Q4 2024 Pilgrim's Pride Corp Earnings Call
Good morning, and welcome to the fourth quarter and fiscal year 'twenty 'twenty four Pilgrim's Pride earnings conference call and webcast.
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Please note that the slides referenced during today's call are available for download from the investors section of the company's website at Www Dot Pilgrim's Dot com.
Speaker Change: After todays presentation, there will be an opportunity to ask questions I would now like to turn the conference over to Andrew Rydzewski head of strategy Investor Relations and sustainability for Pilgrim's Pride.
Speaker Change: Good morning, and thank you for joining us today as we review our operating and financial results for the fourth quarter and fiscal year ended December 29 2024.
Speaker Change: Yesterday afternoon, we issued a press release, providing an overview of our financial performance for the quarter and the year, including a reconciliation of any non-GAAP measures we may disclose.
Speaker Change: A copy of the release is available on our website at IR <unk> com along with slides for reference. These items have also been filed its form eight Ks and are available online at SEC Gov.
Speaker Change: Fabio Sandri, President and Chief Executive Officer, and Matt Galvin, Oni, Chief Financial Officer will present on today's call.
Speaker Change: Before we begin our prepared remarks, I would like to remind everyone of our safe Harbor disclaimer today's call may contain certain forward looking statements that represent our outlook and current expectation at the day of this release other additional factors not anticipated by management may cause actual results to differ materially.
Speaker Change: From those projected in these forward looking statements.
Speaker Change: Further information concerning these factors have been provided in yesterday's press release, our Form 10-K, and our regular filings with the SEC I would now like to turn the call over to Fabio Sandri.
Fabio Sandri: Thank you Randy.
Fabio Sandri: Morning, everyone and thank you for journey yesterday.
Fabio Sandri: I look forward to reveal our Q4 and full year 2024 results today would you invite everyone for our upcoming Investor Day on March 14 for more details.
Fabio Sandri: Long term vision strategy.
Fabio Sandri: For the fourth quarter were 50 54, we reported net revenues of $4 4 billion, along with adjusted EBITDA of $536 million and adjusted EBITDA margin of 12%.
Fabio Sandri: Our Q4 performance.
Fabio Sandri: You should have our strategies as well as our diversified portfolio. They can capture market that's fun.
Fabio Sandri: Offer differentiated products with <unk>.
Fabio Sandri: First the consumer demand combined with our relentless pursuit of operational excellence.
Our U S fresh portfolio improved compared to last year. It was a big burden expanded margins through a combination of strong stable commodity cutout values progress in operational excellence.
Fabio Sandri: He's ready and small birds also drove profitable growth.
Fabio Sandri: Performance.
Fabio Sandri: We can brooks and efficiencies.
Fabio Sandri: Pretty good customer demand and lithium you look for in Delhi.
Fabio Sandri: Prepared foods group.
Fabio Sandri: Last year as interest strengthen for our offerings in retail and foodservice.
Fabio Sandri: Different groups and fine art works for them.
Fabio Sandri: Margins expanded even continued optimization of our manufacturing network and integration of support activities, including our back office.
Fabio Sandri: All scale remained stable retail as consumers increasingly migrate to that perhaps how diversified portfolio is the key.
Fabio Sandri: Yes, Brendan offerings and poultry.
Fabio Sandri: Food service grew double digits from a combination of additional distribution and increase traffic for away from home eating occasions next.
Fabio Sandri: Mexico experienced a stronger Q4, that's commodity market prices increased throughout the quarter.
Fabio Sandri: In both fresh and prepared to.
Fabio Sandri: To keep customers continue to grow from prior year.
Fabio Sandri: Momentum for our branded offerings increased throughout the market.
Fabio Sandri: Diversifying our portfolio.
Fabio Sandri: For the fiscal year 'twenty 'twenty four net revenues were seven people 9 billion with adjusted EBITDA contributed translated into an adjusted EBITDA margin of 12, 4%.
Fabio Sandri: So all pretty pretty for.
Fabio Sandri: <unk> experienced improved chicken demand lower grain cost impasse its commodity.
Fabio Sandri: These factors will combine with key customer growth and progress in operational excellence profitability increased compared to prior year.
Fabio Sandri: Our Europe business undertook a variety of steps to improve our manufacturing network simplify that structure and drive innovation.
Fabio Sandri: These efforts with strengthening our marketplace, Bergen and expanded margins in Mexico commodity sales benefited from reduced input costs and balance supply demand that generated more stable pricing.
Fabio Sandri: These factors were fortinet amplified that works with our key customers that include interest of our branded offerings among consumers improving margins compared to last year.
Fabio Sandri: Turning to supplying last year you indicated.
Fabio Sandri: Indicated ready to Cook, a breakthrough from the Rex chicken children, two 5% compared to the fourth quarter of 'twenty three.
Fabio Sandri: Increases in head count accounted for the production group and.
Fabio Sandri: In beverage Lightweights were comparable to last year.
Fabio Sandri: Perfect. Thank you for the industry more fiacco superfood declining year over year, however, sustained efficiency improvements in the flock.
Fabio Sandri: Coupled with reductions in Mexico, So Greg it's either an increase in excellent resulting in record after utilization.
Fabio Sandri: And it works for me.
Fabio Sandri: M year Searchability continues to be challenged even though the benefit from seasonality based on Europe.
Fabio Sandri: As a result.
Fabio Sandri: Industry rate Q trailed prior year limiting the accretion that would be great.
Fabio Sandri: That's such a big piece continued to lag historical averages.
Fabio Sandri: The data also suggests that the industry has three additional legs to upset the.
Fabio Sandri: Challenges improve lead conversion.
Fabio Sandri: And lively.
Fabio Sandri: Also for it it would be to take those issues.
Fabio Sandri: The Usda's. Most recent production report indicated that ready to group production increased by one 3% for the year.
Fabio Sandri: Driven by significant growth in the second.
Fabio Sandri: For 50, 55, <unk> projecting growth of one 4% with increases in egg sets and placement.
Fabio Sandri: Partially compensated by continuing challenges in taxability more college.
Fabio Sandri: You asked me also reports overall protein availability to grow only one 2%.
Fabio Sandri: Significant decline in overall beef.
Fabio Sandri: We didn't do a supported demand environment for chicken.
Fabio Sandri: That's what the demand in the west.
Fabio Sandri: <unk> proteins.
Fabio Sandri: It exceeded the cost of heating out increased more rapidly than eating at home.
Fabio Sandri: Only to express practicing E tail we.
Fabio Sandri: It remains very competitive.
Fabio Sandri: Currently more than two years ago and stable compared to prior dark meat continues to increase in domestic demand.
Fabio Sandri: While the entire fresh meat department.
Fabio Sandri: Sales growth during the quarter chicken.
Fabio Sandri: The Michigan pricing advantage compared to Gilbert coatings continue to enable growth and satisfy strong consumer demand for a hearing pizza and set up a free option.
Fabio Sandri: The remainder of chicken or group will continue to build on the strong foundation set earlier.
Fabio Sandri: A year.
Fabio Sandri: In both the dairy and food began rabbit demonstrate keeping the ability to meet the needs of consumers seeking to rationalize.
Fabio Sandri: Can you ballpark repricing convenience.
Fabio Sandri: The foodservice Baldwin Wallace Hills, Bolton commercial and non commercial distribution channels.
Fabio Sandri: Where specifically bolstered by strong demand for granted branded products.
Fabio Sandri: Volume and dollar growth also indicate continued transition from foodservice restaurants.
Fabio Sandri: Suggesting consumers are favoring are relatively less expensive to go bring from home option.
Fabio Sandri: Their dollars, Florida.
Fabio Sandri: Yep exports Barney was a slower year over year, well actually redeemed at par.
Fabio Sandri: <unk>.
Fabio Sandri: Domestic demand for dark meat in the rents continues to be the key for increased bad news.
Fabio Sandri: Excellent.
Fabio Sandri: At the end of Q4 overall inventory decline as cold storage inventory dropped 1% month over month, and it was 8% lower compared to last year.
Fabio Sandri: Both graphs, Nathan dark meat, once again showing year over year.
Fabio Sandri: Are you anticipating export demand to remain strong despite some with directional trade schools triggered by multiple high path AI also bring in the system.
Fabio Sandri: In the south eastern.
Fabio Sandri: Let's see.
Fabio Sandri: Most of our trading partners other than China in Ireland have reduced spending levels consumes and counting.
Fabio Sandri: That's correct.
Fabio Sandri: The diversity of our production locations in U S. What do you need to provide flexibility to transition production to breaks apart. In addition, I wasn't happy with like a new cabinet should relieve the procedure to follow if disruptions in March which further to mitigate the impacts of what things go bad.
Fabio Sandri: Turning to feed corn unappreciated motherhood.
Fabio Sandri: Q4 yields somewhat mitigated price means from LP corn export demand.
Fabio Sandri: Perfect.
Fabio Sandri: So that'd be more self funding.
Fabio Sandri: Processing capacity creep supply for the next thing they.
Fabio Sandri: Taken together overall food cost slightly declined.
Fabio Sandri: You have to be lowered the primary route for the 'twenty 'twenty, four corn and soybeans and they're generally crop report you put them into those changes both corn and soy real lives.
Fabio Sandri: Yes.
Fabio Sandri: Nonetheless.
Fabio Sandri: Stop laughing globally are expected to contract versus the prior year.
Fabio Sandri: You heard this contraction in.
Fabio Sandri: The likely trading range and market volatility for corn is expected to increase.
Fabio Sandri: For 2025.
Fabio Sandri: The limited demand from China for corn and potential for strong growth in U S corn acreage versus last year and are currently limited upside so far.
Fabio Sandri: Culture.
Fabio Sandri: These folks are expected to grow in both of the last name globally compared to last year as a Brazilian crude production is expected to more than offset the crop losses from Argentina.
Fabio Sandri: Soybean meal was anticipated to be well supplied across the globe.
Fabio Sandri: Can we.
Fabio Sandri: All of those folks that are expected to decline slightly compared to last year. Nonetheless winter wheat plantings in the fall of 'twenty 'twenty four will be less in Europe, better than expected cognizant, Australia, and Argentina and increased acreage in your Kitty may improve the availability and pricing for next year.
Fabio Sandri: Moving forward well.
Fabio Sandri: Looking at your monitor changes in global grain demand Blayne team and development. After the second crop in Brazil, any X lurking patients when conditions moving forward.
Fabio Sandri: Turning to be less of a diversified portfolio across both sides, which benefited from elevated demand compared to seasonal trends.
Fabio Sandri: Commodity cutout vendors were notably higher than the average over the past five years. Furthermore, input cost that's likely throughout the quarter with declines in soybean yield more than offset an increase in core.
Fabio Sandri: Given this environment profitability at our big bird business improved significantly compared to last year.
Fabio Sandri: Projects and operational excellence to improve yields.
Fabio Sandri: Labor productivity pardon amplified outperform.
Fabio Sandri: In case ready retail demand to remain strong as consumer increasingly torched it didn't even exist.
Fabio Sandri: Okay.
Fabio Sandri: Group, we probably keep customers continued to accelerate as our sales increase significantly above the category efforts.
Fabio Sandri: These factors combined with a continued focus on quality and service piece of.
Fabio Sandri: Profitability improved for citizens.
Fabio Sandri: Compared to last year.
Fabio Sandri: Is it that you're also continues to cultivate and competitive advantage.
Fabio Sandri: French needed offerings and operational activity.
Fabio Sandri: And during the quarter equal what did one of our locations to an air tool technology in partnership with a key customer as a result, we consolidated leadership in differentiated categories.
Fabio Sandri: For some key customer relationships.
Fabio Sandri: Given these recent investments along with our leadership in the Oregon and do more.
Fabio Sandri: Once BARDA average chicken categories cheeky pink ready continues to enhance its competitive advantage through higher attribute equally.
Fabio Sandri: The shaded offerings.
Fabio Sandri: As you know growth opportunities continue to emerge as we therefore keep customers to differentiate and generates robust demand from consumers.
Robert: Robert also benefited from certain areas.
Fabio Sandri: Got it.
Robert: Customers continue to increase their marketplace.
Robert: When combined with our proven operational excellence, our profitability grew substantially compared to Q4 of 2033.
Robert: Our diversification to prepared foods continued its momentum in the fourth quarter, our skills to keep customers significantly outpaced the category average brand continue to play an instrumental role as a share of just there.
Robert: We expect over 200 basis points compared to last year.
Robert: In addition, we think relaunch of premiums do traction with it.
Robert: Julia consuming the synergy given the high quality and through distribution.
Robert: Similarly, our subscribers continue to grow through additional distribution and increased velocity through our portfolios in.
Robert: In Europe, we continue to improve our business.
Robert: The integration of our support functions and optimization of our manufacturing network.
Robert: Exactly.
Robert: We've been marching extension, while cultivating a more nimble.
Robert: Customer focused organization to scale profitably grow in 'twenty five and beyond.
Robert: Were in the quarter.
Robert: We became increasingly attractive as consumer sentiment improve and wage growth continue to sort of flex inflation.
Robert: Our poultry and chilled meals business benefited from character both value and volume in grocery.
Robert: Our branded portfolio realized similar gain given its growth through the quarter led by Frigerator and rollover.
Robert: Each grew faster than the category, we continue to leverage the rich multiple similar affiliation and extend its portfolio.
Robert: We can produce these grocery was the best new product.
Robert: A warm fleets roast chicken sausage, our food service visits also exceed similar.
Robert: Net sales increased double digits.
Robert: Innovation remains a priority to drive profitable growth.
Robert: And we strengthened our partnership with key customers through innovation with a series of investments and line extensions new products and packaging.
Robert: When combined with a working brands, we have launched in the U a significant.
Robert: A portion of our portfolio of products several launches in this fourth quarter.
Robert: Our efforts continue to be remarkably well received by customers.
Robert: Innovation now accounts for over 6% up on last year.
Robert: Our efforts in sustainability also have generated commercial benefits, we keep customers during the quarter. We were recently awarded incremental business given our animal welfare standards.
Robert: We continue to explore opportunities throughout the three people that have differentiated performance and standards.
Robert: Turning to Mexico margins improved from better supply demand fundamentals and continued execution of our strategy.
Robert: And the lifeblood market.
Robert: Quality vendors increased throughout the quarter and overall green costs fell slightly compared to Q3 upside potential.
Robert: Deep customer relationships strengthen as we've just finished volumes grew in the high single digits.
Robert: Well, it's really changed the wording was over 15% and the momentum in our fresh branded offering school opinion as long as it can be nearly 10% compared to the same quarter last year.
Robert: We continue to be worthwhile for 'twenty two value added offerings, given the growth in our prepared foods business.
Robert: Key customer volumes continue to grow in both retail and foodservice.
Robert: And our innovation pipeline has been well received through the trade.
Robert: Efforts to reduce our personal risk and liable creation.
Robert: Our production capacity remain on track.
Robert: Our ramp up for production, maybe there is proceeding as planned and the relocation of the breeder farms mainly truck.
Robert: We recently brought online the additional production in prepared foods, and dark pool or a need for it as well as we continue to explore opportunities for it.
Robert: We also continue our journey of sustainability.
Robert: And there's been a reduction in our scope one and two emissions intensity across all regions. In addition, we continue to explore solutions from leading industry partners that leverage our operational capabilities and fresh with collaborators at green gas USA form our biogas to renewable.
Robert: Yeah.
Robert: This one does that works they tend to reduce emissions.
Robert: Supporting the renewable energy market.
Robert: Moving forward, we will continue to drive efforts to further reduce our emissions footprint.
Speaker Change: With that I'd like to ask our CFO to discuss our financial results.
Speaker Change: Good morning, everyone.
Speaker Change: As I review, our financial performance. Please note that our fourth quarter 2023.
Full year, 2020 period, or 14 week, and 53 week periods, respectively, which were impacted period over period comparisons.
Speaker Change: For the fourth quarter of 2024, net revenues were $4 three $7 billion versus $4.53 billion, a year ago with adjusted EBITDA of $525 $7 million and a margin of 12% compared to $395 million and six 8% margin in Q4 of last year.
Speaker Change: Fiscal year 2024, net revenues were 17 $49 million versus $17 4 billion in fiscal 2023, with adjusted EBITDA of $2 to $1 billion in a 12, 4% margin compared to 1.13 billion and a 6% margin last year.
Speaker Change: Adjusted EBITDA in the U S. For Q4 came in at 370 $146 million with adjusted EBITDA margins at 14, 2%, our big bird business profitability significantly improved year over year as commodity market pricing improved grain costs were lower in the business achieved further operational improvements.
Speaker Change: Also driving the improvement in our quarterly U S results were increases in profitability in both our case ready and small bird business.
Speaker Change: These businesses continue to deliver high quality and strong customer service, allowing us the opportunity to increase distribution with our key customers. Our prepared foods business continued its momentum of branded product sales growth with both retail and foodservice customers.
Speaker Change: During the quarter within our U S. GAAP earnings we reported $95 million in litigation related settlement charges also in the quarter, we finalized the U S pension plan termination program.
Speaker Change: Earlier in the year and recorded $10 $9 million of pension settlement charges.
Speaker Change: <unk> obligation termination is now fully complete.
Speaker Change: One of the fiscal year, our U S. Net revenues were $10 six $3 billion versus 10.13 billion in fiscal 2023, with adjusted EBITDA of $1.56 billion, and a 14, 7% margin compared to $531 5 million and a five 3% margin last year.
Speaker Change: Business maintained its momentum throughout the year with increased sales volume and deliberating operating efficiencies with the backdrop of supportive commodity markets and lower grain cost.
Speaker Change: In Europe adjusted EBITDA in Q4 was $117 $1 million versus one or $2 5 million in 2023, a 14, 2% increase for the full year of Europes adjusted EBITDA improved 28, 3% to $407 million in 2024 from 317 million in 2023.
Speaker Change: Europe drove improved profitability through further operational excellence, including plant closures consolidation of support functions and streamlining the overall management organization structure.
Speaker Change: The efforts over the last two years. It provides the foundation for further cost savings and it's allowed us to partner more efficiently with our key customers in the region, we recognized approximately $93 million of restructuring charges. During the year, while we continue to pursue efficiency measures. We anticipate the vast majority of the charges for these programs are behind us.
Speaker Change: Mexico made $336 $9 million and adjusted EBITDA in Q4 compared to $6 8 million last year, when considering the full year, Mexico made $248 5 million in adjusted EBITDA or an 11% 11, 8% adjusted EBITDA margin Bettering last year's eight 7% margin.
Speaker Change: Here the supply demand fundamentals were well balanced in Mexico.
Speaker Change: Our GAAP SG&A expenses in the fourth quarter and for the full year were higher than prior periods, primarily due to increased legal settlement expenses and higher incentive compensation cost, partially offset by cost efficiency primarily in achieved in Europe.
Speaker Change: Net interest expense for the year was approximately $100 million, including excluding the gain on the realized debt purchases.
Speaker Change: Earlier in the year currently forecast for 2024 net interest expense to be between 65 and $75 million.
Speaker Change: Our full year effective tax rate was 23.0%.
Speaker Change: We recorded a discrete tax planning items in the fourth quarter, which lowered our full year effective tax rate from our pace through the first three quarters of the year.
Speaker Change: For 2025, we anticipate an effective tax rate to approximate 25%.
Speaker Change: We have a strong balance sheet and we'll continue to emphasize cash from operating activities management of working capital and disciplined investment in high return projects that was at the end of the year, our net debt totaled approximately $1.15 billion with a leverage ratio of approximately 0.5 times, our last 12 months adjusted EBITDA our liquidity.
Speaker Change: Position remains very strong and at the end of the fiscal year, we had approximately $3 $1 billion in total cash and available credit we have no short term immediate cash requirements without bonds maturing between 20, and 31 2034, and our U S credit facilities not expiring until 2028.
Speaker Change: Our liquidity position allows us to explore further growth opportunities, including organic growth to meet our key customers' needs.
Speaker Change: We finished the year spending $476 million of Capex.
Speaker Change: This included the conclusion of the construction of the Premier protein conversion point in South, Georgia, and other growth projects to support differentiating product attributes for our key customers.
Speaker Change: We will continue to prioritize our capital spending plans to ensure the safety of our team members optimize our product mix and strengthen our partnerships with key customers currently forecast spending between 450 and $500 million in Capex for 2025, primarily to sustain our operations and for other more routine growth project.
Speaker Change: We are intently focused on growth opportunities first in the last few years, we have invested in our plants in both growth targets and product attributes requested by our key customers and we will continue to do so as we cultivate these relationships.
Speaker Change: So we foresee investments in additional protein conversion capacity to both upgrade our product mix and manage risk by reducing our exposure in outside protein conversion operators. Finally, as we've discussed extensively our U S prepared foods business has grown our branded portfolio through innovative and differentiated products and we anticipate expanding our capacity to meet the growth.
Speaker Change: Trajectory of this portfolio.
Speaker Change: Finally, we have a great business in Mexico, and if organic growth properties in both fresh and prepared.
Speaker Change: These near term growth opportunities aligned to our overall strategy to portfolio diversification focus on key customers operational excellence and our commitment to team member health and safety. Please note we may revise capex spending estimates to accommodate our growth aspiration.
Speaker Change: Continue to flower disappointed approach to capital allocation as we look to profitably grow the company and continue to align investment priorities with these overall strategy.
Speaker Change: We are looking forward to our Investor day in March 14th to share with you our strategic outlook.
Speaker Change: Detailed views on these growth opportunities and further commentary on our capital allocation philosophy.
Speaker Change: Operator. This concludes our prepared remarks, please open the call for questions.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: The interest of allowing equal access we request that you limit your questions to two then rejoin the queue for any follow up.
Speaker Change: I ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to minimize background noise.
Speaker Change: Draw. Your question you May Press Star then two at this time, we will pause momentarily to assemble our roster.
Speaker Change: Today's first question comes from Ben Theurer with Barclays. Please go ahead.
Ben Theurer: Hi, Yeah. Good morning, Thanks for taking my question for you I have to Congress on the results.
Speaker Change: Good morning, guys.
Speaker Change: Yeah. So just to start off maybe just talk a little bit about the market dynamics, what happened in the fourth quarter and as we're moving into the first quarter clearly <unk> was very strong I mean, it feels like there was still a little bit disruptions from the Hurricanes late September early October.
Speaker Change: Coupled with a I, so maybe help us understand a little bit what's been driving these very strong.
Speaker Change: The cutout values, particularly on the Big Bird side as you as you think about it throughout the fourth Florida, but also what you are showing early stage again January you're still being being very elevated so that would be my first question.
Second question that would be more for Matt.
Matt Galvin: And in regards to capital allocation.
Speaker Change: The guidance for the Capex of $4 50 to 500 million it kind of feels a little low of what you can do given the $2 billion in cash that you have available versus wood tends to be a long term average more like $500 million. So anything that you can share maybe in terms of the thoughts around dividends or any other.
Speaker Change: A way of cash return, just given where we're up to lever. It yes. Thank you very much.
Speaker Change: Sure. Thank you.
Speaker Change: Youre right. There is always some seasonality in the chicken business and typically Q4 is a weaker quarter in there.
Speaker Change: For the year.
Speaker Change: It's because of the seasonality of consumption because of Thanksgiving and Christmas. We saw this year with a very strong demand for chicken and I think that is.
Speaker Change: Because of the relative affordability of chicken.
Speaker Change: And some of the menu penetration in food service.
Speaker Change: In Q4 and throughout the year, we saw an increase in demand at retail and food service for chicken.
Speaker Change: In the retail.
Speaker Change: Notably we saw on the phasing for the good progress.
Speaker Change: The fresh category and also on the daily or weekly.
Speaker Change: All of those three categories, leading the demand in the retail and foodservice.
Speaker Change: So despite a reduction in the traffic.
Speaker Change: Especially affected instead of its restaurants, the cube cars continue to grow the demand for chicken and I think that's because of the chicken promotions and Oh man you penetrate.
Speaker Change: And attrition definitely being scheme, so both the retail and foodservice actually increase during Q4 year over here.
Speaker Change: I'm fine what we saw during Q4 because of some of the storms and some of it will be.
Speaker Change: Bad weather and the continued.
Speaker Change: The problem with hatch ability and morphology production was close to one 4%, but the big boys category, which will put more commoditized. One was actually flat. So we saw an increase in demand because of the factors that I mentioned with a flat production.
Good morning to category and there.
Speaker Change: Sustained prices at stable levels and that was a matter of fact now in Q1, which typically features which is a rebound in the demand for chicken receipt prices actually going up almost every day and the commodity category.
Speaker Change: And Ben this is Matt.
Ben Theurer: Thanks, that's a completely fair question relative to where our cash position sits today and our overall leverage I think I'd go back to what I mentioned in the prepared remarks that right now we're guiding at a $4 50 to 500 on the call are sustaining capex plus more you know more routine or smaller growth projects.
Ben Theurer: As I mentioned in her before then in the prepared remarks.
Ben Theurer: Look we are really looking at growth opportunities organic growth opportunities.
Ben Theurer: Partnering with our key customers to increase our protein conversion prepared business needs to expand its capacity and I think we'll be able to talk more about that at the investor day in about a month and we'll look forward to talking about that and just kind of overall capital allocation philosophy and thoughts at that time.
Speaker Change: Okay. Thank you very much congrats again.
Speaker Change: Thank you. The next question comes from Peter Galbo with Bank of America. Please go ahead.
Peter Galbo: Hey, guys good morning.
Speaker Change: Thank you for the question.
Ben Theurer: Maybe to pick up just on on Ben's question around the U S.
Fabio Sandri: Fabio I think I'm, a little bit of the pressure. This morning, as he is probably that the U S.
Fabio Sandri: You know even seasonally still came in a bit below expectations relative to the street.
Fabio Sandri: So just trying to get maybe.
Fabio Sandri: A layer deeper on the underlying I know that you have some some contracts obviously that are more grain based and so we don't have the details of the 10-K, yet but you know was there was there more of a pass through element just in pricing on grain that maybe hit you in the fourth quarter more so than anticipated.
Fabio Sandri: Just any additional color maybe by you know by sub channel would be helpful. As we think about <unk> relative to your own expectations and relative to where the street was.
Fabio Sandri: Oh sure I think were always talking about the portfolio right. Then we have exposure to the commodity markets through our big bird operations, but that is a third of our portfolio.
Fabio Sandri: The other two thirds of our portfolio at more of a small board seat and the P graduate operations, which tend to be way more.
Fabio Sandri: Hum stable and I think as we mentioned because.
Fabio Sandri: Our contract and pricing in those other segments.
Fabio Sandri: Green Bay or in negotiation and we keep the prices.
Fabio Sandri: Unless something changes either in cost.
Fabio Sandri: Or in the supply and demand and when you look at the comparison year over year, we actually improved in every single category.
Fabio Sandri: Because of our operational excellence initiatives. So there's a lot of operational excellence.
Fabio Sandri: We went through the bottom line for the year, we have more than $100 million in operational improvements but.
Fabio Sandri: Those segments had more stable and that's why we are able to capture the upside when the market is really strong, but protecting the downside and I think that's what makes up our.
Fabio Sandri: Our Baltimore line less volatile and we've been working in this portfolio over time to make sure that we.
Fabio Sandri: Can benefit from the commodity cycles and can capture the upsides, we're protecting the downside at all for the prepared foods.
Fabio Sandri: In growing our brands and through distribution enemy of course, there's an offset to the commodity cycle has a lot of the raw materials.
Fabio Sandri: Prepared foods.
Fabio Sandri: In a commodity.
Fabio Sandri: So I think that's why Q4 was even stronger than it could be but when you look at the year over year, but a significant improvement and then looking to the economy I think we saw all of the portfolio.
Fabio Sandri: And prices really changes.
Fabio Sandri: We have more stable, but we were able to capture those upsides.
Fabio Sandri: Great. Thank you for that and then Matt maybe just a couple of quick ones are modeling wise for 25, I think you said net interest expense of 65 to 75 I just wanted to make sure that I that I heard that correctly.
Fabio Sandri: And then just the two others if you could help us with deep DNA and then just how you're thinking about SG&A expense as well thanks very much.
Fabio Sandri: Sure I would.
Fabio Sandri: From an SG&A perspective, I would model it for two or $330 million to $135 million a quarter I think that'll give you a good range there to use.
Fabio Sandri: Relative to the DNA and about a 440 number annually more than $40 million and then the interest expense net interest expense.
Fabio Sandri: Just on kind of the current.
Fabio Sandri: Guide on to capital expenditures of $4 $50 million to $500 million do you think that kind of exiting the baseline to kind of.
Fabio Sandri: Look at that relative to cash generation during the year and cashews.
Fabio Sandri: And based on an estimate of what we can do for net interest interest income too.
Fabio Sandri: Got it thanks very much guys.
Speaker Change: Thank you. The next question is from Andrew <unk> with BMO. Please go ahead.
Andrew Rydzewski: Hey, good morning, Thanks for taking the questions.
Speaker Change: My first one I wanted to ask about Mexico, I, just wanted to better understand.
Speaker Change: What drove the counter seasonal kind of improvement and cut off values that you've that you've talked about and kind of how to think about given that margins in Mexico into 2025 years through 2025, a I assume that first quarter margins are probably going to be up year over year, but just trying to better understand what's going on in Mexico, and how to think about the outlook there.
Speaker Change: Sure.
And hopefully we're really happy.
Speaker Change: Happy with the margins that were having in Mexico is a growing economy. We continue to invest there as I mentioned, we're just starting a new complex and niche Linda married that region. So we are diversifying our geographic position in Mexico, and capturing most thrilled opportunities I think Mexico can be very volatile.
Speaker Change: The quarter over quarter, but then you look at the year number.
Speaker Change: Typically more stable and double digits in terms of EBIT. So we.
Speaker Change: Once again, we really believe in the economy of Mexico, now and continue to invest there I think what we saw this year.
It's a strong demand for the chicken products I think we saw also that with the high prices of the commodities in the United States, especially with at quarter's end and breast meat.
Speaker Change: For more demand in the domestic market.
Speaker Change: In Mexico.
Speaker Change: The big volatility Mexico typically comes from the life market.
Speaker Change: I think we had mentioned this many times there is still a market in Mexico, where we produce the birds and we have been wise to wholesalers.
Speaker Change: Ridiculous sports two small slaughterhouses networks, Phil the meat to the consumers actually around the Mexico City is life market is highly volatile because theres a lot of small competitors that can appear and goal.
Speaker Change: The profitability is strong or weak.
Speaker Change: That segment, which again once again called Ah Hi.
Speaker Change: That figure there I think we'd be able to improve our.
Speaker Change: Presence in that market, we continue to grow in that market. That's for all which are stable in Mexico, but we continue to differentiate our portfolio with the growth of repair.
Speaker Change: Any growth.
Speaker Change: All other branded fresh offerings.
Speaker Change: And that is the message.
Speaker Change: That is the market that continues to be highly volatile and this year I think we saw some good business in Mexico.
Speaker Change: Impacted their lives production.
Speaker Change: And that created a little bit more volatility there. We don't know if that is going to be the case in 2025 of course, we follow a very strong biosecurity, Mexico, but the movement is.
Speaker Change: <unk> increased the list in terms of Biosecurity and that's why we have a oh a disease.
Speaker Change: In Mexico, which is higher than in U S. So that's what creates more of the volatility in Mexico, but again, we continue to expect increasing demand for chicken chicken continues to be.
Affordable category for from the Mexican panels, and we will continue to invest in Mexico to grow our production.
Speaker Change: Andrew It's Matt just you know when we look back at Q1 of last year, Mexico, adjusted EBITDA margins of nine 2%.
Speaker Change: It's very solid.
Speaker Change: Q1 of last year, a great year overall.
Speaker Change: So just something to consider when you think about Q1 2025, we are lapping a nine 2% margins which were solid.
Speaker Change: Got it okay, Okay, that's clear and that's helpful.
Speaker Change: My My other question is just going back to the the U S side and if I think.
Speaker Change: Back to the summer U S margins were excellent, but breast prices were basically around the five year average level and now we're coming into this year with you know.
Speaker Change: Above average seasonal prices, so I'm I guess I'm trying to say.
Speaker Change: Think about given the way you're talking about supply and demand the right way to think about breast prices over the summer again, I mean do you think the setup here is to get to above normal prices or hold above normal prices as we get into the summer or.
Set up more similar to last year, especially in the context of feed costs.
Speaker Change: Especially on the corn side have gone up a little bit. Thanks.
Speaker Change: Yeah, I think the demand for the brand and it continues to be really strong as I mentioned last year, we saw customers close to the five year average I think the five year average that also highly impacted.
Speaker Change: Because one of my favorite high prices during the 'twenty to 'twenty two.
Speaker Change: Periods, so I I expected the NIM to continue to be strong as they're looking to the supply.
Speaker Change: We are seeing with the egg sets and chicks placed in days on what we are seeing on the hatch agreed to members and more time for members that demand. According to the U S. VA will be close to one 4%.
Speaker Change: And that is more in the first semester rather than the second semester.
Speaker Change: And if you look into the overall protein availability and less will be close to 1%. When you look at all the all the proteins, especially if the beef is really below.
Speaker Change: The USDA is expecting and because of the delta in pricing.
Speaker Change: At retail.
Speaker Change: It was brett compared to ground beef things fluctuate typically compare.
Speaker Change: Highest level in history.
Speaker Change: There's a strong demand in retail.
Speaker Change: For the chicken problems and that goal.
Speaker Change: Over the supply in the case, where the category because it takes big bird meat.
Speaker Change: What if he needs to augment the strong demand, especially in going into summer, that's what tends to increase the commodity pricing on the commodity segments.
Speaker Change: Yeah.
Speaker Change: So I expect the continued strong demand for chicken, especially during the summer.
Speaker Change: And I think the prices will react accordingly.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you. The next question is from Heather Jones with Heather Jones Research. Please go ahead.
Heather Jones: Good morning, congratulations on the quarter.
Speaker Change: Good morning.
Speaker Change: Good morning, I wanted to really asked for a clarification cause Bobby is some of your prepared comments I was had difficultly understanding so really quickly on bird flu you've mentioned some of the U S export partners that has changed too.
Speaker Change: Like a county level as opposed to state level, and then Mexico does that but I was wondering if you could repeat those comments.
Speaker Change: Which countries have switched to doing just county level.
Speaker Change: Yeah, I think the biggest reduction in terms of exports if you listen to the landscape has been felt especially pay you one.
Speaker Change: Taiwan was the one that is creating a new procedure.
Speaker Change: [laughter].
Speaker Change: Specific on the county levels, but they are changing.
Speaker Change: They are thoughtful calls to take these bundle level. This morning to some of the zones.
Speaker Change: Okay.
Speaker Change: He came and said there's a big change for them for this year well again overall.
Speaker Change: IPad AI and we mentioned many times that he has been a big issue for <unk> and for the AG industry for US we have the bio security protocols at the maximum.
Speaker Change: We have a very widespread.
Speaker Change: Production.
Speaker Change: We have things to tweak your plants and even our houses.
Speaker Change: As we actually work very well and each fund has typically three to four houses. So we'd have 110 to 150000 bars in Israel.
Speaker Change: Those.
Speaker Change: Primary forms so I think the our biosecurity in our geographic diversification helps on creating lapsing back to them.
Speaker Change: In terms of losing birds with as you mentioned.
Speaker Change: Export bans are the ones that are really impactful for our business, but as we are seeing very strong demand in the external markets for the American product because of its affordability and competitiveness compared to all the cool things aren't even all of their chicken geographies.
Speaker Change: And we're seeing also strong demand in here in the United States, especially for the bond document.
Speaker Change: And that is limiting the availability of export yourself like bloggers, so very strong pricing.
Speaker Change: Over to you.
Speaker Change: Okay. Thank you for that and then moving back to the ER to the U S Big Bird.
Speaker Change:
Speaker Change: I hate to belabor this point, but I just was wondering so the U S profitability.
Speaker Change: Was a little it was a little light and I understand that you you know you've got a diversified business and two thirds of the business the pricing doesn't move around a lot, but I was wondering if also there was effect from.
Speaker Change: The Douglas complex stand out because my understanding is that it.
Speaker Change: Because of the loss of a lot of that housing that you guys might be having to buy wants on the outsides of process and so I was just wondering if you could talk qualitatively to Hao.
Speaker Change: The Douglas complex impacted results during the quarter.
Speaker Change: And when do you all expect that complex to the housing there can be back to normal.
Speaker Change: Oh, yes.
Speaker Change: Thank you for the question once again, yeah that was.
Speaker Change: A devastating.
Speaker Change: Storm that we have in the Douglas the health of the communities. We vet the nickel menu, we donated $1 million to have a big airports too.
Speaker Change: Proof.
Speaker Change: And rebuild their community and Fortunately law lost a lot of housing in that in that region. I think it would be building houses we've been getting houses on the market and we've been increasing our production there, but what we did we have a lot of all their operations in the region, we moved some birds around and weed.
Speaker Change: Being able to upgrade the complex, they're satisfying operational level, we're not focusing the the law says that Douglas and just that complex of course, it was more impacted than all others. We also have some impact on LIFO.
Speaker Change: Cause us at this point.
Speaker Change: But we are moving things around and again, we are with the <unk>.
Speaker Change: Mary.
Speaker Change: <unk> operation there and we are with a great.
Speaker Change: Efficiency in all the other complexes through these monthly Bill Burns I think will also impacted a little bit in the quarter by the.
Speaker Change: Change in our facility that we moved from Air to you I think we've stayed down for for close to a week in that facility, but I think those were not.
Speaker Change: Very impactful for the quarter Walmart true.
Speaker Change: We expect to continue to impact our operation, we expect the Douglas ramp up to be.
Speaker Change: Close to Q3, Q4, and it's building houses as modest painful as it was in the past.
Speaker Change: He has a great level of commitment from our growers and the level of commitment from the authorities also on helping on financing.
Speaker Change: Those outages and the permitting on those houses.
Speaker Change: Perfect. Thank you so much for that color.
Speaker Change: Thank you. The next question comes from poorer in sarcoma with Stephens. Please go ahead.
Speaker Change: Thank you and congrats on the quarter.
Speaker Change: Hmm.
Speaker Change: Sure Yeah, just wanted to focus on I think you kind of mentioned this in the prepared remarks, but.
Speaker Change: Wanted to dive into hatch ability live ability it looks like trends still a challenge for production.
Speaker Change: Just wondering if you could give us an update if there's a if there's a fix on the way of could you maybe just remind us what those fixes are in and you know what are the what are the potential timelines here.
Speaker Change: Of course.
Speaker Change: Thank you yeah. It could put call into question and we've seen this a hatch ability issue.
Speaker Change: For a while now it all started with the new breed and Disney agreed has a great numbers in terms of yields.
Speaker Change: And in terms of conversion, but I think that the genetic companies do is that they always try to answer the questions from the industry and that's what we want quality.
Speaker Change: Yields and conversion costs and this new breed answered those questions. So you have the improved.
Speaker Change: Improved numbers close to 1% to 2% every year on both categories and a very good quality. Unfortunately, it is a board that is really difficult to manage on the life side.
Speaker Change: And I think on the life side it generates.
Speaker Change: Mahler amount of eggs, but also.
Speaker Change: Have a very little hatch.
Speaker Change: As we look into the numbers actually.
Speaker Change: Five is something with a lower number than we saw in 'twenty to 'twenty four yeah, there's always some seasonality because of the weather.
Speaker Change: Pension funds, it's actually it's probably lower.
Speaker Change: Principally it before which was the lowest.
Speaker Change: On record for the hatch ability.
He is about animal handling and the lifestyle.
Speaker Change: In the United States is structure.
Speaker Change: To have minimal interaction with a box so you need the boards in the houses.
Speaker Change: <unk> created a flow through as well.
Speaker Change: Part of the difficult management of Pittsburgh, we need to have individual.
Speaker Change: Manage it management of these buffers, we have back in Europe in Mexico, and somewhat in Brazil. So we're seeing that there had to be together, but it is the structure of the houses and the way we manage the Barnes.
Speaker Change: The change and we would be changing our protocols new spending more time to manage these imports specifically the week.
Speaker Change: Pittsburgh.
Speaker Change: Because of the weighting factors that have the ability.
Speaker Change: We are spending more time.
Speaker Change: The houses, but really need to change the structure of the houses we completely need to change the way, we manage those Florida as I mentioned that folks.
Speaker Change: The buyer security, we also have partner forums that food.
Speaker Change: No.
Speaker Change: The blue bars for us and it's all scattered throughout the country and really need to invest in those houses and change all the management and that it takes a lot of times, so theres no silver bullets for being proving patch ability, but we expect to get better at managing these breed.
Speaker Change: Time.
Speaker Change: Okay, Great I appreciate that commentary and I guess.
Speaker Change: Hum.
Speaker Change: Just further Furthermore, just flushing out your your commentary here you mentioned that you had weather.
Speaker Change: And we've seen this Arctic weather come in so I think a lot of people are talking about that.
Speaker Change: Thank you mentioned big Bird production may have been flat at some point.
Speaker Change: Just wondering how to think about this.
Speaker Change: For <unk>, given we have seen this colder weather kind of persist.
Speaker Change: Yeah.
Speaker Change: The weather is.
Speaker Change: Always a challenge for us, especially because we saw some really cold weather in the south right at some point to have snow.
Speaker Change: Florida and that is what's.
Speaker Change: With a while but I don't think it is a persistent for a significant.
Speaker Change: In France that will impact the productivity or the production or even the demand in that region for a long time I think we always have one or two weather events of course, we mentioned also the the.
Speaker Change: Many hurricane that we have in the buildings and region that will swing back to football operation and I think we will always have that those types of events and that's why the geographic diversification that we have allowed us to keep our great service levels to our customers and we didn't disrupt.
Speaker Change: Walk into our bottom line.
Speaker Change: Great I appreciate the color congrats again on the quarter I'll jump back in the queue.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Next question comes from Korea, or he Gupta with Barclays. Please go ahead.
Gupta: Hi, Good morning, Thank you and congrats on the quarter.
Speaker Change: No.
Speaker Change: Start with you a little that you know really strong free cash flow performance.
Speaker Change: To round out the year as we look to 'twenty five and some of the comments around volatility on the input side could you maybe walk us through how we should think about working capital I'm as contributing to cash Wow, you know how much of a drag should it be or could we see.
Fabio Sandri: See a potentially neutral outcome and then secondly, maybe Fabio if you could touch on them.
Fabio Sandri: In fact that the business could potentially see.
Fabio Sandri: With regards to some of the terrorists therapy considered.
Fabio Sandri: You know not just globally, but also.
Fabio Sandri: Also with regards to Mexico, and if you can walk us through the puts and takes between the U S and the Mexican business is and how that dynamic cut kind of backbone to those things.
Fabio Sandri: Sure. Thanks for the questions pretty I'll I'll start and then I'll pass it over to Fabio after when you think about our cash flows for 'twenty for you know when I look at.
Fabio Sandri: Our working capital contributions were significant right. I mean, we were you know in that over 300 million working capital for this past year.
Fabio Sandri: I don't anticipate having that type of uplift with the brain being kind of low where they were.
Fabio Sandri: It really was provided us with a nice benefit.
Fabio Sandri: Last year, not like I'm, not predicting a major drag against this year, because I think we've got enough offsets with corn being a bit higher sort of being a bit lower I, just think that the working capital impact will be more flattish.
Fabio Sandri: Still have very very strong free cash flow.
Fabio Sandri: I just feel I, just don't think their working capital is going to be that type of benefit that we saw in 'twenty four hopefully that helps yeah. We saw a significant reduction in our finished goods inventory.
Fabio Sandri: You know as we all saw the pros.
Fabio Sandri: And inventories in the whole U S dollar.
Fabio Sandri: Over here on the tariffs side I think there's still a lot of uncertainty about when and where the tariffs would be in place and also what would be the answer from the trading partner, sending medicine, Mexico, Mexican waves, where our largest trading partner.
What can you export any exports close to 24%.
Fabio Sandri: The U S exports to Mexico.
Fabio Sandri: And it's typically leg quarters.
Fabio Sandri: And the C and train for prepared foods.
Fabio Sandri: It's a very important source for Mexico.
Fabio Sandri: More than.
Fabio Sandri: 70% of the Mexican imports of chicken come from the United States tornado and expect a massive or any important.
Fabio Sandri: When the addiction.
Fabio Sandri: That trade I think the Mexicans are very concerned about food inflation and I think this is a great.
Speaker Change: Timothy for Mexico to bring very competitive meet to their country.
Fabio Sandri: Of course, we also have a larger furniture new Mexico.
Speaker Change: And Mexico is a very economy as I mentioned, we will continue to invest in growing our operation there, but there's also other proteins being imported from your last sentence, mainly pork and I think that also I don't expect a big impact in that trade, but if that happens of course, we will.
Speaker Change: Has the benefit of having our operation in Mexico. So there is a little bit of hedge for us if there's any problem in trade with Mexico fill them, having the operations there.
Speaker Change: I think the other big.
Speaker Change: Part of the trade, it's corn that schools, a lot from United States to Mexico, and they're also going to expect any.
Speaker Change: From.
Speaker Change: That's trade once again I think that the Mexico.
Countries very concerned about food deflation and having the access to the USA corn, which is the cheapest in the world.
Speaker Change: Very important for their economy.
Speaker Change: Thank you so much for the color.
Speaker Change: Yes.
Speaker Change: Thank you. This concludes our question and answer session.
Speaker Change: I'd like to turn the conference over to Mr. Sanjay for any closing remarks.
Speaker Change: Well. Thank you everyone for attending today's call 2024, with a very successful here and I'd like to thank our team members for demonstrating our leadership mindset.
Speaker Change: Living advantage and elevating our performance throughout the year.
Speaker Change: <unk> strategies, we captured the upside from enhanced market conditions.
Speaker Change: We keep customers further diversify our portfolio and improve production efficiency through operational excellence as a result, we collect.
Speaker Change: At least stablish, new financial and operational milestones for our business.
Speaker Change: Nonetheless, our vision is to be the best and most respected company in our industry, creating a better future for our team members and their families and that remains the same to get and I look forward to accelerating our work throughout 2025 and beyond.
Speaker Change: Thank you everyone.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].