invest in the communities in which we operate, contributing more than $12.5 million in cash and products to uplift communities. This includes investment in the hometown food security project across sector coalition working to alleviate food insecurity in Mara County, Minnesota. There are many other meaningful updates featured in our Global Impact Report and I encourage you to take a look.
Dan: The second part of your question, obviously, there's a lot more nuance Dan.
Speaker Change: It's not to avoid the question, but they really are so many moving parts in terms of what's happening in the marketplace right now as we start to look into 25, there are still many many unknowns.
Speaker Change: I think it's fair to say, we've all seen that egg sets are way down.
Speaker Change: There's always the uncertainty.
Speaker Change: What's going to happen with any any disease.
What's going to happen with with the grain market. So.
Speaker Change: Our focus is as we've said.
Speaker Change: Probably two years ago now as we worked through the <unk> integration.
Speaker Change: Our goal is to become a more demand driven organization and we've had a lot of success doing that.
Speaker Change: We're continuing on that journey, both in retail and foodservice, obviously theres been some dynamics in 24 that have negatively impacted the whole bird business, but really as we go to 25 is still a bit too early given all of the moving parts.
Speaker Change: Okay. Thanks for that.
Speaker Change: And then.
Speaker Change: Jim if I go back to win.
Speaker Change: Planters deal was initially announced I think a lot of the pieces that you.
Speaker Change: The management team had was.
Speaker Change: If we invested more in marketing and this was a business that was kind of starved for capital.
Jacinth Smiley: I would like to extend my thanks to the team's committed to achieving our corporate responsibility goals and completing our 20 by 30 challenge.
Speaker Change: The results could could improve pretty dramatically.
Speaker Change: And I guess.
Speaker Change: There has been an improvement on the marketing side, but just as you've kind of evaluated.
Operator: Now I will turn the call over to the operator for the question and answer section. Thank you. Ladies and gentlemen, we will now begin the question and after session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear prompt that your hand has been raised. To do is to decline from the polling process, please press star followed by the two.
Speaker Change: Now with the recall and the issues at the plant.
Speaker Change: What levels of under investment, where they're kind of in the in the operations are in the facility.
Unknown Executive: Your line is now open.
Speaker Change: As we just think about it. This is truly contained at this point from a from an impact standpoint on the next few quarters. Thanks very much.
Speaker Change: Yes. Thanks.
Speaker Change: Sure.
Speaker Change: Going back to the business at the time of acquisition still holds and I think we just prior to the production disruption, we're demonstrating the value of what we could do for the business and it was hitting on all cylinders when we think about distribution gains.
Benjamin Theurer: Yes, good morning and thanks for taking my question, Jim, Jacinth. So just wanted to start off maybe with the update to the guidance and if you could give us a little bit more clarity in what you're seeing in terms of like the high end versus the low end. I mean, you took down sales for about 300 million, but there's still a range of about 300 million.
Speaker Change: Innovation gains really connecting with younger different consumers on the retail side driving the C store business not only.
Speaker Change: Just for the plant tours business, but having that synergistic effect across our entire.
Speaker Change: Food safety portfolio.
Speaker Change: It was playing out it is playing out the way that that we thought.
James Snee: So what are the potential outcomes here as it relates to the top line and then if you can break this down why the lower top line has no impact down on the on the profit line as EPS was was essentially just narrowed but not changed. Yeah, good morning, Ben. Thanks. Thanks for the question. Obviously there's there's a lot there. It gets important for us to start with the third quarter and the performance in the third quarter on the top line, you know, the decline really is driven by three primary things.
Speaker Change: And when you acquire facilities, obviously, we did significant due diligence.
Speaker Change: And.
Speaker Change: Our.
Speaker Change: Like we were in a good position.
Speaker Change: But as we took over the business, we were able to implement a lot of our food safety protocols, which were enhanced environmental and product testing since we've owned the business.
Speaker Change: And that allowed us to find this issue early and to be able to address it so well.
Speaker Change: While we could talk about the financial impact and you know what was right what was wrong. The fact is our system worked we found what we needed to find we address it and we're doing the right thing.
James Snee: You know, we talked about the three quarters of the top line being driven by Turkey contract manufacturing planters. We still have the second thing is we still have some impact in our convenient meals and proteins pricing that we've taken, we're seeing the benefit of the pricing, but that is still having some minimal impact. And then the third factor in the quarter is the comparison in our international group where we're really lapping some some high volume low margin commodity business from last year in the third quarter.
Speaker Change: The plant was down for five weeks the ramp up has taken us a little longer than we thought but as we're ramping back up obviously, we expect demand to correct and we will be able to get back on track to really deliver on that original thesis, which was to drive our whole enterprise entertaining and stacking port.
Speaker Change: Folio.
Speaker Change: So we're still very excited about the business. Obviously this disruption is never a good thing, but the team has done great work and feel like we'll be able to get back to hitting on all cylinders in the not too distant future.
James Snee: So that's the decline in there for the third quarter and as we look forward into the fourth quarter, you know, there's a couple of things that are there's similar but also some things that are different from a market perspective, you know, they're high, but they're not as high as we expected. So that'll continue to impact us just since and I both talked about the impact of our Suffolk product or plant disruption of that has an impact in third quarter will continue to have an impact in Q4 as we continue to ramp back up and we get improved fill rates.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Your next question comes from <unk> <unk> par Perique with Oppenheimer. Your line is now open.
Speaker Change: Morning, Thanks for taking my question and Deanna also congrats on your retirement.
Just starting out with volumes.
Speaker Change: How did volumes play out versus your expectations for the quarter.
Speaker Change:
Speaker Change: The biggest things for us through passion and the third quarter was the planters volume was lower than we expected.
James Snee: The continued headwind of our contract manufacturing and then again the lapping in HFIC. So I mean, you put all those things together and that's how we how we get to the range. You know, when we think about what could take us one way or another and why we're able to really keep the bottom line the same is is a lot of the declines were high volume low margins in some cases negative margins pieces of business.
Speaker Change: Talk about the contract manufacturing piece.
Speaker Change: That was another part that was significantly lower than than we expected.
Speaker Change: Turkey, whereas the decline year over year, but largely in line with what we did expect.
Great and then I'm not sure how much you can comment on this but as we look to next fiscal year does that any initial puts and takes you can share. It obviously you plant or it could be a tailwind as we go into next year. So just wanted to get a sense of whole bird, Turkey, and just contract manufacturing if we maybe those could be a net neutral or even positive as we look out to next year.
James Snee: And what we're talking about in terms of improvement on the bottom line that we've got our international business which continues to to rebound and improve off of last year. Our inner our retail business, you know, their strength and the underlying core business. I mean, we're seeing key retail brand bacon, Genio, Skippy, Applegate, spam. All perform really, really well. We talked about, you know, we expect Q4 to be, you know, to continue to build in terms of our transform and modernize initiative and we'll have an opportunity to speak in more detail on the Q4 call.
Speaker Change: Yeah, I mean it.
Speaker Change: I'm going to say that it's early for us to be to be talking about 2025, but I do think there are some specific areas that.
Speaker Change: As we're starting to look into that timeframe and think about it.
Speaker Change: To the comments I just made obviously, we expect planters to be able to rebound and hit again on all cylinders both retail foodservice.
Speaker Change: The continued build in our transform and modernize the initiative.
James Snee: So so all of those things, you know, it's a it's a long answer, but when you package all those things, that's what gets us to that top line guide while still being able to maintain, you know, the bottom line midpoint and being able to narrow the range. Okay, perfect. And then thanks for that very clear.
Speaker Change: We expect to be able to maintain some of the momentum in our key retail brands.
Speaker Change: Our international business is really hitting its stride and we expect that to continue to grow.
Speaker Change: Other part in all of this is to make sure you have the available capacity to grow and so we have spent a lot of time on that as well to make sure that we have the necessary capacity to support some of our strategic growth areas and then as I commented on Peter's question. The Turkey part just is so dynamic it has so many moving.
James Snee: And then I have one quick follow-up on just the food service dynamics. And I mean, we're still seeing volume growth, but not as elevated at the beginning of the year.
James Snee: So as you look into the fourth quarter, what are you seeing from your customers in food service as it relates to like the momentum and volume? Yeah, I mean, we still expect, you know, solid volume and sales growth from our food service business that top-lying growth has been really broad based, which has been encouraging not only across our product categories, but the different segments within food service in which we compete. Food service is on track for our record year. So food service remains strong and well positioned to drive value for us. Perfect. I'll pause it on six.
Speaker Change: Parts that it's really early at this point, but yes. There is a lot of puts and takes but there's there's a lot to like about the work that we've been doing and that's why we're excited about the position we're in even though we're navigating some of these.
Speaker Change: Identified headwinds.
Speaker Change: Great. Thank you for all the color.
Speaker Change: Your next question comes from Michael Lavery with Piper Sandler Your line is now.
Michael Lavery: Thank you good morning.
Speaker Change: Just one more back on planters you mentioned with the additional III expected impact and stretching into <unk>.
Kenneth Goldman: Your next question comes from Ken Goldman with JP Morgan.
Michael Lavery: You had said I think the term commercial impact along with some of the other things you cited in gist.
Kenneth Goldman: Your line is now open.
Kenneth Goldman: Hi, good morning and thank you. First question, I was unclear. Does your guidance include any potential financial impact from the storm damage? And I wanted to get a sense of what maybe the range of possibilities to your bottom line was from the storm.
Michael Lavery: Just wanted to make sure I understand exactly what that means is that does that point to any potential distribution losses, you might have to recover.
Speaker Change: So could that stretch into 20 into fiscal 'twenty five.
Speaker Change: Yes, Michael It is the commercial impact is the the sales impact that we're missing out on.
Kenneth Goldman: Good morning, Ken. So yes, we did have this unfortunate damage from the storm earlier in the in the quarter and our production is fully back up and running in addition, we also have redundant capacity as well for our plant and when we think about impact from a sales perspective, then that doesn't at all impact sales. The cost that we're talking about and calling out is really to repair our facility. So it has no impact at all on our top line. Okay, I'll follow up on that one.
Speaker Change: At this point.
Speaker Change: We have not had any distribution losses.
Speaker Change: Obviously, we've been able to work through inventory, we're ramping up production supplementing that with co manufacturing and although we're not where we need to be.
Speaker Change: We're certainly navigating the situation and in constant communication with our customers.
Speaker Change: Part that we don't want to lose sight of is that planters is a very very important brand in this category and so when we're when we're talking to customer service that recognition.
Speaker Change: They always want us back up and running faster, we want to be back up and running faster, but it's an important part of the category and we.
Kenneth Goldman: And then my second question, and maybe this is a little more direct than I intended to be, but why are you selling product for zero or negative margin? Is it mainly to spread fixed overhead over a bigger revenue base? And I guess the broader question there is how do we think about the potential down the road for maybe incremental supply chain efficiencies that could allow you to reduce your need? Or desire to sell product from a co-man for commodity perspective that doesn't really help your bottom line directly?
Speaker Change: We can't tell you today exactly what type of spillover there might be into 2025, but.
Speaker Change: You know again, we're doing everything we can to make sure that we're filling those needs.
Speaker Change: Okay. Thanks.
Speaker Change: Just on the Capex guide that you are holding.
Speaker Change: It points to.
Speaker Change: Pretty big spend in <unk>.
Kenneth Goldman: Yeah, Ken, there's a couple of things there. So the first part of it is, you know, we do have on the pork side and the turkey side, you know, live harvest and when you're harvesting animals, you know, we sell everything. And so our goal and we've been very successful at it is to continue to move up that value added ladder. And so we feel really good about the progress we've made over the decades, but they're still always going to be elements of that that are more commodity driven and depending what the market conditions are.
Speaker Change: Is that correct and just maybe what were some of that be.
Speaker Change: You didn't change it so I guess, it's not.
Speaker Change: Sort of picks up costs for the storm damage.
Speaker Change: Any color on just.
Speaker Change: The what seems like a big spiked up with them.
Speaker Change: Late in the year in Capex.
Michael Lavery: Yeah, Good morning, Michael.
So you are correct and this is fairly consistent actually with how it sequences during the year and so Q4, we typically do see a big spend and so we're comfortable with achieving that amounted to 280 million that we have we have put out.
Kenneth Goldman: You know, we may find ourselves in that situation. And so that part isn't going to change. I guess the second part and it's an important part of the work that we're doing and transform and modernize is the total portfolio optimization, because it is exactly what you say is that we don't want to find ourselves in that position where we're selling, you know, non strategic items at negative margin. And so our team has been hard at work at that over this last year and we'll start to see the effects of that towards the end of this year into 25 and 26.
Michael Lavery: For for the year, so nothing really unusual in terms of the spend this time of the year.
Michael Lavery: And our engineering team does a really good job of scrubbing the projects and the spend rate throughout the year. So.
Michael Lavery: Yeah, we feel like we're in a good position.
Speaker Change: Okay. Thanks, I'll pass it on.
Speaker Change: Your next question comes from Heather Jones with Heather Jones Research. Your line is now open.
Speaker Change: Good morning, Thanks for the question.
Kenneth Goldman: We'll, again, be able to provide more clarity on the queue for call, but it is in our minds to distinct different areas. There's a part of the business that just naturally flows. The second part is a piece that we can and we'll take action. Understood.
Heather Jones: My first question is going back to the Hulbert, Turkey and co man comments I think you all said they represented roughly three quarters of the net sales to go on decline, but given their lower price point is it fair to think that they.
Kenneth Goldman: Thank you.
Speaker Change: We're a bigger chunk of the volume decline and just wondering when the comparisons will be cycled.
Peter Galbo: Your next question comes from Peter Galbo with Bank of America.
Peter Galbo: Your line is now open.
Speaker Change #100: Yeah, I mean, I think it's from a volume perspective, it's fairly fairly equal.
Peter Galbo: Hey guys, good morning. I maybe just wanted to start with Turkey. I believe previously you would said it was about a 15 cent headwind into the earnings for fiscal 24. So I just wanted to confirm that that's still the number. And then the second part of that question, just Jim if Turkey fundamentals just don't improve from here, right? Let's let's say they don't get worse, they don't get better, they just kind of flat line.
Peter Galbo: Just if there any sense of how much of that 15 cents, you know, you can recover next year or simply if the supply demand situation stays the same, but maybe, you know, some other inputs or supply chain get better at this point. Peter, thanks for the question. The first part of your question, really there's no change, you know, and it goes back to what we guided on the Q1 call that everything's played out the way we thought and that 15 cents is still the number.
Speaker Change #101: You know as as we're working through the holiday season for 2024.
Speaker Change #102: We'll get better visibility in terms of what the demand is what the sell through is.
Speaker Change #102: But the supply side of the business is and so while it would be nice to say that youre going to have a clear read heading into 2025.
Speaker Change #102: Those read throughs tend to be a bit delayed so it'll it'll be probably spring of 2025 before we're really able to give a better view of how that cycle looks.
Speaker Change #103: And what about the co man side is that you are talking about that as well or just what are your comments more on this on the whole bird side.
Speaker Change #103: It's more on the whole bird side, so I I'm, sorry, Heather I missed your co man question could you go ahead and elaborate on that again.
Peter Galbo: The second part of your question obviously is a lot more nuanced and you know, it's not to avoid the question, but there really are so many moving parts in terms of what's happening in the marketplace right now, you know, as we start to look into 25, there's still many, many unknowns. It's fair to say we've all seen that egg sets are way down, you know, there's always the uncertainty that what's going to happen with any any disease, you know, what's going to happen with with the grain markets.
Heather Jones: Well you were you all said that co man planners and whole bird, we're roughly three quarters of the net sales decline in the quarter.
Heather Jones: They are lower price points I was assuming there a bigger chunk of the volume decline and then I was wondering when do you think you cycle the komen.
Heather Jones: Softness.
Heather Jones: So Heather just.
Heather Jones: What we've said is it's got contract manufacturing.
Speaker Change #104: And so that is a facility century foods that we own.
Peter Galbo: So, you know, our focus as we said, you know, probably two years ago now is we worked through the jot integration was our goal is to become a more demand driven organization, and we've had a lot of success doing that. We're continuing on that journey, both in retail and food service, obviously there's been some dynamics in in 24 that have negatively impacted the whole bird business, but really as we go to 25 it's still a bit too early given all of the moving parts. Okay, thanks for that.
Heather Jones: And so we're I mean, we're constantly working on that business to drive demand and bring new business into the facility. So that is not a co manufacturing issue. It's a facility that we own and we refer to it as contract manufacturing.
Speaker Change #105: Okay and then my second question is going back to <unk> analyst day last year, and targeting 250, and EBIT improvement by 26. It seems like this year is likely to be down year on year, so applying a greater lift by 'twenty six.
Speaker Change #105: And just wondering.
Speaker Change #107: Given what's happened with planners hulbard et cetera is there anything that changes your view as to that the achievability of that.
James Snee: And then, you know, Jim, if I go back to when you know, the planter steel was initially announced, I think a lot of the the thesis that you, you know, the management team had was if we invested more in marketing and this is a business that was kind of starved for for capital that, you know, the results could improve pretty dramatically. And I guess, you know, there's been an improvement on the marketing side, but just as you've kind of evaluated, you know, and now with the recall and the issues at the plan, just what levels of under investment were there kind of in the operations or in the facility.
Speaker Change #108: Good morning Heather.
Speaker Change #109: Just in terms of clarity you mentioned that were down.
Speaker Change #110: Year over over a year now.
So I am clear on that on that piece of it what I can tell you is that we are tracking really well towards achieving that 250 by 22006, and we will definitely give more color on the Q4 call as we talked about during our Investor call October last year we.
Speaker Change #110: This year as being 2024, a year of investment for sure and so there will be a pretty good ramp 25 to 26 that being said, we are seeing really meaningful impact to our margins and our bottom line here in 'twenty.
James Snee: You know, as we just think about if this is truly contained at this point from a from a, you know, impact standpoint on the next few quarters, thanks very much. Yeah, thanks, thanks. You know, the thesis going back to for the business at the time of acquisition means still holds and I think we, you know, just prior to the production disruption, we're demonstrating the value of what we could do for the business and it was hitting on all cylinders.
Speaker Change #110: 24 era irrespective of that.
Speaker Change #111: Okay alright, thank you.
Speaker Change #112: Your next question comes from Adam Samuelson with Goldman Sachs. Your line is now open.
James Snee: When we think about distribution gains, innovation gains, really connecting with younger different consumers on the retail side, driving the sea store business not only just for the planter's business, but having that synergistic effect across our entire food safety portfolio. I mean, it was playing out, it is playing out the way that that we thought. You know, and when you acquire facilities, obviously we did significant due diligence and, you know, our felt like we were in a good position, but as we took over the business, we were able to implement a lot of our food safety protocols, which were enhanced environmental and product testing since we've owned the business.
Adam Samuelson: Oh, yes, thank you and good morning, everyone.
Adam Samuelson: Maybe maybe kind of following up on Heather's question in a slightly different way and I know youre going to give a bigger discussion of the transformer modernized initiatives on the fourth quarter call, but can you help dimensionalize the amount of savings that you have realized.
Adam Samuelson: To date from those initiatives.
You talked about the fourth quarter being the strongest.
Speaker Change #114: Contributor from those initiatives of the year.
Speaker Change #114: So what.
Speaker Change #114: Ballpark are those expected to be on a year on year basis. As we start to then think about an annualized run rate.
Speaker Change #114: Into 2025.
Speaker Change #114: Yes.
James Snee: And, you know, that allowed us to find this issue early and be able to address it. So, you know, while we could talk about the financial impact and, you know, what was right, what was wrong, the fact is our system worked, we found what we needed to find, we addressed it and we're doing the right thing. You know, the plant was down for five weeks, the ramp up has taken us a little longer than we thought, but as we're ramping back up, obviously we expect demand to correct and we'll be able to get back on track to really deliver on that original thesis, which was to drive our whole enterprise entertaining and snacking portfolio.
Speaker Change #114: Adam we are going to <unk>.
Speaker Change #116: Provide a deeper dive in Q4, and so that is going to be in a better opportunity for us to talk about what we've been able to achieve.
Speaker Change #116: Financially in 'twenty, four and how we're thinking about 25.
Speaker Change #117: What I would say is we talked today in the prepared remarks about planning the business and making that business, but equally important is the work that we're doing on the buy side and we are realizing benefits from our procurement savings expected logistic.
Speaker Change #117: <unk> supplies.
Speaker Change #117: A.
Speaker Change #117: Move perspective, having the analytics across our refrigerated network too.
James Snee: So we're still very excited about the business, obviously this disruption is never a good thing, but the team has done great work and feel like we'll be able to get back to hitting on all sit wonders in the not too distant future. Thank you.
Speaker Change #117: Enhance our service levels and just I mean, just in general our processes are really developing and in mature. It will also have the opportunity to talk about portfolio optimization and so we're not in a position to get into the financial part today, but rest assured we will we will do that.
Rupesh Parikh: Your next question comes from Rupesh Parikh with Oppenheimer. Your line is now open.
Speaker Change #118: On the Q4 call Yeah, no I would just add as well.
Rupesh Parikh: Good morning. Thanks for taking my question.
James Snee: And Deanna also congrats on your retirement. Just starting out with volumes. How did volumes play out first of your expectations for the quarter? The biggest things for us, Rupesh in the third quarter was the planters volume. Was lower than we expected. Talk about the contract manufacturing piece. That was another part that was significantly lower than than we expected. You know, Turkey was a decline year over year, but largely in line with what what we did expect.
Speaker Change #119: You'll see you know some of the benefits that you see showing up here in terms of the margin expansion in the business is a direct result of those savings thats falling through the bottom line from different different places in the P&L, whether that's from a gross margin standpoint or truly.
Speaker Change #119: To earnings, where we're driving that savings and efficiencies in our supply chain. So.
Speaker Change #119: Stay tuned here for our call in Q4 for us to really give you a lot more color there.
Speaker Change #119: Okay.
Speaker Change #120: I appreciate that and if I guess ask a follow up just on the sales guidance for.
James Snee: Great. And then I'm not sure how much you can comment on this, but as we look in next next fiscal year, does any initial puts and takes you can share, you know, obviously planters, you know, could be a tailwind as we go into next year. Both want to get a sense of, you know, whole bird turkey into contract manufacturing. If we, you know, maybe this could be a net neutral or even positive as we look out the next year.
Speaker Change #120: For the fourth quarter.
Speaker Change #121: Kind of implies down down six 4% year over year, just any kind of rough framing on the split there between kind of volume versus versus price mix.
James Snee: Yeah, I mean, you know, I'm going to say that it's early for us to be to be talking about 2025, but I do think there are, you know, some specific areas that, you know, as we're starting to look into that timeframe and think about it, you know, to the comments I just made. Obviously, we expect planters to be able to rebound and hit again on all cylinders, both retail food service that continued build in our our transform and modernize initiative.
Speaker Change #122: And a company level by segment for the for the fourth quarter as Youre thinking about it than others.
Speaker Change #123: Can be a lot of noise.
Speaker Change #123: With the commodity Turkey whole birds, and some of the fresh meat exports and the <unk>.
Come in so I would just help clarify kind of where.
Speaker Change #124: So those are going to kind of flow through the P&L are through the sales line in the different businesses. Thank you.
Speaker Change #124: Yeah. Thanks, Adam So as we're thinking about the Q4 outlook, we expect the retail business to be.
James Snee: You know, we expect to be able to maintain some of the momentum in our key retail brands. You know, our international business is really hitting it's right and we expect that to continue to grow. The other part in all of this is, you know, to make sure you have the available capacity to grow. And so we have spent a lot of time on that as well to make sure that we have the necessary capacity to support some of our strategic growth areas.
Speaker Change #124: Down mid single digits, a lot of the retail dynamics.
Speaker Change #125: <unk> will be similar we talked about contract manufacturing not commands.
Speaker Change #124: Yeah.
Speaker Change #124: Some of the market impact that we had originally thought was going to be there.
Speaker Change #124: As we continue to work through the plant or a situation, but mid single digits is a good number for retail we expect foodservice to be up mid single digits.
James Snee: And then as I, you know, I commented on Peter's question, the turkey part just is so dynamic and has so many moving parts that it's really early at this point. But yeah, there's a lot of puts and takes, but there's there's a lot to like about the work that we've been doing and that's why, you know, we're excited about the position we're in, even though we're navigating some of these, you know, identified headwinds.
Speaker Change #124: International.
Speaker Change #126: Well be lapping on the volume side commodity business again, but we do see improved mix that'll get sales to low single digits and it gets us to the range Youre, describing which is really low low single digits, but I think the.
Rupesh Parikh: Great, thank you for the color.
Speaker Change #126: The takeaway here is we can do that math, but the core business is very healthy for our retail foodservice and international.
Michael Lavery: Your next question comes from Michael Lavery with Piper Sandler. Thank you.
Michael Lavery: Good morning. Just one more back on planters. You mentioned with the additional three cents expected impact and stretching into 4Q. You said, I think the term was commercial impact along with some of the other things you cited and just want to make sure I understand exactly what that means. And is that, does that point to any potential distribution losses? You might have to recover and could, if so, could that stretch into 20 into fiscal 25?
Speaker Change #127: Okay. That's very helpful. I appreciate the color I'll pass it on.
Speaker Change #127: There are no further questions at this time I will now turn the call over to Jim Snee for closing remarks.
Speaker Change #127: Yes.
Jim Snee: We are pleased to have delivered another quarter of better than expected earnings.
Jim Snee: While we continue to navigate several identified headwinds our team remains focused on finishing the year strong and delivering on our commitments.
Speaker Change #128: I want to thank all of you for joining US This morning, and hope you have a good rest of the week.
Michael Lavery: Yeah, Michael, it is that the commercial impact is the, you know, the sales impact that we're missing out on, you know, at this point, we have not had any distribution losses. You know, obviously we've been able to work through inventory, we're ramping up production, supplementing that with co manufacturing. And although we're not where we need to be, you know, we were certainly navigating the situation and in constant communication with our customers.
Jim Snee: Yeah.
Speaker Change #129: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Speaker Change #129: Oh.
Speaker Change #129: Okay.
Speaker Change #129: Okay.
Speaker Change #129: Okay.
Speaker Change #129: Yeah.
Michael Lavery: The part that we don't want to lose sight of is that, you know, planters is a very, very important brand in this category. And so, you know, when we're, when we're talking to customers, there's that recognition, they always want us back up and running faster. We want to be back up and running faster, but it's an important part of the category and, you know, we can't tell you today exactly what type of still over there, there might be into 2025. But, you know, again, we're doing everything that we can to make sure that we're filling those needs.
Michael Lavery: Okay, thanks.
Speaker Change #129: Okay.
Michael Lavery: And just on the capex guide that you're holding, it points to a pretty big spend in 4Q. Is that correct? And just what, you know, maybe what would some of that be? You didn't change it. So I guess it's not the sort of fix up costs for the storm damage. What's, you know, any color on just the what seems like a big spike up in the late in the year and capex?
Michael Lavery: Yeah, the more Michael. So, so, so you are corrected. This is fairly consistent actually with how it sequences during the year and so Q4, we typically do see a big spend. And so we're comfortable with achieving that about the 280 million that we have, we have put out for for the year. So nothing really unusual in terms of the spend this time of the year. And our engineering team does a really good job of scrubbing the projects and the spend rate throughout the year. So yeah, we feel like we're in a good position. Okay, thanks.
Unknown Executive: Well, that's a lot.
Heather Jones: Your next question comes from Heather Jones with Heather Jones Research. Your line is now open. Thanks for the question.
Heather Jones: My first question is going back to the whole bird turkey and command comments. I think y'all said they represent roughly three quarters of the net sales decline declines, but given their lower price points, is it fair to think that they are more bigger chunk of the volume decline and just wondering when those comparisons will be psyched? Yeah, I mean, I think it's from a volume perspective. It's it's fairly fairly equal. You know, as as we're working through the holiday season for 2024, you know, we'll get better visibility in terms of, you know, what the demand is, what the sell through is, you know, what the supply side of the businesses. And so, you know, while it would be nice to say that you're going to have a clear read heading into 2025, those those read throughs tend to be a bit delayed.
James Snee: So it'll it'll be probably spring of 2025 before we're really able to give a better view of how that cycle looks. And what about the co man side, is that you're talking about that as well or just where your comments more on the from the whole bird side? That was more on the whole bird side. So I'm sorry, Heather, I missed your co man question. Could you go ahead and elaborate on that again?
James Snee: Well, you were, you all said that co man planners and whole bird were roughly three quarters in the net sales decline in the quarter. And they're lower price points. I was assuming they're a bigger chunk of the volume decline. And then I was wondering when you think you'll cycle the co man softness. Yeah, so Heather, just what we've said is it's contract manufacturing. And so that is a facility, century foods that we own.
James Snee: And so where I mean, we're constantly working on that business to drive demand and bring new business into the facility. So that is not a co manufacturing issue. It's a facility that we own and we refer to it as contract manufacturing.
Heather Jones: Okay, then my second question is going back to Gal's analyst day, yes, last year in targeting 250 and even improvement by 26. It seems like this year is likely to be down year on year, so applying a greater lift by 26 and just wondering, given what's happened with planners and whole birds, et cetera, is there anything that changes your view as to that the chief ability of that?
James Snee: Good morning, Heather. I just in terms of clarity, you mentioned that we're down year over year and not from clear on that piece of it. What I can tell you is that we are tracking really well towards achieving that 250 by 26 and will definitely give more color in the Q4 call. As we talked about during our investor call, October last year, we called the shearers being, you know, 2024, a year of investment for sure. And so there will be a pretty good ramp 25 to 26. That being said, we are seeing really meaningful impact to our margins and our bottom lines here in 2024, irrespective of that.
Heather Jones: Okay, all right, thank you.
Adam Samuelson: Your next question comes from Adam Samuel Sengwith Goldman Sachs. Your line has now opened. Yes, thank you.
Adam Samuelson: Good morning, everyone. Maybe kind of following up on Heather's question in a slightly different way. I know you're going to give a bigger discussion of the transformer modernized initiatives on the fourth quarter call. But can you help dimensionize the amount of savings that you have realized year to date from those initiatives? You talked about the fourth quarter being the strongest contributor from those initiatives of the year. So what ballpark are those expected to be on a year on your basis, as we started and think about that annualized run rate into 2025?
Adam Samuelson: Yeah, and Adam, we are going to provide a deeper dive in Q4. And so that is going to be the better opportunity for us to talk about what we've been able to achieve financially in 24 and how we're thinking about 25. You know, what I would say is, you know, we talked today in the prepared remarks about planning the business and making the business, but equally important is the work that we're doing on the buy side.
Adam Samuelson: And we are realizing benefits from our procurement savings, expected logistics supplies, you know, from a move perspective, having the analytics across our refrigerated network to enhance our service levels. And just, I mean, just in general, our processes are really developing and and we'll also have the opportunity to talk about portfolio optimization. And so we're not in a position to get into the financial part today, but rest assured, we will do that on the Q4 call.
Adam Samuelson: No, and I'll just add as well, Adam, you'll see, you know, some of the benefits that you see showing up here in terms of the margin expansion in the business is a direct result of those savings that's falling through the bottom line from different different places in the PNL, where then that's from a gross margin standpoint or truly to earnings, where we're driving that savings and efficiency in our supply chains. And so stay tuned here for our call in Q4 for us to really give you a lot more color there.
Adam Samuelson: Okay, I appreciate that and if I guess I could follow up just on the sales guidance for the fourth quarter kind of implies down, down six up 4% year of year, just any kind of rough framing on the split there between kind of volume versus, versus price mix. And kind of company level is by segment for the for the fourth quarter is you're thinking about it and others can be a lot of noise with the commodity turkey whole birds and some of the fresh meat exports and the command so I just help clarify kind of where those are going to kind of flow through the PNL or through the sales line in the different businesses.
Adam Samuelson: Thank you. Yeah, thanks Adam. So as we're thinking about the Q4 outlook, we expect the retail business to be down mid single digits, a lot of the retail dynamics will be similar. We talked about contract manufacturing, not commands, you know, the some of the market impact that we had originally thought was going to be there as we continue to work through the planter situation. But mid single digits is a good number for retail, we expect food service to be up mid single digits, you know, international will be lapping on the volume side commodity business again, but we do see improved mix that will get sales to low single digits and it gets us to the range you're describing, which is really low single digits. But I think the takeaway here is we can do that math that the core business is is very healthy for retail food service and international. Okay, that's a very helpful. I appreciate the car passing on.
Operator: There are no further questions at this time.
James Snee: I will now turn the call over to Jim Smith for closing remarks. We are pleased to have delivered another quarter of better than expected earnings, while we continue to navigate several identified headwinds, our team remains focused on finishing the year strong and delivering in our commitments.
James Snee: I want to thank all of you for joining us this morning and hope you have a good rest of the week.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating in that that you please disconnect your lines.
Thank you very much.