Pilgrim's Pride Corporation

Good morning and welcome to the first quarter of 2024 Pilgrims Pride Earnings Conference Call and Webcast. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. At the company's request, this call is being recorded. Please note that the slides referenced during today's call are available for download from the investor section of the company's website at www.pilgrims.com. After today's presentation, there will be an opportunity to ask your questions. I would now like to turn the conference over to Mr. Andrew Rogeski, Head of Strategy, Investor Relations, and Sustainability for Pilgrims. You may proceed, sir.

Good morning, and thank you for joining us today as we review our operating and financial results for the first quarter ended on March 31st, 2024. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAAP measures we may discuss. A copy of the release is available on our website at ir.programs.com, along with slides for reference. These items have also been filed as Form 8Ks and are available online at sec.gov. Fabio Sandre, President and Chief Executive Officer, and Matt Galvinoni, Chief Financial Officer, will present on today's call. Before we begin our prepared remarks, I would like to remind everyone of our safe harbor disclaimer. Today's call may contain certain foreign-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. Further information concerning these factors have been provided in this morning's press release, our Form 10-K, and our regular filings with the SEC. I would now like to turn the call over to Fabio Sandri.

Thank you, Andy. Good morning, everyone, and thank you for joining us today. For the first quarter of 2024, we reported net revenues of $4.4 billion, a 4.7% increase over the same quarter last year. Our adjusted EBITDA was $372 million, up 145% versus Q1 of 2023. Our adjusted EBITDA margin was 8.5% compared to 3.6% last year. Our Q1 demonstrates the results of consistent execution of our strategy. Over the past quarters, we experienced significant volatility in the commodity cut-out values, persistent inflation, and challenging labor markets. Nonetheless, we maintain a focus on key customers' partnerships, portfolio diversification, growth of value-added offerings, and a relentless pursuit of operational excellence. While these efforts reduce downside risk, they are also further strengthening our competitive advantage. As a result, our business became increasingly well-positioned to realize potential upside as enhanced market fundamentals emerged. In the U.S., Case Ready increased its marketplace presence, giving key customer growth supported by our differentiated offerings, whereas Big Bird improved profitability through continued progress in operational excellence and stronger commodity cut-out values. Small Bird remained strong, giving significant growth in the daily and steady performance by QSRs. prepared foods, further diversify our portfolio as our brands grew across retail and food service. Our European business continued to make progress on its profitability journey. During the quarter, the team secured additional business with several key customers in retail. Efforts to further diversify our portfolio continued to gain traction as our brands grew faster than category averages. These efforts were augmented through the optimization of our manufacturing network and integration of corporate support activities. Mexico's results improved through a combination of enhanced commodity fundamentals, exchange rate favorability, and consistent execution of our strategies. Led by key customer partnerships, the business continued to grow across both retail and food service. Branded offerings rose double digits compared to the same period last year, further diversifying our portfolio. Operational excellence efforts to enhance production efficiencies and reduce biosecurity risks remain on track. We also continue to drive sustainability efforts. During the quarter, a third party conducted a limited assurance audit of our GHG emission related to our sustainable link bond. Based on this work, our emissions intensity declined by 15.6% from 2019 to 2022. Moving forward, we will continue to invest in infrastructure, operating procedures and training that can reduce our emissions intensity. Also, our investments in organic growth continued progress as we initiated startup and production at our protein conversion facility in South Georgia. Similarly, our expansion efforts in Mexico to drive profitable growth and access new geographies remains as our new projects have progressed as scheduled. Looking at feed inputs, global corn prices fell As additional demand for U.S. corn did not emerge in export markets and South America growing season experienced suitable growing conditions. As for the U.S., a normal growing season for corn should enable for a build on the 24-25 ending stocks above less crops already comfortable levels. Like corn, U.S. and world soybean stocks are set to build in both the 23-24 and the 24-25 crop years, reaching historical levels. comfortable levels. The South American soybean crop achieved record production, limiting US export demand. As for the US, soybean acreage is expected to increase in this crop year, further increasing supply. Additional soybean crushing capacity is also expected to emerge, which may also lower the value of soybean meal. On wheat, balance sheets are somewhat more sensitive, given the overall increase in demand and slight decrease in production in last crop year. However, The increasing global stocks of all grains may serve as a counterbalance. Moving forward, weather and crop conditions also suggest an increase in yields versus last year, despite lower planted acreage potentially increasing the supply. In the first three months of 2024, the USDA estimates indicated ready-to-cook production for the West chicken decreased 1% relative to the first quarter of 2023. impacted by less production days than the prior year. Production was also impacted as headcounts did not pace at levels equivalent to last year, mainly driven by reductions in small bird and case-red categories. Contrary to the other segments, the big bird segment grew production during the same period. Since early in the first semester, improved flock productivity amplified egg production, translating to increased egg sets. Even with the higher flock productivity, Hatchability and mortality continues to be a challenge of setting a significant portion of increased sets. Based on recent trends in egg sets, higher average live weights, and low feed pricing, USDA data suggests a 1.5% growth in chicken for the full year, assuming normal season patterns. However, continued hatchability and livability challenges may limit the ability of the industry to grow accordingly to the USDA estimates. Concerning cold storage supply of chicken, USDA reported inventories indicated a 13% reduction from the end of 2023 through the end of March. Given this reduction, inventories are almost 11% below March 2023 levels. Inventory depletion came from both front and back half, allowing the industry to enter the second quarter with significantly reduced stock levels. As for overall protein availability, USDA anticipates limited growth, as increasing ports of beef, additional pork production, and the expected increase in chicken supply are more than offset by a significant decline in beef production, given the reduced herd size and increased retention. Domestic volume of chicken demand shows steady growth in the first quarter of 2024. The retail channel experienced improved volumes. In the fresh department, demand has remained robust while pricing remains stable. Volume has grown, despite a lower share of chicken on promotion, suggesting consumer everyday purchases are improving year over year. Volumes rose across the category, especially on the boneless breast category, where the volume growth of our key customers outpaced the overall industry growth. Overall frozen sales also experienced higher volumes. Consumer continued to favor frozen value-added over the frozen commodity category, as value-added volumes more than offset the volume declines in commodities. Within the value added, our key customers also outpace category growth rates, suggesting that our branded offerings are well-suited to capitalize with further growth as the consumer looks for convenience and differentiated solutions in the frozen aisle. As for the retail deli, unit and dollar growth remain robust as the department can offer strong value to consumers who may be looking to trade out of traditional food service meals to rationalize spending without sacrificing convenience. In the food service channel, revenue and volume sales improved in both commercial and non-commercial food service distribution subchannels. The commercial distribution subchannel experienced larger dollar growth as rising fresh wholesale prices were able to be passed through to operators. Within the subchannel, the QSR category drove the majority of volume growth, also suggestive of consumers looking for more affordable meals. The non-commercial distribution subchannels continued to build steadily, especially education and healthcare, adding incremental volume relative to the first quarter of 2023. In the export channel, the value of export shipments remained steady while higher pricing, while volumes declined on a year-over-year basis. Despite the volume decrease, left-quarter and other dark meat inventories fell more than seasonal norms and ended March significantly below the five-year average. Combined exports and domestic dark meat remained supportive of pricing, as USDA leg price quarter prices averaged 18% higher than the first quarter of 2023. Since combined domestic retail and food service volume sales growth outstripped the supply growth experienced in the quarter, further cold storage inventories were drawn, more than the seasonal norm. As a result, The pricing for commodity chicken experienced above average seasonal improvements, along with jumbo cutouts value above the five-year average, beginning in the second quarter. Our U.S. business experienced another strong quarter through a combination of enhanced market fundamentals and consistent execution of our strategies. It is ready to increase its market presence as our key customers grow faster than category averages. Additional opportunities exist, giving continued consumer interest in differentiated higher attribute offerings, growth in consumer-specific products, and increase in retail spreads between chicken and other proteins. Small Bird remains strong given the robust growth by key customers in Retail Deli and QSR. The team continues to drive operational excellence and growth, especially at our recent expanded facility in Athens, Georgia, as production continues to improve and ramp-up remains on schedule. Big Bird has continuously focused on operational excellence efforts to improve plant efficiencies, upgrade product mix, and optimize live operations over the past year. When these efforts are combined with enhanced commodity cut-out values, profitability increased dramatically from prior year. Moving forward, we'll continue to invest in our operations to accelerate margin expansions. On prepared foods, it demonstrated yet another strong performance as volume and profitability grew through increased distribution in both retail and food service. Diversification through brands remained the key driver as the JustBear and Pilgrim's portfolio collectively grew 30% in retail relative to prior year. Equally important, our efforts in digital continue to gain traction as sales increased 20% compared to last year. Turning to Europe, Our diversification lineup enabled our business to meet the evolving needs of consumers and customers alike. Chicken grew more in volume and value than any other protein offering. While overall fresh pork demand fell, bacon, sausage, and gammon all increased volume throughout the quarter. Our branded portfolio also benefited from rising consumer confidence, as net sales rose 6% compared to last year. Richmond and Frigerators were particularly well received as each grew 6.5% and 9.6% respectively. Growth with key customers continued to be a priority as the team secured multiple awards for new business in retail throughout the quarter. Several potential opportunities remain and the team will continue to cultivate partnerships to drive innovation. Our operational excellence efforts are becoming increasingly durable as margin improved compared to last year. While we've made progress in all areas, our advancements in ready meals have been the most pronounced, as our network optimization has evolved and the consumer starts returning to differentiated options. The integration of our European business continues to progress well, as we are already realizing benefits. Moving forward, we will continue to invest in growth, develop our innovation pipeline, and evaluate opportunities to continue to optimize our network and enable a more customer-focused, nimble organization. Mexico's results also improve, giving more balanced supply and demand fundamentals in commodity markets, favorable exchange rates, and continued execution of our strategies. Led by the retail channel, key customer partnerships grew over 13% during the quarter. Additional opportunities for growth remain in retail and food service through our continued excellence in quality and service. Our diversification efforts through brands and prepare continues to make progress. Fresh brand and net sales grew over 10% from last year, driven by both established offerings and recent launches. Pilgrims grew in double digits through increased investments in promotion and social media, whereas favoritos grew over 4.5 times, and unique taste rose 59% compared to last year. Similarly, JustBear is realizing strong traction as the lineup sold up during the quarter. Repaired food grew by nearly 20% from last year's level, driven by success in QSR, food service, and select retail lineups. The team also further cultivated its branded portfolio value item through the latch of the Principe Italia Meats. Both retailer and consumer acceptance has been robust to date. Operational excellence efforts continue to drive improvements in production efficiency. To that, the team has implemented a series of projects to optimize our manufacturing footprint in fresh and enhanced production efficiencies in prepared. We continue to invest in profitable growth throughout our business. In the U.S., a recently constructed protein conversion plant in South Georgia initiated its production, further diversifying our portfolio. We also invested in plant specific upgrades in case ready to strengthen our relationship with key customers. Europe has also implemented a series of projects to improve labor efficiency mix and yields over the past year, all of which are progressing as planned. When these efforts are combined with our potential opportunities, we can accelerate our ability to scale our presence of differentiated offerings, especially with key customers. In Mexico, Projects to expand capacity are also on schedule. The hatchery and feed mill in the Merida region are slated for startup during the second quarter, whereas the boiler farms are scheduled for full completion in the second half of the year. Similarly, new pullet and breeder farms remain on track as production is already underway in several locations. Finally, we continue to drive sustainability in our business through enhanced operating procedures, capital investments, and improved team member training. When these efforts are combined with improvements in energy infrastructure, our greenhouse emissions intensity declined by 15.6% from 2019 to 2022. Moving forward, we'll continue to identify opportunities and implement projects to reduce our emissions footprint. With that, I'd like to ask our CFO, Matt Galvanoni, to discuss our financial results.