Pilgrim's Pride Corporation

Good morning and welcome to the second quarter of 2026 Pilgrim's Pride earnings conference call and webcast. All participants will be in a listen-only mode for the duration of the call. Should you need any assistance today, 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 call over to Andrew Rojeski, head of strategy, investor relations, and sustainability for Pilgrim's Pride.

Good morning and thank you for joining us today as we review our operating and financial results for the second quarter ended on June 28, 2026. 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 also have been filed as Form 8Ks and are available online at sec.gov. Fabio Sandri, President and Chief Executive Officer, and Matt Galvanoni, 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. Good morning, everyone, and thank you for joining us today. For the second quarter of 2026, we reported net revenues of $4.6 billion with an adjusted EBITDA of $360 million. Our adjusted EBITDA margin was 7.8% compared to 14.4% last year. During the quarter, chicken demand remained firm across all regions, leading the growth in meat protein consumption. Equally important, we continue to drive growth projects to strengthen our portfolio, drive sales growth, and enhance margins. In the U.S., demand for chicken continued to grow in both retail and food service. Operations improved compared to previous quarter, given the completion of our plant upgrades and progress in the efficiency for our live operations. Volumes to key customers in fresh remained steady, whereas prepare grew double digits, as Just Bear continued to lead growth and velocity in the frozen fully cooked category. In Europe, Poultry and ready meals drove overall sales growth, as their affordability and convenience resonated with value-conscious consumers. Margins were compressed, giving competition from imported pork into UK and increased costs driven by the Middle East conflict. Mexico also increased volumes compared to last year, driven by exceptional growing environment for birds. We continue to grow our branded offerings in both fresh and prepared. and the previously announced growth and diversification projects all remain on schedule. We continue to focus all aspects in the environment, social and government matters within sustainability. Our approach to team member development and retention were recently recognized across regions for the workplace satisfaction, including America's Greatest Workplace by Newsweek in the US, Employer of the Year by The Grocery in Europe, and exceptional companies award by the Institute for the Promotion of Quality in Mexico. Turning to supply in the US, the USDA reported ready-to-cook production increased 4.5% over same period last year from higher head counts and modestly higher live weights. Egg sets rose 2% from improved layer flock productivity, whereas chick placements grew 2.4% from moderate improvements in hatchability. A significant part of the growth came from much better livability than previous years. Given the size of the layer flock, recent pullet placements, and production environment, the USDA anticipates chicken production growth to slow down in the second half of the year to around 2.5%, closing the year at 3.3%. As for other proteins, the USDA expected limited growth in pork, along with minor increase in beef availability, as higher imports partially offset domestic production headwinds. When these factors are combined with increased chicken supply, the USDA estimates overall net protein availability will increase by 2.2% compared to last year. Within the US, the affordability of chicken provided a great option to household budgets pressured by persistent inflation and elevated energy prices. As a result, Chicken continue to be resilient as volumes increase across both retail and food service channels. In retail, the fresh meat department posted dollar sales growth across all major proteins. From a value standpoint, chicken delivered the highest growth among all proteins compared to the same period last year. Boneless skinless breast volumes increase over year over year as pricing remains steady and the spread versus ground beef remain at record levels. Boneless, skinless dark meat continued to deliver strong growth as volumes rose compared to the first quarter of 2026. In Delhi, consumer demand for convenience, ready-to-eat options drove growth in rotisserie woks and cut-up portions. Sales and volumes for appetizers, including popcorn chicken and wings, also rose compared to the same period last year. Demand for convenience and value also permeated the frozen prepared category as chicken grew compared to last year. Within food service, chicken values remain positive despite mixed industry performance and traffic trends as operators continue to expand chicken as a value-oriented protein offering. Overall, food service volumes increase despite continuous concern about food traffic, with chicken gaining many penetration. QSR and non-commercial channels presented the largest growth, with chicken-focused chains lead growth in QSR. Despite continued healthy growth in chicken across all channels, demand was more than offset by the increase in supply. As a result, counter-seasonal movements emerged in the commodity chicken market, lowering cut-out values compared to previous quarter. In exports, overall poultry exports remained steady compared to last year as trade flows continued to navigate through a variety of circumstances. Our volume growth was strong. and we outpaced the channel through an increase present in several key markets. Within the Middle East, trade to GCC countries continue to flow through alternative courts, giving a comprehensive inland transportation network, enabling a resilient supply chain. For Asia, recent meetings between government officials from the United States and China created a favorable outcome for the US poultry exports. As such, China released 17 states from its avian influenza ban, allowing shipments of raw products to resume. Additional opportunities exist as other states that are currently free of high path avian influenza have yet to be fully recognized. Further meeting scheduled later in the year may result in the release of these states and resumption by China to follow the phase one agreement. Turning to feed, corn was volatile throughout the quarter. Early in the period, concerns about disrupted fertilizer supply and higher energy costs associated with the Middle East conflict elevated prices. Corn markets eventually fell given favorable U.S. planting weather, higher level of U.S. planting acreage relative to the forecasted expectations, and better than expected production in South America. Looking ahead, Higher risk premiums for corn may emerge, pending outcomes in the Middle East and reactions by China to potential trade policies changes by the U.S. Nonetheless, yields for the U.S. crop, along with weather in the Midwest, will be the key drivers for corn pricing in the short term. The soy complex shows similar volatility given the Middle East conflict, along with additional uncertainty from the pace and volume of Chinese purchases of U.S. soybeans. Another year of record soybean production in South America, along with increased soybean acreage in U.S. versus last year, reinforced healthy stock levels. Given the potential of increment buys of U.S. soybeans by China, a rich premium will continue to exist within the soy market. Soybean oil continues to be the stronger leg of the soy complex, keeping the soybean meal price relatively lower. In wheat, Global stocks remain at comfortable levels despite a decline in production from all-time high last year. Availability may be further enhanced later this year as UK anticipates a production increase of 25% versus prior year. However, recent concerns regarding shipments in the Black Sea given the conflict between Ukraine and Russia may trigger an increase in price. In the US, The investment in converting our plant in Russellville to a case-ready operation to further strengthen key customer partnerships was completed as planned. We'll also continue to improve our sales mix given the recent installation of dark meat deboning and portioning equipment in several Big Bird plants. Given this work, our portfolio was more prepared to manage the counter seasonal declines in commodity cutout values, enhancing profitability from the first quarter. In fresh, Volumes grew compared to the same period last year. Margins expanded from the previous quarter given the completion of the plant upgrades and continued improvements in live operations. Case-ready volumes rose compared to last year from incremental distribution and stable velocity throughout retail. We also secured several promotional events with the several leading retailers to further drive demand during the next quarter. Small birds also grew as volumes to key customer exceeded channel averages. Our big bird plants provide an additional product to support the growth of prepared foods, mitigating the impact of commodity market declines. To support the growth of our key customers, we recently announced investments in LGA Georgia to expand production and do more deboning of small birds. Based on this work, we will further align our portfolio to meet the fast-growing boneless chicken categories. such as Chicken Sandwich and Tenders. Momentum to further diversify our portfolio through prepared foods continue to accelerate. Overall volumes increased nearly 14% compared to the same period last year. Retail sales of Just Bear increased over 30%, six times the category average. We also receive additional recognition for the taste and quality of Just Bear as recent survey of Chefs by the All Recipes, name it nugget one of the best in the category. Given its extensive growth and consumer acceptance, it has achieved nearly 15% market share, making it the second largest brand in frozen fully cooked. We continue to drive growth of our branded presence in retail through innovation. To that end, we have created expansions to expand Just Bear presence across different occasions and consumer segments. Similarly, we are securing partnership to deliver and launch new flavor offerings through the retail and club for the Pilgrims branded in retail. We are building further awareness of our superior taste and culinary focus of the broader Just Bear fresh prepare portfolio through media partnerships. Recently, Our innovation was featured on the award-winning television series The Bear and further supported by selected dining experience, meal kits, and press coverage. Based on this work, we've generated over 950 million earned media impressions. In food service, we continue to increase our presence of branded offerings as market share has increased in both commercial and non-commercial channels. Moving forward, we'll continue to cultivate our presence through innovation Digital Engagement and New Product Development. Our investment in the Walker County, Georgia, to further support our growth remains on track, with commissions slated for the second half of 2027. In Europe, our diversified portfolio continues to adapt to meet evolving marketplace needs. The affordability of our poultry and meals resonated with inflation-strapped consumers, as each were among the fastest-growing categories in retail. are volumes to key customer roles faster than both the grocery channel averages and prior year, reinforcing our partnerships. In the branded segments, volume in the rollover grew double digits and garnered significant retailer acceptance and consumer interest. Fridge raiders remained relatively steady as additional distribution was secured throughout grocery, enabling further growth for the remainder of the year. While Richmond's margins remain attractive, the pace of volume growth lags our expectations as extensive promotion activity, along with significant retailer support of premium private label offerings, has intensified competition pressures. Given Richmond's market presence and further profitability growth potential, we'll continue to emphasize sales execution, investing in brand building, and drive innovation. In food service, QSRs continue to experience declines in store visits, resulting in lower volumes and sales. We will continue to work closely with leading food service providers to expand our portfolio of value-focused offerings, generating additional traffic. Despite increasing costs from the Middle East conflict and competition from important pork into the UK, overall profitability was comparable with last year. Within pork, Continued reductions in the existing herd, along with further diversification in prepare, should alleviate margin pressures. In addition, our processing arrangements for customer-specific offerings allow for recovery from raw material escalation. Turning to Mexico, the country experienced a counter-seasonal, very positive growing environment for birds. As a result, production expanded from elevated livability and higher live weight. Increased production of domestic eggs and additional pork imports further grew overall protein availability in the country. Nonetheless, demand for chicken was very strong, absorbing the additional supply. We continued to grow our differentiated brandy offerings. In fresh, volumes of retail-branded products grew over 30% compared to last year. Just Bear once led the growth as volumes increased over 2.5 times. Repair Foods offers continue to gain marketplace traction as volumes rose across retail and food service. Pilgrim's branded offering led growth as volumes grew double-digit across both channels. Operational excellence efforts made significant progress, given improvements in productivity and live operations, further enabling our business to navigate these challenging market conditions. We continue our investments to drive sales growth and reduce the volatility of our portfolios. To that end, we complete our expansion of the prepared line at Port Veneer and start the production as scheduled. Our investments in live in the Southern Peninsula are also on track and ramp up continuous. We continue to emphasize all aspects of sustainability throughout our operations. As part of this effort, we've made repeated investments in team member training to reinforce our values throughout our organization. Thank you, Fabio. Good morning, everyone.