Q1 2025 Pilgrim's Pride Corp Earnings Call
Good morning, and welcome to the first quarter of 'twenty twenty-five Pilgrim's Pride earnings conference call and webcast.
All participants will be in listen only mode.
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At the company's request. This call is being recorded. Please note the slides referencing the rest are in today's call are available for download from the investors section of the company's website at Www Dot Pilgrim's dotcom.
After todays presentation, there will be a question and answer session.
I would now like to turn the conference over to Andrew Jessica <unk> head of strategy and Investor relations and sustainability for carbon spot.
Speaker Change: Good morning, and thank you for joining us today as we review our operating and financial results for the first quarter ended on March 32025, yes.
Speaker Change: Yesterday afternoon, we issued a press release, providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAAP measures. We may discuss a copy of the release is available on our website at IR Docs Pilgrim's Dot com along with the slides for reference. These items have also been filed its form 8-K and are available.
Speaker Change: 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 expectations as of the date of the release other additional factors not anticipated by management may cause actual results to differ materially from those projected in.
Speaker Change: These forward looking statements.
Speaker Change: Further information concerning these factors have been provided in yesterday's press release, our board 10-K, and our regular filings with the SEC.
Speaker Change: I would now like to turn the call over to Fabio Sandri.
Fabio Sandri: Thank you Andy and good morning, everyone and thank you for joining us today for the first quarter of 2025, we reported net revenues of $4 5 billion at two 3% increase over the same quarter last year. Our adjusted EBITDA was 533 million up 62% versus Q1 of 2024.
Fabio Sandri: Our adjusted EBITDA margin was 12% compared to eight 5% last year. Our performance reflects our disciplined execution of our strategies emphasis on our teams and our focus on what we can control throughout our business.
<unk> sales and adjusted EBITDA increased compared to prior year.
Fabio Sandri: Big bird capture benefits from elevated commodity values and improvements in production efficiencies were skis already grew given strong demand in retail and expanded key customer partnerships.
Fabio Sandri: Small birds improve with curious Saar growth and operational excellence efforts diversification efforts to prepare accelerated through portfolio expansion across retail and foodservice.
Fabio Sandri: Improve.
Fabio Sandri: In Europe.
Fabio Sandri: Last year.
Fabio Sandri: To sustain it benefits from business integration mixing instruments and network optimization opportunities to scale profitable growth further develop given multiple awards from key customers and launch of robust innovation.
Fabio Sandri: Sales of core branded offerings also rose further diversifying our portfolio.
Fabio Sandri: Mexico continued to drive our strategies and sales to key customers increased double digits.
Fabio Sandri: And sales of our branded portfolio and prepare continues to grow.
Fabio Sandri: To support this growth and diversify our geography, Mexico, our efforts to expand capacity and fresh and prepared foods remain on schedule.
Fabio Sandri: Turning to supply and U S. USDA indicated ready to Cook production for U S chicken.
Fabio Sandri: That grew one 1% compared to the first quarter of 'twenty 'twenty four is increasing average live weights offset declines in head count.
Fabio Sandri: 2024 increase in mortality and reduce hatch ability challenge our boiler broiler production to offset these impacts and provide production growth hatchery utilization remain at record highs.
Fabio Sandri: Considering continued growth in sets and placements USDA currently projected growth of one 7% for 2025, reflecting are we supposed to supportive demand environment that chicken has experienced recent.
Fabio Sandri: In recent quarters as for overall protein availability USDA anticipates, one 6% growth due to expected growth of chicken alone pork production increases.
Fabio Sandri: Regarding demand the cost of eating out increased more rapidly than eating at home.
Fabio Sandri: Such retail propel further growth for chicken.
Fabio Sandri: Within the fresh aisle boneless skinless breast the anchor of the fresh category realized substantial growth in demand, even with less promotional activity, giving us record price spreads to other proteins.
Fabio Sandri: The remainder of the fresh category in chicken also experienced momentum for 2025, producing strong growth across almost all major media groups.
Fabio Sandri: Boneless thighs have experienced record double digit growth based on availability and consumer acceptance Maloney have fresh chicken grown materially both the deli and frozen departments has also added demand at a sustainable rate.
Fabio Sandri: In exports winter weather port disruptions in January concerns over potential port strike and increased domestic demand for that dark meat products reduced the volumes throughout the quarter and compared to prior year.
Fabio Sandri: However, these dynamics enable further momentum in pricing during the early stages of the second quarter and may be further amplified by strong domestic demand for boneless dark meat.
Fabio Sandri: U S inventories are slightly below the five year average potentially adding more support to domestic and international pricing, thereby limiting export volume.
Speaker Change: What is the potential for high path avian influenza outbreaks to exist. The first quarter of 2025 was relatively muted compared to the second half of 'twenty 'twenty four as such several markets released their temporary county and state level bans.
Speaker Change: Assuming typical seasonality the second quarter may experienced an increase in high path AI activity. Nonetheless, our geographic diversity of production locations across the U S will continue to provide the flexibility to transition production for export if outbreaks occur.
Speaker Change: As for China, the relationship with the U S is currently in transition and it appears both countries are positioning themselves for a brother negotiation in the future well China is an important global agriculture in border the potential impact may be limited as exports of U S chicken products, notably the pause has significant.
Speaker Change: <unk> decline since 2023, given the high path AI bans.
Speaker Change: To date other trading partners around the world continues to navigate tariffs, enabling strong demand. This is partially attributed to do attractive value chicken compared to more expensive proteins, along with disease and supply issues in other chicken producing countries.
Speaker Change: Turning to feed corn prices experienced volatility throughout the quarter in January a strong rally in March giving reductions in the final U S corn and soy yields. However, this gains subside by the end of the quarter and South America, we realized greater than expected production.
Speaker Change: Moving forward more corn supply is anticipated as the March USDA prospective planting report indicated additional acreage for the 20 to 25 growing season.
Speaker Change: As for soybean meal prices fell during the first quarter as South America realized record high production given favorable weather.
Increased soybean processing capacity across the globe also drove further to soybean meal production, resulting ample supply.
Speaker Change: In weak global stocks make contract for the nearly completed crop year, however, strong crops in Australia, and Argentina, so limit the likelihood of a significant pricing price increase in the short term.
Ager wheat, producing regions, including the EU, Ukraine, and Russia are primed for higher crops in the upcoming year. The U K also anticipates higher production in 2025.
Speaker Change: Given these anticipated increases along with a substantial build in U S supply, which pricing is actually expected.
We expect it to decline.
Speaker Change: Moving forward you asked whether we would be the primary driver of corn and soybean meal prices trade disruption to jazz disputes with also be important with the soybean complex more exposed to tariffs changes compared to the corn market.
Speaker Change: In the U S consumers are still aware and concerned about high inflation and higher prices within retail grocery buyers behaviors indicate the growing habit of purchasing less per trip, while shopping more frequently signifying a stretch household budget in foodservice declines in traffic.
Speaker Change: Suggest a reduction in dining out occasions, among customers, which enabled their spending to go farther in other areas.
Speaker Change: Given the affordability of chicken and our strategies our team was well positioned to continue to unlock value for the consumer.
Speaker Change: As such our team maintained their focus on driving differentiation through quality and service for our key customers.
Speaker Change: In Big Bird, we focus on operational excellence to upgrade mix enhanced yields and maximize throughput.
Speaker Change: These efforts were further amplified by improvements in live operations.
Speaker Change: Yes.
Speaker Change: Our progress in attractive market fundamentals profitability and Big Bird group, you'll see that it would be.
Speaker Change: Small, but also improved profitability compared to the prior year, giving lower grain cost and operational efficiencies, especially at our expanded operation in that it.
Speaker Change: Despite strong volumes in Q, sorry in daily throughout the quarter breakfast for a whole birds and daily were lower compared to last year unlocking value for key customers and consumers equally important we are launching a variety of innovations to further strengthen our competitive advantage.
Speaker Change: He has already experienced strong retail demand throughout the quarter as such we work closely in partnership with key customers to ensure increasing availability considering the direction of our higher attributed offerings in the marketplace along with improvements in production efficiencies, we experienced an improvement year over year.
Speaker Change: Prepared foods grew over 20% compared to prior year from increased distribution across retail and foodservice diversification through brands play a critical role at sales or just being an eagerness collectively rose over 50%.
Speaker Change: Commerce continues to be a key enabler for Brenda growth as sales rose over 35% compared to last year as such we will continue to accelerate our growth through our relationship with leading online suppliers traditionally tailors and foodservice providers.
Speaker Change: In Europe profitability improved compared to last year true business integration mixing hassmann and manufacturing optimization.
Speaker Change: During the quarter, the consumer environment remain attractive as wage growth exceeding inflation in grocery.
Speaker Change: The tree pork and chilled meals category grew benefiting our portfolio, while foodservice experience a decline in visits are demand increase.
Speaker Change: We continue to cultivate growth through partnership with key customers as.
Speaker Change: As such we secured long term arrangements with selected retail partners, many of which were driven by our differentiated sustainability and animal welfare practices.
Speaker Change: Fortinet amplifier of growths to innovation as we launch over 80, new products through March.
Speaker Change: Diversification through key brands continued to gain traction as both sales and volume grew compared to last year. Frigerator has continued to grow ahead of the category averages and recently became one of the top 100 brands in the UK market.
Speaker Change: Richmond also realize similar success, where rollover increased distribution through new accounts moving forward, we will continue to invest in promotional activities and media efforts to increase brand awareness among consumers.
Speaker Change: In Mexico overall profitability remained steady year over year, but with significant volatility throughout the quarter. The increase in exchange rate between the peso and dollars impacted our costs and we experienced demand pressure in the lives commodity market during the month of March.
Speaker Change: On the left we drove profitability growth through our strategies.
Speaker Change: As such sales to key customers and retail increased by 11%.
Speaker Change: Diversification efforts through branded and value added offerings also accelerated in fresh our branded portfolio grew by 15% compared to last year.
Speaker Change: In prepared net sales rose 9%.
Speaker Change: Both dealers and just bare brands continue to gain distribution and market share and the sales of our mist R. Taco isn't typical Mexican food have grown nearly 50%, establishing a new record sales for the court.
Speaker Change: We also continue to invest and evaluate opportunities to further drive profitable growth in U S. A growth in prepared foods is exceeding our current capacity and we are committed to expand our production both in our existing plants and through a greenfield.
Speaker Change: In fresh we're also growing faster than the category, especially with our differentiated offerings to key customers. We are always looking for opportunities to unlock additional processing within the existing locations and we also committed to convert one of our commodity plants to differentiate it trade back for a key customer.
Speaker Change: We continue to evaluate alternatives to expand our protein conversion capacity and that value to our products did that and we are assessing multiple sites and refining our analysis to assess the best alternatives just as we did with our new planting Douglas Georgia.
Speaker Change: In Mexico, our investments and capacity expansion for trashing their crews and marrying that remains on schedule and we anticipate completion in the first half of 2026.
Speaker Change: Based on those investments, we can further enhance our buyer security and supply chain capabilities strengthening our relationship with key customers in Italy are invested investments and prepare are proceeding as planned with our new line expected to be operational at the end of Q4 for them, enabling branded growth.
Speaker Change: In sustainability, we continue to drive operational efficiency throughout our supply chain to reduce our greenhouse emissions footprint equal.
Speaker Change: Equally important third party reports have demonstrated that the decrease our scope one and two emissions intensity below target levels moving forward, we'll continue to explore alternatives to enhance our climate resiliency throughout our value chain.
Speaker Change: With that I would like to ask our CFO method of ammonia to discuss our financial results.
Speaker Change: Thank you Fabio good morning, everyone for the first quarter of 2025, net revenues were $4 $46 billion versus $4 $3 6 billion a year ago with adjusted EBITDA of $533 2 million and a margin of 12.0% compared to $371 9 million and an eight 5% margin.
Speaker Change: Q1 last year adjusted.
Speaker Change: Adjusted EBITDA margins in Q1 were 14, 3% in the U S compared to nine 4% a year ago for our Europe business adjusted EBITDA margins came in at eight 1% for Q1 compared to six 4% last year.
Speaker Change: In Mexico, adjusted EBITDA margins in Q1 were eight 4% versus nine 2% a year ago.
U S. Net revenues were $2 74 billion versus $2 five 8 billion a year ago, a six 2% increase U S. Adjusted EBITDA came in at $392 $5 million compared to $242 9 million in Q1 2024.
Speaker Change: Recovery in the commodity chicken markets compared to a year ago, along with moderate green costs and continued operational improvements drove strong year over year profitability improvement in our big Bird business. The case ready and prepared foods businesses have continued to increase distribution with key customers driving both year over year and quarter over quarter profitability.
Speaker Change: Improvements.
Speaker Change: These improvements offset a $10 million headwind from challenging weather conditions in the southeast during the first half of the quarter.
Speaker Change: In Europe coming off strong seasonal results in Q4, adjusted EBITDA in Q1 was $99 $5 million versus $81 5 million in Q1 2020 for the business has benefited from its continued structural reorganization, including integration of support functions and manufacturing optimization programs Wildcat.
Speaker Change: Debating key customer partnerships with continued innovative offerings, we incurred $16 $6 million of restructuring charges during the quarter and supported this integration program, Mexico, Mexico generated $41 2 million and adjusted EBITDA in Q1, compared to $47 $5 million last year and $36.
Speaker Change: $9 million in the fourth quarter, the year over year negative FX impact for Mexico, approximated eight and a half million dollars.
Speaker Change: Sequentially from Q4, the Mexican business profitability improved.
Speaker Change: Primarily due to a more balanced supply demand fundamentals.
Speaker Change: SG&A in the quarter was higher year over year, primarily due to an increase in legal settlement and defense costs and increased incentive compensation costs.
Speaker Change: Our effective tax rate for the quarter was 24, 1% as I noted in our February call, we anticipate our full year effective tax rate to approximate 25%.
Speaker Change: We have a strong balance sheet and we will continue to emphasize cash flows from operating activities management of working capital and disciplined investment in high return projects.
Speaker Change: Our liquidity position remains very strong even following a $1 5 billion special dividend paid on April 17th we have over $1 $6 billion in total cash and available credit we have no short term immediate cash requirements with our bonds maturing between 2031 in 2034, and our U S credit facility not expiring until 2028.
Speaker Change: Our liquidity position provides flexibility and allows us to explore various growth opportunities.
Speaker Change: As of the end of Q1, our net debt totaled approximately $1 $1 billion with a leverage ratio of less than 0.5 times, our last 12 months adjusted.
Speaker Change: Adjusting for the $1 5 billion special dividend, our leverage ratio was one one times still below our target of two to three times adjusted EBITDA.
Speaker Change: Net interest expense for the quarter totaled $17 million, we anticipate our full year net interest expense to be between 110 and $120 million.
Speaker Change: As discussed at our Investor Day, we will continue to invest in growth while additional considerations have emerged we will continue to enable our growth ambitions through financial discipline.
In the U S. We recently completed our planned conversion to an air show operation. We are now the largest any organic and ear show producer in the U S. Demonstrating our focus on offering differentiated product attributes to our key customers are.
Speaker Change: Our plans to increase capacity in the U S and small bird prepared foods and protein conversion also remain on track as such we continue to pursue site selections refined capital estimates and progressed engineering work in Mexico or investments in fresh and prepared continue to progress and remain on schedule as we have secured a variety of long lead equipment.
Speaker Change: We spent $98 million of Capex during the quarter and will continue to ramp capital capital spending in support of our growth projects. At this time, our full year Capex estimate remains at approximately $750 million our capital allocation approach will remain disciplined as we continue to align our investment priorities with our overall strategy is to drive.
Speaker Change: Growth enhanced margins and reduce volatility.
Speaker Change: Operator. This concludes our prepared remarks, please open the call for questions.
Speaker Change: Yes. Thank you.
Speaker Change: I'll begin the question and answer session.
Speaker Change: In the interest of all else equal access request that you limit your questions to two twice.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys to minimize background noise.
Charlie: Charlie a question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Ben Theurer: And the first question comes from Ben Theurer with Barclays.
Ben Theurer: Yeah. Good morning, Javier Matt. Thank you very much for taking my question and congrats to never.
Ben Theurer: <unk> quarter.
Speaker Change: First question, maybe just for you Matt following up on your comments you just made around capital allocation progress et cetera.
Speaker Change: Just maybe can you elaborate a little bit more as to what has caused probably a slightly lower level of capex in <unk>, except a couple of considerations here.
Speaker Change: Same time, you are still sticking to the 750 million. So how should we think about the capex over the next couple of quarters and what are those additional considerations. So that would be my first question is just around capex because I have a quick one.
Speaker Change: No no that's fair thanks, Ben for the question the.
Speaker Change: The way we're looking at this it's more timing related right and one of the things we talked about during Investor day was it it takes a while sometimes just to get to the starting line for some of these bigger capex projects and US working on site selection and overall estimates and permitting and things of that nature take some time, we are going to see our.
Speaker Change: Right, we do anticipate seeing a ramp up of capital spend over the next number of quarters.
Speaker Change: 750, we're not going to come off that number right, yet, we'll see how things progress, but we're committed to the growth projects and just kind of moving forward, but we're gonna be disciplined right. I mean, we really wanted to make sure that we're spending the right amount for the right pieces of equipment, the right sites et cetera et cetera.
Speaker Change: Okay got it very clear. Thank you very much and then just maybe on the on the current market dynamics and obviously I mean, we're seeing cutout values and pricing in general still.
Speaker Change: Very good levels now have you seen and maybe there is just been a little bit of weakness in certain items instead of anything related to our consumer softness are you seeing anything that even within chicken drives down trading or have you seen any impact from just like the general geopolitical flash tariff noise affecting.
Speaker Change: Somehow consumption and a good or in a bad way.
Speaker Change: Oh, Okay yeah.
Speaker Change: I think it is.
The evolving market conditions right. So just like I mentioned on the prepared remarks, I think there is a concern for the consumer about high prices and inflation. It started some years ago is not something new and they are watching their spending closely.
Speaker Change: They are moving more from foodservice to retail.
Speaker Change: Seen higher inflation on the food away from home.
Speaker Change: When compared to the food at retail so we were seeing.
Speaker Change: Movement from one segment to another that is leading to the shift of meal occasions.
And with that we are seeing some very strong demand in retail.
Speaker Change: <unk>.
Speaker Change: Biggest.
Speaker Change: Portfolio or the biggest part of the chicken that is sold in retail is breast meat and we're seeing some very strong demand there in the retail.
Speaker Change: Despite that strong demand on breast meat, we're seeing some very strong demand also on boneless dark meat youre seeing some double digit growth on the on the dark meat category. So that's strong demand on retail is pressuring the.
Speaker Change: The promotional activity.
Speaker Change: And especially in the supply and because.
Speaker Change: That happens every grilling season, where we buy big bird meat to augment the supply for retail that is happening.
Speaker Change: Even before the grilling season is happening right now and that is pressuring you also the commodity market because by buying these big bird meat and putting on the on the retail that reduces the supply on the food service category.
Speaker Change: We were talking about this movement from foodservice to retail impacting the demand for chicken in retail, but also in foodservice as operators are trying to respond to this reduction in foot traffic. They are increasing their promotional activities and they are increasing the number of low priced.
Speaker Change: In their menu and with that chicken is gaining traction and gaining menu penetration. So chicken also increase in foodservice, mainly on the <unk> and the non commercials.
Speaker Change: But we are seeing traction also in the foodservice. Despite the reduction in the foot traffic that weird, where everybody is experiencing so chicken is winning on the retail because of the movement of food away from home to food at home, but also gaining traction in foodservice with me.
Speaker Change: Penetration and more promotional activities.
Speaker Change: Okay perfect. Thank you very much for that call February pop at all.
Speaker Change: Thank you and the next question comes around just Charles <unk> with BMO capital markets.
Ben Theurer: Hi, Good morning, this is actually Ben on for Andrew.
Ben Theurer: So my first question has to do with the EU UK business.
Ben Theurer: And the margin performance there.
Ben Theurer: And you guys have spoken in the past about.
Ben Theurer: More of a like a steady state.
Ben Theurer: Seven 8%.
Ben Theurer: Margin that you can eventually reach I'm just wondering when you think about the cadence for this year.
Ben Theurer: And do you anticipate the.
Ben Theurer: The next three quarters kind of looking.
Ben Theurer: Similar in terms of margin expansion to what we saw in first quarter and how do you view the.
Ben Theurer: The local consumer in Europe, we've heard a couple of anecdotal reports about some potential weakness there. So I was just hoping you can you can.
Ben Theurer: And kind of bridge that together thanks.
Ben Theurer: Sure.
Ben Theurer: Just on our operations. So we integrated our three business over the last two years and with that then I think Matt mentioned some of the restructuring. So we're putting all of this business together and we are seeing the benefits coming to the bottom line of that streamline.
Ben Theurer: Our back offices and streamline our operations, we're also seeing that change.
Ben Theurer: Change in the let's say the momentum there from integration now we're moving to a more expansion and true innovation. So that's exactly what we expected when we put these three business together to realize all the benefits from the integration at the beginning and now moving to a more.
Ben Theurer: Rapid expansion through innovation. So we expect the growth in performance from year over year to continue.
Ben Theurer: In terms of the consumer I think we were seeing the inflation in Europe to more moderating and we are seeing the.
Ben Theurer: The.
Ben Theurer: Wages, increasing ahead of the inflation that was creating.
Ben Theurer: A better scenario, especially for our portfolio on the branded side when the consumer in Europe are facing.
Ben Theurer: Challenges in inflation, they typically tend to go for private labels on the on the prepared food side.
Ben Theurer: Our Richmond brand was not growing as expected in the past, but now we're seeing some the Richmond brand and the Frigerator as brands are growing ahead of the market and that indicates that the consumer has more confidence I think specifically in U K. There was an increase in the national insurance there.
Ben Theurer: Created of some sort.
Ben Theurer: Certainty about jobs and inflation at grocery.
Ben Theurer: Lately I think with so many reports from from retailers that that will cost us some billions of dollars.
Ben Theurer: For them and that will be some layoffs because of that so that was maybe a momentary issue in U K, but overall in Europe, we are seeing an improvement in consumer confidence.
Speaker Change: Thank you and just my last question.
Speaker Change: In terms of Mexico.
Speaker Change: Obviously, you had a you had a big FX hit there during the quarter, but just.
Speaker Change: You know from a fundamental standpoint.
Speaker Change:
Speaker Change: You know how do you think about the cadence for the rest of the year in terms of kind of rolling in some of your investments.
Speaker Change: And then also versus just the you know the flow of supply and demand in the local market.
Speaker Change:
Speaker Change: Do you think things are getting stronger there in the economy.
Speaker Change: There is some hesitation amongst consumers given.
Speaker Change: No I'm all the trade chatter just trying to get a better sense of how your you're framing up Mexico I guess you know a month. After we last saw you at the Investor day. Thank you very much appreciate it sure sure yet, but as I mentioned, Mexico is a growing economy.
Speaker Change: We are seeing growing in the consumer spending over there and met and chicken has always been the entry point in the protein as the consumer has more available.
Speaker Change: Spending they will go to a higher protein diet in chicken is the entry point. So we are really excited about the opportunity to continue to grow in Mexico with that.
Speaker Change: As I mentioned, we are expanding our operation in Veracruz, and we are expanding to a new geography, which is the mirror the region, depending slow so we can diversify our operations and reach a bigger market in there. We're also believe that with the expansion in consumer spending prepared foods and convenience.
Speaker Change: Becomes a source of growth as well for US one that's why we are expanding with a new line in our operations that will be fully operational by Q4. So over the long term, we're really excited about the growth perspective in Mexico now quarter over quarter as we mentioned it could.
Speaker Change: Be quite volatile and the biggest source of the volatility is the life market that still exist in Mexico that create lower by a security than we see in all other places of the world.
Speaker Change: Because of that the supply and demand can be mismatch in any given quarter because of diseases and because that market is really easy for entrants to get in and to get out. So when you see.
Speaker Change: Hi profitability as we saw in Q2 last year, we see these marginal players who come and produce life chicken to be sold to the consumers and that creates more volatility in that market in a way. That's why we're trying to diversify from that segment with more branded.
Speaker Change: And more prepared foods, but it's still a very profitable segment so that volatility.
Speaker Change: In the life market impacts our results during any given quarter.
Speaker Change: And then I would just say relative to Q2 last year in Mexico, very very strong quarter last year.
Speaker Change: Sex impacts kind of year over year Q2 to Q2 of this year, we'll still probably be in that 15 ish percent area.
Speaker Change: Pending of course, where the peso goes from now forward, but my Crystal ball, that's kind of how I would think about it but it is.
Speaker Change: It's a very very strong Q2 last year with business is great, but just keep that FX impact in mind for Q2, this year and in terms of consumer confidence because of trade I think we've seen that.
Speaker Change: Mexico is one of the largest trade partner with U S and I think there was a lot of talk about the all.
Speaker Change: All the products aside from stealing cars being off any type of tariffs. So I think there is less uncertainty in Mexico than in other places.
Heather Jones: Thank you and the next question comes from Heather Jones with Heather Jones Research LLC.
Heather Jones: Good morning, Thank you for the question.
Heather Jones: I guess I wanted to start with the U S as far as volumes they were much stronger than I was looking for and.
Heather Jones: And then you had good growth in the U S year on year and Q1 of 24, two and so I guess just wondering if you could help us think about how we should.
Speaker Change: As you think about your pounds growth in the U S. As you brain.
Heather Jones: Douglas on them back up to speed, but then.
Heather Jones: I guess, you're having your conversion of russellville to a smaller bird at some point. This year. So just how should we think be thinking about pounds I think that's for the for 25.
Heather Jones: Yeah, I think we have a strategy of always supporting the growth of our key customers and as I mentioned, we are growing ahead of the market. So we saw a strong growth in retail.
Heather Jones: Especially for our differentiated offerings and.
Heather Jones: Such we increase our volumes in the retail category I think the whole industry continues to be constrained in terms of.
Heather Jones: Overall growth, but I think we are all working.
Heather Jones: Working really hard to get a better live operation and that's what we've been doing during Q1 and I think despite a lot of challenges, especially in terms of respiratory diseases that we are seeing throughout the south we were able to improve our live operations and improve our volumes.
Heather Jones: Specially too as I mentioned in the retail segments.
Heather Jones: Going forward I think we will continue with that strategy, Heather and yes, you're right with the conversion of a big bird plant to.
Heather Jones: Case ready plant, we will reduce the volumes in that operation, but we expect that to be more impactful for next year.
Speaker Change: Okay. So just to finish up on that question you all are expecting if these continued improvements in life go along you're expecting to.
Meaningful volume growth for the full year and the U S.
Speaker Change: We expect to be a little bit ahead of the market.
Speaker Change: Okay.
Speaker Change: And then go on to your Greenfield plants. So.
Speaker Change: I think you're pursuing wanted prepared and then another protein conversion.
Speaker Change: And just wondering.
Speaker Change: It's the timing.
Speaker Change: Uncertain, because I have read in like in local media reports of you all getting pushback on like some some locations on the protein conversion side at all like is that is that side proving more difficult for permitting approvals or.
Speaker Change: What's the primary driver of timing on those two fronts.
Speaker Change: I think theres always some negotiation with local municipalities right I think we had some some noise too, but a protocol version plant.
Speaker Change: Today is a very.
Good operation without any smell I think the technology has improved really well. So there is minimal disruption if any in terms of the smell to the municipality. So I think that is still a lot of let's say.
Speaker Change: Preconceived ideas about whether rendering operations is that sometimes trigger some some of this.
Speaker Change:
Speaker Change: Bad breath sort to say, but I think as we go into locality we explain our strategies. We explained our vision of creating better future for our team members to help the communities and with the New technologies. I think then we can move along and is a great example was the Douglas.
Speaker Change: Georgia Operation that we just started we were having a great partnership with location there with the municipalities.
Speaker Change: So if there is any pushback.
Speaker Change: Pushback from municipalities is sometimes.
Speaker Change: Short term operation the timing it is about finding finding the right location and starting and having all the permits.
Speaker Change: Okay awesome. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Comes from <unk> Sharma with Stephens.
Speaker Change: Great. Thanks for the question I'm, just kind of start off with.
Speaker Change: Maybe if you could discuss wings in general, we're seeing a strong strengthened and breasts.
In the back half of the bird, but it seems like wings or had the other way just wondering if you could give us some color on what are you hearing from from like the commercial side of the business.
Speaker Change: And do you expect.
Speaker Change: Seasonal demand kick in you know you have NFL season.
Speaker Change: Season, starting here in the fall.
Speaker Change: Would love to hear your thoughts on that cut.
Speaker Change: Oh sure sure Bryan. Thank you for the question and you're right I think when you look at the cut out for the big but we see some really strong fundamentals, but when you go into the parts I think the boneless has being the strongest part of the leg quarters as I mentioned continue to be very well supported Bloomington.
Speaker Change: Nationally and domestically I mentioned are.
Speaker Change: The growth in boneless ties into retail that is double digit in the wings have been the candidate that has been.
Speaker Change: Less strong and it's actually lower than last year significantly lower than last year and lower than the five year average and the reason for that is the shift.
Speaker Change: That we mentioned on the food away from home to food at retail.
Speaker Change: <unk> are mainly a foodservice items, so when we see some weakness in the foot traffic that impacted directly wings also last year, we saw some strong pricing and demand for wings with trigger some promotional activity in menu substitution to bone.
Speaker Change: Yes.
Speaker Change: Because when they see a boneless wings is actually boneless breast.
Speaker Change: So we see then this.
Speaker Change: The seesaw impact on the wings and boneless breasts on the food service.
Speaker Change: As we see the low prices of wings, we are seeing more feature activity on the wing on the bone in wings, and we're seeing more promotional activity for the foodservice, especially the main concepts. So we expect the price of wings to go back.
Back into the normal seasonality, it's normal to see this behavior on the wings that I think when you analyze a long long time will have always this.
Speaker Change: She saw issues on the wings, where in one year, we have a significant higher prices than the averages and then the next year, we see some softening and then what we see in the following year is that the prices come back to the previous level and even higher because as we always mentioned there are only two wings.
Speaker Change: And we are being.
Speaker Change: Challenged by pads in our industry.
Speaker Change: Right no I appreciate that color I guess my follow up all are well.
Speaker Change: We will be I guess on the lines of that you're being challenged on production.
Speaker Change:
Speaker Change: That's obviously kind of helping with the elevated price situation along with relative affordability.
Speaker Change: But just wanted to see if.
Speaker Change: You know you are concerned at all about the uptick in cold storage, particularly in breast that we've seen over the past couple of months.
Speaker Change: We've also seen a you know production up call it mid single digits since March.
Speaker Change:
Speaker Change: But despite that you you continue to see these elevated price points for for breast. So just wondering if you could tease that dynamic out a little bit more for us.
Speaker Change: So of course I think.
Speaker Change: First going to the.
Speaker Change: Cold storage I think first if you look at the leg quarters and other items. The cold storage numbers are significantly lower than last year, and very low compare to to normal.
Speaker Change: Five year average and so I think the increase in boneless was more promotional activity, especially one.
Speaker Change: Foodservice, operator that put a lot of breast meat for the promotional activity, but also it is a little bit of the foodservice operators expecting higher prices in building inventory. So they don't have to buy breast meat in the commodity market when the prices go even higher.
Speaker Change: When you look at overall production for the U S. We and USDA unexpected the growth that we saw in Q1 to moderate during the next quarter or two and annual growth of one 4%. We will continue with the same issues as we mentioned with this new breed.
Speaker Change: We're seeing more eggs per hen. So we increased the number of egg sets, but then we are being challenged with the hatch ability one of the lowest we ever seen and one of the highest mortality we ever see I alluded a little bit stood a respiratory diseases and that's what.
Speaker Change: We are seeing throughout our operations, but that is impacting feed conversion, but it is also impacting a lot of the mortality of the boats and that's when you see the increase in X cents on the range of 242, 5% and then you go to the number of birds or head count.
Speaker Change: Is actually down so all of that growth is being <unk>.
Speaker Change: <unk> by the challenges in hedge ability and we've ability and we have not seen a significant improvement on dose of course as I mentioned.
Speaker Change: We've been improving our operations we've been.
Speaker Change: Really pushing on having a better care of the individual birds I think this is a burden needs individual management, rather than a floor management.
Speaker Change: And we're seeing some improvements, but it's nothing that is significant and will go back to prior numbers of hatch ability and mortality.
Speaker Change: Alright, thanks for the color.
Speaker Change: Thank you Jasmine just wanted with bank of America.
Speaker Change: Hey, guys. Thank you so much for the question.
Speaker Change: So I wanted to dig in a little bit to your U S sales and pricing came in a bit better than expected this quarter.
Speaker Change: But this is the second quarter were U S. Gross profit was a little bit behind so could you, possibly outline some puts and takes in the quarter as to why gross profit on a on a gross profit perspective things were a bit behind.
Oh, sure and and I think we need to remind everyone of our portfolio as we always mentioned, we have a diversified portfolio of sizes of birds.
Speaker Change: <unk> portfolio of offerings and diversify our portfolio of.
Speaker Change: Pricing.
Speaker Change: So in the Big Bird category, we see very strong pricing because of the commodity everyday pricing and I think that is little differentiation in that segment, we have some differentiation through lower tobacco ever offerings, but it is a category that moves more in line with the commodity markets that we can.
Speaker Change: See every day so in that segment it is.
Speaker Change: Immediate let's say.
Speaker Change: Rice change.
Speaker Change: Compared to the market on all the other segments, we have more stable.
Speaker Change: Pricing and more stable margins as we've proven when the commodity markets were weak and when we have significant changes in foodservice and in.
Speaker Change: Retail so our pricing is way more stable, because we base our pricing to our retailers for reinvestment levels.
Speaker Change: And with the changes in cost and as we saw the cost of our products coming down because of the moderating in prices of grain over.
Speaker Change: The last several months, we've tested that vintage back to our key partners and as you see in the retail.
Speaker Change: To the end user pricing chicken prices are lower year over year.
Speaker Change: So our portfolio don't follow 100% the commodity market.
Speaker Change: Loss on purpose, because we believe that we can capture the upsides as we we've proven with a very strong profitability in Q1, but we can protect the downsides when we have more stable pricing.
Speaker Change: And that is when you compare our portfolio to a just pure commodity portfolio you don't see the same spikes in prices and you don't see the same challenges when the prices are lower.
Okay got it.
Speaker Change: I guess to follow up on that a little bit you talked earlier about shifts in relocations and spend moving from foodservice to retail. So I'm also wondering if growing faster than retail versus commodity created gross profit mix headwind in the quarter. So you know if you have to.
Speaker Change: In the retail channel with commodity meat.
Speaker Change: I think that it.
Speaker Change: That is a great point, yes, if we compare the profitability of the more stable business that we have with the profitability of the commodity segment that will not follow the same trajectory but of course, if you look at the same quarter last year, then the profitability.
Speaker Change: Of those more stable segments will be far superior to the commodity denim once again, that's how we we.
Speaker Change: We created a portfolio, but who absolute through right.
Speaker Change: Profitability of our commodity operator, or the commodity portfolio right now it is higher than the profitability of the more stable segments.
Speaker Change: Great. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Constantly I'm, Paris with Us and then there.
Speaker Change: Okay.
Speaker Change: Good morning, Matt.
Speaker Change: Andrew Thanks for being here.
Speaker Change: Sure.
Speaker Change: Two questions here. The first one is if you could if you can beat the market pay on the Capex for the year in terms of expansion and maintenance and what would be the manned locations here in terms of expansion. So we could have some sense in terms of capacity and go into 2026.
Speaker Change: The second question here you Pablo you mentioned a lot about mortality.
Speaker Change: If you could just tried to explain choice a bit how.
Speaker Change: How much of that is related to disease is how much is about genetics and the wisely, we could expect going forward on the mortality mainly on hands because it seems that this is also impacting the supply of chips as well.
Speaker Change: Yes, I'll take the first question relative to the Capex I think it's important to understand relative to this growth capex that we laid out at Investor day.
Speaker Change: Many of those dollars and many of that effort will be for projects that really will not expand capacity until 2027 or later, we will have some things that will.
Speaker Change: Be more impactful next year, we talked about the conversion of one of our big bird plants to a to a case ready facility for a key customer that would be more impactful starting in 2026, but really right now when we think about capacity expansions and the time it would take to get many of those up.
Running an inn and finished well we're not talking 2026 type of changes in general were talking more outer years from there.
Bob: I don't know Bob you will take the next one.
Speaker Change: Of course in EMEA and I think is a good question as you see the higher mortality in the broilers, but we are seeing the same higher mortality on the breeder and that's why from the pullet placements that we're seeing we're not seeing the size of the flock growing in the same.
Bob: Inc right.
Bob: Also the.
Bob: The breeding flock is not growing as much as expected given the very strong profitability in our segment because of the high.
Bob: Utilization of our hatcheries so eight.
Bob: Older Bird will always have even lower hedge ability that we are seeing in the current.
Bob: Optimal.
Hen. So when you have that then we put a lot of stress in the in our hatcheries. So that's what what why we are seeing the commercial block or the layer flock smaller than in prior years.
Speaker Change: And then you mentioned the distinction between diseases in genetics, but they are connected I think we always take one step back on where we got here and that was this new breed as we try to solve the problem.
Speaker Change: We have in the years before in terms of quality of the meat with the coal the Woody breast. We introduced this new breed. This new breed is also great for conversion and great for yields.
Speaker Change: So we don't think that we will go back to previous breeds just because of the mortality.
Speaker Change: Cause once again, what the industry looks is for a more.
Speaker Change: Better conversion and better.
Speaker Change: Yields which is a more let's say sustainable, but then more of a.
Speaker Change: <unk>, but.
Speaker Change: But the genetics and the diseases or <unk>.
Speaker Change: Somewhat connected I think we've been talking about managing individual birds as these birds grow so fast we need to keep an eye on individual birds, even on delaying flock.
Speaker Change: And also when we look at the.
Speaker Change: The genetics, we believe that as less of the resistant being passed from from generations. So this.
Speaker Change: Breed broilers, a little bit weaker in terms of respiratory diseases, but.
Speaker Change: Yes.
Speaker Change: The time goes by we will learn how to manage we will adjust our houses and we'll get back to better mortality situation that we had before.
Speaker Change: Thank you Matt.
Speaker Change: Thank you.
Speaker Change: Question comes from Priya, <unk> Gupta with Barclays.
Speaker Change: Hi, Good morning, Thank you for the call.
Speaker Change: Just two questions from me.
Speaker Change: Mostly from Matt, Matt can you talk a little bit about.
Speaker Change: The working capital swing that we saw in the quarter was fairly sizable it looks like a number of the line items.
Speaker Change: Tribute Ed.
Speaker Change: And how we should think about that flowing into Europe.
Speaker Change: And then the second one is just around your open market bond.
Speaker Change: Purchases in the quarter, so what's the thinking there.
Speaker Change: It was a little bit surprising.
Speaker Change: It's small.
Speaker Change: Small size, but just how you're thinking about that going forward. Thanks.
Speaker Change: Yeah.
Speaker Change: The first question relative to working capital. If you go back five six years and I was going back to 2020, you look at first quarter on a working capital change other than last year, it's always challenging right. It's in the it's more it's always negative.
First quarter is always one of those ones between paying out incentive compensation and other changes that happen.
Speaker Change: We see more of a negative trend in the working capital changes.
Speaker Change: In Q1, so we anticipate that to turnaround last year was a bit of an anomaly in that green pricing can have dropped precipitously.
Speaker Change: Last year, which really kind of we'll see a benefit and we also had a very purposeful reduction of finished goods inventories.
During Q1 of last year, so that was really more of the driver last year being a bit more of the anomaly of.
Speaker Change: The favorable working capital change during Q1.
Speaker Change: Relatively open market purchase that was just more opportunistic I think theres. Some things that were looking at and considering we do believe we will be generating a fair amount of cash here. This year. If you look at the end of the view relative to how the year should play on and we consider a lot of different options relative to how to handle or.
Speaker Change: Our capital allocation, which does include repurchases of debt, which we did last year and we said a.
Speaker Change: A little bit of a small opportunistic opportunity during the Q1 and will be a kind of assessing what we're doing here going forward.
Speaker Change: Great. Thank you.
Speaker Change: Thank you and this concludes our question and answer session I would like to turn the conference back over to Fabry Alessandra for any closing comments.
Speaker Change: Thank you everyone for attending today's call since 25 started office and a strong node for BPC as such I'd like to thank our team members for their commitment to living our values driving our methods and executing our strategies. We must continue these efforts and maintain our unwavering focus on team member safety and well being.
Speaker Change: Given this approach we can grow sales enhance margins and reduce volatility in our business more importantly, we can achieve our vision to be the best and most respected company in our industry, creating a better future for our team members today and I look forward to accelerating our efforts in the remainder of 2025 and beyond Thank you everyone.
Speaker Change: Thank you. This concludes today's conference call you may now disconnect your lines.
Speaker Change: [music].