Pilgrim's Pride Corporation

Good morning and welcome to the third quarter of 2024 Pilgrim's Pride earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal 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 questions. I would now like to turn the conference over to Andrew Rogeski, Head of Strategy, Investor Relations, and Sustainability for Pilgrims Pride. Please go ahead.

Good morning, and thank you for joining us today as we review our operating and financial results for the third quarter ended on September 29th, 2024. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAAP measures we may discuss. A copy of the release is available on our website at ir.pilgrims.com, along with slides for reference. These items have also been filed as Form 8Ks and are available online at 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 forward-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 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.

Thank you, Andy. Good morning, everyone, and thank you for joining us today. For the third quarter of 2024, we reported net revenues of $4.6 billion, a 5.2% increase over the same quarter last year. Our adjusted EBITDA was $660 million versus $324 million in Q3 of 2023. Adjusted EBITDA margin was 14.4% compared to 7.4% last year. Q3 results demonstrate the benefit from consistent execution of our strategies. Our diversified portfolio continued to capture the upsides of positive commodity market fundamentals, whereas our key customer partnerships enabled collaboration that simultaneously drove demand and unlocked value for consumers. The efforts were further amplified through the growth of our brands and continued focus on operational excellence and in quality, service, and innovation. In the U.S., big bird benefited from sustained improvements in production efficiencies, lower input costs, and enhanced commodity cut-out values. Case ready, continued to reinvest with key customers, resulting in greater than category average growth. The momentum of small bird increased, giving continued interest in chicken in the deli and among QSRs. Europe expanded margins from benefits in manufacturing network restructuring and optimize organizational structure. Diversification efforts continue to gain traction given the growth from our leading brands and extensive industry recognition and awards from our recently launched innovation. These efforts were further amplified by incremental distribution with key customers. While Mexico experienced a decline in demand given normal seasonality and disruptions from the hurricanes, we continue to grow our business with key customers across retail and food service. Our diversification and operational excellence efforts remain on track as our brands grew ahead of the market and our investments in growth and risk mitigation proceed as scheduled. Turning to supply, USDA indicated ready-to-cook production for the U.S. chicken grew 2.7% compared to the third quarter of 2023. Increases in headcount and average line weight drove production growth. Throughout 2024, the industry layer flock has consistently declined year over year. However, a more efficient flock, along with reductions in exports, have increased exits, pushing hatchery utilization to record levels. While puller placements have grown by 0.7% year to date, increased mortality has muted potential production gains. Like trends early in the year, hatchability challenges have prevented full realization of increased sets. Based on recent trends along with projections for the remainder of 2024, USDA data suggests growth in chicken production of approximately 1.7% for the full year. This growth indicates a response to firm demand exhibited during the quarter. As for overall protein availability, the USDA anticipates 2.3% growth as the expected increase in chicken supply is augmented by increased beef imports and additional pork production. Domestic chicken demand was strong throughout the quarter. With inflation still a major concern, consumers continue to shift shopping towards retail and eating patterns in food service. Chicken demand in the retail channel improved volume across all departments, in fresh, consumers continue to rely on chicken fulfilling their everyday center-of-the-plate protein needs in a challenging environment as volume roses in both white and dark meat cuts. For boneless, skinless breasts, everyday retail pricing per USDA has continued to decline and fell below $4 per pound, a 5.4% reduction from last year and over 16% reduction since September 2022. In contrast, other proteins consistently rose during the quarter and throughout the past two years. As an example, the retail spread between boneless, skinless breasts versus ground beef recently hit another all-time high, surpassing the previous record set in the second quarter of 2024. This coincided with a strong quarterly performance from boneless, skinless breasts, which saw sales post notably year-over-year growth. The remainder of chicken at retail continued to build on the strong foundation set earlier in the year. Growth in both the deli and frozen value added demonstrated chicken's ability to meet the needs of consumer seeking to rationalize spending without sacrificing convenience. In food service, revenue and volume sales both grew in commercial and non-commercial distribution sub-channels. The commercial distribution sub-channels realized large dollar increases, while non-commercial continued to build steadily as business and industry activity increased. Breast meat, tenders, and wings all continue to post positive volume growth at current prices, given the relative affordability of poultry. Within the food service sub-channels, QSRs continue to drive the most volume growth, suggesting consumers continue to seek more affordable meals. Given chicken's propensity towards QSR, and overall versatility, it has continued to pose strong growth, despite a reduction in away-from-home eating occasions. In export, U.S. broiler volume was 11.3% lower, while pricing is at strong levels. Robust demand for dark meat in U.S. continued to shift production from local markets, limiting availability for export. We anticipate export demand will remain strong as competing protein prices continue to make chicken the most appealing global option given its relative affordability. While the potential for a port strike in the East Coast and Gulf disrupted some shipments late in the quarter, it had a limited impact. Disruptions to the supply chain were non-material to the market as shipments quickly rebounded in the beginning of Q3, and overall cold storage remains relatively low as supplies are down 7% compared to last year and 9% below the five-year average. Brass meat and dark meat inventories both fell year over year. Despite recent outbreaks of high pet avian influenza in the western U.S., the majority of chicken-producing states have not been affected. Nonetheless, we continue to take the necessary precautions to safeguard our farms given seasonal changes in migratory patterns. The geographical diversification of our production facilities provides flexibility to shift business should any isolated commercial breaks surface. China remains the exception on trade restrictions, and no movement on lifting current bans has emerged. Nevertheless, the majority of U.S. trading partners continue to reduce ban to zones or to county level, with only a few banning the entire states. Turning to feed, input prices were fairly stable throughout the quarter, as the U.S. realized generally favorable weather for the development of the corn and soybean crops. Given the low price of corn relative to recent years, stronger than expected demand for U.S. corn exports emerged, pulling down stocks from previous years and cutting into supplies from the current year. While the U.S. began with a smaller initial supply, record U.S. corn yields created a still comfortable new crop carryout estimated at about 2 billion bushels. Moving forward, the corn market will respond to South American weather and the magnitude of China imports. Both globally and in the U.S., soybean stocks continue to build. Despite a record U.S. soybean crop and lower board future prices, changes in exchange rate encourage expansion in South America's soybean planting. The soybean processing industry also continued to expand, leaving the soybean meal market well-supplied and limiting the upside in meal prices. In wheat, 24-25 production increased marginally. However, this was offset by a decrease in initial supply, creating expectations that global wheat ending stocks will be down slightly versus prior year. Global import demand for wheat is lower this year, giving better crops from several traditional wheat importers in the Middle East and North African regions. As a result, wheat prices remain basically flat in Q3, reflecting balanced supply and demand. While the current WASDE projections suggest growing stocks in the U.S. for all major crops and relatively narrow price ranges for feed inputs, there's still risk. As such, we will continue to monitor changes in global grain demand, progression weather in South America, exchange rate changes, and geopolitical events. In the U.S., consumers are still aware and concerned about high prices and continued inflation. Within retail, grocery buyer behaviors indicate consumers are purchasing less per trip while shopping more frequently, indicating a stretched household budget. Additionally, Many consumers indicated cutting food service spend as a top method of cost saving, reducing dining out occasions, or adjusting their food habits to enable their spending to go farther. Given the affordability of chicken and our diversified portfolio, our team was well positioned to unlock value for the consumer. To that end, our team continued to focus on operational excellence efforts across all locations to enhance quality, service, and mix. Equally important, We overcame disruptions late in the quarter from Hurricane Helene to ensure superior fuel rates to our key customers. Case ready, benefited from increased protein demand throughout retail. Interest in chicken was amplified given the reduction in price of chicken that created new record spreads between ground beef and boneless, skinless breasts. Furthermore, our approach with key customers adapted to reflect changes in input costs creating opportunities for additional investments in promotional activity, generating more demand. Our case-ready business grew together with our key customers, as increased distribution and continued consumer interest in our differentiated, higher-attribute offerings drove volumes ahead of fresh category averages. In small birds, QSR demand for chicken continued to grow with better penetration, despite softening traffic throughout food service. where errors daily remain the fastest-growing category in retail. When these factors are combined with expansion at key customers, along with improvements in operational excellence, Small Bird grew significantly compared to last year. In Big Bird, we continue to drive new improvements from capital investments and team member retention and training. These efforts were further aided by mixed enhancements throughout our facilities and across our customer base. When these efforts are combined with strong commodity cut-out values, along with a reduction in input costs, our business improved considerably from depressed margins last year. Our prepared foods continue to gain momentum. We have expanded our marketplace presence and diversification throughout retail, deli, and food service, driven by incremental distribution and leading consumer innovation. Commerce continues to play a role as digital sales increased by 32% compared to prior year. In Europe, we have completed a variety of actions to enhance our agility and innovation capabilities to further cultivate partnerships with key customers. As part of these efforts, we have increased our integration and synergies throughout the diversified portfolio across protein and channels. On fresh offerings, we have strong presence in poultry, pork, and lamb. These segments constitute roughly one-third of overall net sales in Europe. Poultry is the largest with approximately two-thirds of the segment's net sales. We are a major player in the retail value-added and prepared segment, with UK leading brands such as Richemont and innovative protein snacking brands with refrigerators. And we are a category leader in both the chilled and frozen meals business. Taken together, this business comprises nearly half of the total net sales in Europe. Food service is the third part of our business. It includes a variety of frozen and prepared offerings designed to meet the needs for retail deli, leading QSRs, and other distribution channels. Turning to the consumer, confidence improved year over year as wage growth continues to outplace inflation, helping our branded products to continue to grow faster than category averages. Demand for offerings in poultry and chilled meals outpaced total retail growth, whereas demand in pork, both fresh and prepared, continued to lag. Within food service, sales have not yet returned to pre-COVID levels. Nonetheless, consumers are becoming increasingly interested in food away from home options as average spend, frequency per week, and participation rate have all increased over past year. Our diversified portfolio across brands, proteins, and prepared items benefit from these trends. Sales of our branded offerings increased 7% from last year, as refrigerators and Richmond continue to grow faster than category average. Similarly, our poultry and chilled meals offering grew ahead of the market. In pork, we have secured several new awards in bacon, cooked meats, and sausages across retail and food service. We have complemented these diversification efforts to continue the expansion of our exports business in both pork, poultry, and lamb. To that end, we now have over 150 clients, open 18 additional markets, and increase our customer base by 53%. We continue to cultivate our innovation pipeline to enhance mix and drive profitable growth. During the quarter, we launched over 280 new products many of which receive awards from various leading retailers for best product quality and innovation. Our efforts to unlock value from our manufacturing network optimization and integration of our corporate support activities continue to remain on track as we have realized the anticipated benefits. Moving forward, we will continue to evaluate additional opportunities to enhance our production efficiencies and drive a more innovative, agile, and responsive organization to meet customer and key customer needs. In Mexico, we experienced some market volatility as chicken demand followed typical seasonal changes, combined with some disruptions from hurricanes during the late September. In fresh, we experienced significant key customer growth above category in both retail and food service. Our branded efforts continue to gain momentum as sales from Pilgrims and Favoritos grew 20% and 60% respectively. JustBear has realized similar success, as sales are up nearly 30% from previous quarter. We continue to diversify our portfolio through value-added, as sales increased 7% compared to last year. Pilgrims' branded, prepared offerings also had the most momentum, as sales grew almost 40% compared to last year. Our investments in operational excellence to expand capacity and mitigate operational risk remain on track. We ramped up our production in Merida, and relocation of our breeder farms continued to proceed as planned. We also supported the continued growth of our prepared business in part fry and fully cooked offerings through building new capacity. Earlier this year, this week, we published our 2023 Sustainability Report, to provide an update on our efforts to become an industry leader in environment, social, and government matters. We continue to embed sustainability as a core component to our overall business strategy as means to drive a more robust food system through industry-leading initiatives. To that end, we have decreased our absolute scope one and two emissions by 17% since 2019. And now we use over 14% renewable electricity in our global operations. We have also certified 100% of our facilities in the United States and Europe according to the GFSI standards by independent third parties and improve our global safety index performance by 24% since 2022. Our Better Future programs continue to be exceptionally well-received, as over 1,500 team members have signed up for the program since inception. With that, I'd like to ask our CFO, Matt Galvanoni, to discuss our financial results. Thank you, Fabio.