Good morning, and welcome to the Fourth Quarter and Fiscal Year 2024 Pilgrim's Pride Earnings Conference Call and Webcast. [Operator Instructions]. 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 Investors section of the company's website at www.pilgrims.com. [Operator Instructions]. I would now like to turn the conference 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 fourth quarter and fiscal year ended December 29, 2024. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter and the year, including a reconciliation of any non-GAAP measures we may disclose. 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 8-Ks 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 has 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. I look forward to reviewing our Q4 and full year 2024 results today with you, and invite everyone for our upcoming Investor Day on March 14 for a more detailed view on our long-term vision, strategy and method. For the fourth quarter of 2024, we reported net revenues of $4.4 billion, along with adjusted EBITDA of $526 million and adjusted EBITDA margin of 12%. Our Q4 performance reflects the execution of our strategies of a diversified portfolio that can capture market upsides while offering differentiated products that answers to consumer demand, combined with our relentless pursuit of operational excellence. Our U.S. Fresh portfolio improved compared to last year as Big Bird expanded margins through a combination of strong, stable commodity cutout values, progress in operational excellence and enhanced mix. Case Ready and Small Bird also drove profitable growth to improve performance and production efficiencies and increased key customer demand in retail, QSR and deli. Prepared Foods grew sales compared to last year as interest strengthened for our brand offerings in retail and foodservice, further diversifying our portfolio. In Europe, margins expanded given continued optimization of our manufacturing network and integration of support activities, including our back office. Overall, sales remained stable in retail as consumers increasingly migrated across our diversified portfolio into poultry and chilled meals, branded offerings and poultry. Foodservice grew double digits from a combination of additional distribution and increased traffic for away-from-home eating occasions. Mexico experienced a stronger Q4 as commodity market pricing increased throughout the quarter. In both Fresh and Prepared, sales to key customers continue to grow from prior year. Similarly, momentum for our branded offerings increased throughout the marketplace, further diversifying our portfolio. For the fiscal year 2024, net revenues were…

Good morning, everyone. As I review our financial performance, please note that our fourth quarter 2023 and fiscal year 2023 periods were 14-week and 53-week periods, respectively, which will impact the period-over-period comparison. For the fourth quarter of 2024, net revenues were $4.37 billion versus $4.53 billion a year ago, with adjusted EBITDA of $525.7 million and a margin of 12% compared to $309.5 million and a 6.8% margin in Q4 last year. For fiscal year 2024, net revenues were $17.9 billion versus $17.4 billion in fiscal 2023, with adjusted EBITDA of $2.21 billion and a 12.4% margin compared to $1.03 billion and a 6% margin last year. Adjusted EBITDA in the U.S. for Q4 came in at $371.6 million, with adjusted EBITDA margins at 14.2%. Our Big Bird business profitability significantly improved year-over-year as commodity market pricing improved, grain costs were lower and the business achieved further operational improvement. Also driving the improvement in the quarterly U.S. results were increases in profitability in both our Case Ready and Small Bird businesses. These businesses continue to deliver high-quality and strong customer service, allowing us the opportunity to increase distribution with our key customers. Our Prepared Foods business continued its momentum of branded product sales growth with both retail and foodservice customers. During the quarter, within our U.S. GAAP earnings, we recorded $95 million in litigation-related settlement charges. Also, in the quarter, we finalized the U.S. pension plan termination program that commenced earlier in the year and recorded $10.9 million of pension settlement charges. This pension obligation termination is now fully complete. For the fiscal year, our U.S. net revenues were $10.63 billion versus $10.03 billion in fiscal 2023, with adjusted EBITDA of $1.56 billion and a 14.7% margin compared to $531.5 million and a 5.3% margin last year. The U.S.…

[Operator Instructions]. Today's first question comes from Ben Theurer with Barclays. Please go ahead.

Good morning, and thanks for taking my question. Fabio, congrats on the results. Yes. So, to start off, maybe just talk a little bit about the market dynamics, what happened in the fourth quarter and as we're moving into the first quarter. Clearly, 4Q was very strong. I mean it feels like there was still a little bit disruption from the hurricanes late September, early October, coupled with AI. So maybe help us understand a little bit what's been driving these very strong cutout values, particularly on the Big Bird side as you think about it throughout the fourth quarter, but also what you're showing early stage in January still being very elevated. So that would be my first question. And second question, that would be more for Matt in regards to the capital allocation on the guidance for the CapEx of $450 million to $500 million. It kind of feels a little low of what you can do given the $2 billion in cash that you have available versus what tends to be long-term average more like $500 million. So, anything that you can share maybe in terms of the thoughts around dividends or any other way of cash return, just given where the leverage is? Thank you, very much.

Sure. Thank you, Ben. You're right. There is always some seasonality in the chicken business. And typically, Q4 is the weaker quarter in the year. It's because of the seasonality of the consumption because of Thanksgiving and Christmas. What we saw this year was a very strong demand for chicken. I think that is because of the relative affordability of chicken and some of the menu penetration in foodservice. In Q4 and throughout the year, we saw an increase in demand in retail and foodservice for chicken. In the retail, most notably, we saw on the frozen food category and on the fresh category and also on the deli. So, we saw those three categories leading the demand in the retail. And in the foodservice, we also saw despite a reduction in the traffic that especially affected the foodservice restaurants, the QSRs continue to grow the demand for chicken. I think that's because of the chicken promotions and the menu penetration that we've been seeing. So, both the retail and the foodservice actually increased during Q4 year-over-year. At the same time, what we saw during Q4 because of some of the storms and some of the bad weather and the continued problem with hatchability and a quality. Production was up close to 1.4%, but the big bird category, which was a more commoditized one, was actually flat. So, we saw an increase in demand because of the factors that I mentioned with a flat production in the commodity category. And that sustained the prices at stable levels. And as a matter of fact, now in Q1, we typically see this, which is a rebound in the demand for chicken. We see prices actually going up almost every day in the commodity category.

And Ben, this is Matt. Thanks. That's a completely fair question relative to where our cash position sits today and our overall leverage. I think I go back to what I mentioned in the prepared remarks that right now, we're guiding at a $450 million to $500 million on we'll call our sustaining CapEx plus more routine or smaller growth projects. As I mentioned before and in the prepared remarks, we are really looking at growth opportunities, organic growth opportunities to partner with our key customers to increase our protein conversion. Our Prepared business needs to expand its capacity. And I think we'll be able to talk more about that at the Investor Day in about a month, and we really look forward to talking about that and just kind of overall capital allocation philosophy and thoughts at that time.

The next question comes from Peter Galbo with Bank of America. Please go ahead.

Good morning. Thank you for the question. Maybe to pick up just on Ben's question around the U.S., Fabio, I think a little bit of the pressure this morning is probably that the U.S. even seasonally still came in a bit below expectations relative to the Street. So just trying to get maybe a layer deeper on the underlying. I know that you have some contracts, obviously, that are more grain-based. And so, we don't have the details of the 10-K yet, but was there more of a pass-through element just in pricing on grain that maybe hit you in the fourth quarter more so than anticipated? Just any additional color maybe by subchannel would be helpful as we think about 4Q relative to your own expectations and relative to where the Street was.

No, sure. I think we've been always talking about our portfolio, right? And we have exposure to the commodity markets through our Big Bird operations, but that is 1/3 of our portfolio. The other 2/3 of our portfolio are more in the Small Birds and the Case Ready operations, which tend to be way more stable. And I think as we mentioned, because our contracts and pricing in those other segments are more grain-based or a negotiation that we keep the prices unless something changes, either in cost or in the supply and demand. And when you look at the comparison year-over-year, we actually improved in every single category because of our operational excellence initiatives. So, there is a lot of operational excellence that went through the bottom line. For the year, we have more than $100 million in operational improvements. But those segments are more stable. And that's why we are able to capture the upside when the market is really strong, but protecting the downside. And I think that's what makes our bottom line less volatile. And we've been working in this portfolio over time to make sure that we, again, can benefit from the commodity cycles and can capture the upside while protecting the downside. Also, on the Prepared Foods, we've been growing our brands and through distribution, and we of course, is an offset to the commodity cycle as a lot of the raw materials for this Prepared Foods is the commodity meat. So, I think that's why Q4 was not even stronger than it could be. But when you look at year-over-year, there was a significant improvement. And when we look into the yearly, I think we saw how the portfolio reacts when prices really changes. So, we are more stable, but we're able to capture those upsides.

Great. And, Matt, maybe just a couple of quick ones’ modeling-wise for '25. I think you said net interest expense of $65 million to $75 million. I just wanted to make sure that I heard that correctly. And then just the two others, if you could help us with D&A and then just how you're thinking about SG&A expense as well.

Sure. I would -- from an SG&A perspective, I would kind of model us at sort of this $130 million to $135 million a quarter. I think that will give you a good range there to use relative to D&A in about a $440 million number annually, $440 million. And then the interest expense -- the net interest expense, that's based on kind of the current guide on the capital expenditures of the $450 million to $500 million and just using that kind of as the baseline to kind of look at that relative to cash generation during the year and cash use based on an estimate of what we can do for net interest -- for interest income, too.

The next question is from Andrew Strelzik with BMO. Please go ahead.

My first one, I wanted to ask about Mexico. I just wanted to better understand what drove the counter-seasonal kind of improvement in cattle values that you talked about and kind of how to think about given that margins in Mexico into 2025 or through 2025? I assume that first quarter margins are probably going to be up year-over-year, but just trying to better understand what's going on in Mexico and how to think about the outlook there.

Sure. And once again, we're really happy with the margins we have in Mexico. It's a growing economy. We continue to invest there. As I mentioned, we just started a new complex in the Peninsula in the Merida region. So, we're diversifying our geographic position in Mexico and capturing those growth opportunities. I think Mexico can be very volatile. quarter-over-quarter. But when we look at the year number, it's typically more stable and double digits in terms of EBIT. So, we, once again, really believe in the economy of Mexico and continue to invest there. I think what we saw this year was a strong demand for the chicken products. I think we saw also that with the high prices of the commodities in the United States, especially leg quarters and breast meat, we saw more demand in the domestic market in Mexico. The big volatility in Mexico typically comes from the live market. I think we've mentioned these many times, there is still a market in Mexico where we produce the birds and we sell them live to wholesalers that we distribute those birds to small slaughterhouses that will sell the meat to the consumers, especially around the Mexico City. This live market is highly volatile because there's a lot of small competitors that can appear and go as the profitability is strong or weak in that segment, which, again, once again calls high volatility there. I think we've been able to improve our presence in that market. We continue to grow in that market as well, which is stable in Mexico. But we continue to differentiate our portfolio with the growth of Prepared Foods and the growth of our branded Fresh offerings. And that is the -- that is the market that continues to be highly volatile. And this year, I think we saw some diseases in Mexico that impacted the live production, and that created a little bit more volatility there. We don't know if that is going to be the case in 2025. Of course, we follow a very strong biosecurity in Mexico, but the movement of these lives increase the risk in terms of biosecurity. That's why we have a disease in Mexico, which is higher than in the U.S. So that's what creates more of the volatility in Mexico. But once again, we continue to expect increase in demand for chicken. Chicken continues to be an affordable category for the Mexican families, and we'll continue to invest in Mexico to grow our production there.

Yes. And Andrew, it's Matt. Just when we look back at Q1 of last year, Mexico's adjusted EBITDA margins of 9.2%, very, very solid Q1 of last year, a great year overall. And so just something to consider when you think about Q1 2025, we are lapping 9.2% margins, which were solid.

Got it. Okay. That's clear, and that's helpful. My other question is going back to the U.S. side. And if I think back to the summer, U.S. margins were excellent, but breast prices were basically around the 5-year average level. And now we're coming into this year with above average seasonal prices. So, I guess I'm trying to think about, given the way you're talking about supply and demand, the right way to think about breast prices over the summer, again, I mean, do you think the setup here is to get to above normal prices or hold above normal prices as we get into the summer? Or is the setup more similar to last year, especially in the context of feed costs, which especially on the corn side have gone up a little bit? Thanks.

Yes. I think the demand for the breast meat continues to be really strong. As I mentioned, last year, we saw prices close to the 5-year average. I think the 5-year average are also highly impacted by because of very high prices during the 2022 period. So, I expect the demand to continue to be strong. If you look into the supply, we are seeing with the egg sets and chicks place and based on what we are seeing on the hatchability numbers and mortality numbers that demand according to the USDA will be close to 1.4%. And that is more in the first semester rather than the second semester. Beef, and if you look into the overall protein availability in U.S. will be close to 1% when you look at all the other proteins, especially if the beef herd is really below as the USDA is expecting. And because of the delta in pricing, we're seeing at retail boneless breast compared to ground beef is what we typically compare is at the highest level in history. So, there is a strong demand in retail for the chicken products. And that goes over the supply in the Case Ready category because it takes Big Bird meat, which is the commodity meat to augment the strong demand, especially during the summer. That's what tends to increase the commodity pricing on the commodity segment. So, I expect the continued strong demand for chicken, especially during the summer. And I think the prices will react accordingly.

The next question is from Heather Jones with Heather Jones Research. Please go ahead.

Good morning. Congratulations on the quarter. I wanted to really ask for a clarification because, Fabio, some of your prepared comments, I was -- had a difficulty understanding. So really quickly on bird flu, you mentioned some of the U.S. export partners that have changed to like a county level as opposed to state level. And I know Mexico does that. But I was wondering if you could repeat those comments, which countries have switched to doing just county level?

Yes. I think the biggest reduction in terms of exports, if you look into the United States has been Southeast Asia, especially Taiwan. So, I think Taiwan was the one that is creating a new procedure. It's not -- I don't know specific on county levels, but they are changing their protocols to take the down levels more into some zones. -- is a big change, and that was a big change for this year. One, again, overall, high-path AI, as we mentioned many times, I think it has been a big issue for turkey and for the ag industry. For us, we have the biosecurity protocols at the maximum. We have a very widespread production footprint. We have 23 plants. And even our houses are very spread, as you know, very well. And each farm has typically two to four houses. So, we have 110,000 to 150,000 birds in each one of those family farms. So, I think our biosecurity and our geographic diversification helps on creating less impact on high-path AI in terms of using birds. But as you mentioned, the export ban are the ones that are really impactful for our business. But as we are seeing a very strong demand in the external markets for the American product because of its affordability and competitiveness compared to all other proteins and even all other chicken geographies. And we're seeing also strong demand here in the United States, especially for the meat and that is limiting the availability of exports of leg quarters. So very strong pricing over the year.

Okay. Thank you, for that. And then moving back to the U.S. Big Bird. I hate to belabor this point, but I just was wondering, so the U.S. profitability was a little light. And I understand that you've got a diversified business and 2/3 of the business, the pricing doesn't move around a lot. But I was wondering if also there was effect from the Douglas complex being down because my understanding is that because of the loss of a lot of that housing that you guys might be having to buy logs on the outside to process. And so, I was just wondering if you could talk qualitatively to how the Douglas complex impacted results during the quarter? And when do you all expect that complex to -- the housing there to be back to normal?

Yes. Thank you for the question. Once again, yes, there was a devastating storm that we have in the Douglas. We helped the community. We invest in the community. We donated $1 million to help with the efforts to improve and rebuild the community. And we unfortunately lost a lot of housing in that region. I think we've been building houses. We've been getting houses on the market, and we've been increasing our production there. But what we did, we have a lot of other operations in the region. We moved some birds around, and we've been able to operate the complex at a very satisfying operational level. So, we're not focusing the losses of Douglas in just that complex. Of course, it was more impacted than others. We also have some impact in Live Oak because of the storm. But we're moving those around. And again, we are with a very efficient operation there, and we are with a great efficiency in all the other complexes through this movement of [indiscernible]. I think we're also impacted a little bit in the quarter by the change in our facility that we moved to last year. I think we stayed down for close to a week in that facility. But I think those were not very impactful for the quarter or material things that we expect to continue to impact our operation. We expect the Douglas ramp-up to be close to Q3, Q4 as building houses is not as simple as it was in the past. But we see a great level of commitment from our growers, and we see a great level of commitment from the authorities also on helping on financing those houses and the permitting on those houses.

The next question comes from Pooran Sharma with Stephens. Please go ahead.

Thank you, and congrats on the quarter. Yes, I just wanted to focus on -- I think you kind of mentioned this in the prepared remarks, but I wanted to dive into hatchability, livability. It looks like trends still look challenged for production. Just wondering if you could give us an update if there's a fix on the way. Could you maybe just remind us what those fixes are? And what are the potential time lines here?

Of course. Thank you. Yes, it's a comp question. And we've seen this hatchability issue for a while now. It all started with a new breed. And this new breed has great numbers in terms of yields and in terms of conversion. So, I think what the genetic companies do is that they always try to answer the questions from the industry. And that's what we want, quality, yields and conversion costs. And this new breed answered those questions. So, it has improved numbers, close to 1% to 2% every year on those categories and a very good quality. Unfortunately, it is a bird that is really difficult to manage on the live side. And I think on the life side, it generates a smaller amount of eggs, but also has a very low hatch. And as we're looking into the numbers, actually, 2025 is starting with a lower number than we saw in 2024. There's always some seasonality because of the weather, but 2025 is actually starting lower from 2024, which was the lowest on record for the hatchability. It is about animal handling on the live side. And the United States is structure to have minimal interaction with the birds. So, we leave the birds in the houses to create the fertile eggs. But because of the difficult management of these birds, we need to have individual management of these birds. We have that in Europe, in Mexico and somewhat in Brazil. So, we're seeing better hatchability there. But it is the structure of the houses and the way we manage the birds. To change, and we've been changing our protocols, we're spending more time to manage these birds, specifically the weight of these birds because the weight impacts the hatchability. And we are spending more time in the houses, but we will need to change the structure of the houses. We completely need to change the way we manage those parts. And as I mentioned, that helps in the biosecurity, we also have partner firms that do the -- that keep the breeders for us, and it is all scattered throughout the country, and we need to invest in those houses and change all the management, and that takes a lot of time. So, there's no silver bullet for the improving hatchability, but we expect to get better at managing this breed with the time.

Okay. Great. I appreciate that commentary. And I guess -- just furthermore, just fleshing out your commentary here. You mentioned that you had weather disruptions, and we've seen this Arctic weather come in. So, I think a lot of people are talking about that. I think you mentioned big bird production may have been flat at some point. Just wondering how to think about this for 1Q, given we have seen this colder weather kind of persist?

Yes, the weather is always a challenge for us, especially because we saw some really cold weather in the South, right? At some point, we have snow in Florida. And that disrupts for a little while. But I don't think it is a persistent or a significant event that will impact the productivity or the production or even the demand in that region for a long time. I think we always have one or two weather events. Of course, we mentioned also the mini hurricane that we have in the Bellevue region that was impacted for that operation. But I think we will always have those types of events. And that's why the geographic diversification that we have allowed us to keep great service levels to our key customers and didn't disrupt a lot into our bottom line.

The next question comes from Priya Ohri-Gupta with Barclays. Please go ahead.

Good morning and thank you and the congrats on the quarter. Matt, I was wondering if we could start with you a little bit, really strong free cash flow performance to round out the year. As we look to '25 and some of the comments around volatility on the input side, could you maybe walk us through how we should think about working capital as contributing to cash flow? How much of a drag should it be? Or could we see a potentially neutral outcome? And then secondly, maybe, Fabio, if you could touch on the impact that the business could potentially see with regards to some of the tariffs that are being considered, not just globally, but also with regards to Mexico. And if you could walk us through the puts and takes between the U.S. and the Mexican businesses and how that dynamic could affect both of those?

Sure. Thanks for the questions, Priya. I'll start and then I'll pass it over to Fabio after. When you think about our cash flows for '24, when I look at our working capital contributions were significant, right? I mean we were in that over $300 million just in working capital for this past year. I don't anticipate having that type of uplift. I think with the grains being kind of low where they were, really was provided us a nice benefit last year. And I'd like -- I'm not necessarily predicting a major drag against this year because I think we've got enough offsets with corn being a bit higher, soy being a bit lower. I just think that the working capital impact will be more flattish. We still have very, very strong free cash flow. But I just don't think the working capital is going to be the type of benefit that we saw in '24. Hopefully, that helps.

Yes. We saw a significant reduction in our finished goods inventory as we all saw frozen inventories in the U.S. going down year-over-year. On the tariff side, I think there is still a lot of uncertainty about if, when and where the tariffs will be in place and also what will be the answer from the trading partners as we mentioned Mexico, right? Mexico is our largest trading partner. What we export and we export close to 24% of the U.S. exports going to Mexico. And it's typically leg quarters, industry and chain for Prepared Foods. So, it's a very important source for Mexico. I think it's more than 70% of the Mexican imports of chicken come from the United States. So, I don't expect massive or any important reduction in that trade. I think the Mexicans are very concerned about food inflation. And I think this is a great opportunity for Mexico to bring very competitive meat to their country. Of course, we also have a large operation in Mexico. And Mexico is a growing economy. As I mentioned, we will continue to invest in growing our operation there. But there's also other proteins that they import from the U.S., it's mainly pork. And I think that also, I don't expect a big impact in that trade. But if that happens, of course, we will have the benefit of having our operation in Mexico. So, there's a little bit of hedge for us if there's any problem in trade with Mexico from having the operations there. I think the other big part of the trade, it's corn that goes a lot from the United States to Mexico. And I also don't expect any disruption from -- in that trade. Once again, I think the Mexico country is very concerned about food inflation and having access to the U.S.A. corn, which is the cheapest in the world is very important for their economy.

Thank you. This concludes our question-and-answer session. I would like to turn the conference over to Mr. Sandri for any closing remarks.

Well, thank you, everyone, for attending today's call. 2024 was a very successful year. I'd like to thank our team members for demonstrating a leadership mindset, driving our values and elevating our performance throughout the year. Following our strategies, we captured the upside from enhanced market conditions, grew our presence with key customers, further diversify our portfolio and improved production efficiency through operational excellence. As a result, we collectively established new financial and operational milestones for our business. Nonetheless, our vision is to be the best and most respected company in our industry, creating a better future for our team members and their families, and that remains the same. To that end, I look forward to accelerating our work throughout 2025 and beyond. Thank you, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.