Pilgrim's Pride Corporation Price & Performance (PPC)

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 [indiscernible] 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 eight ks are available online sec.gov. Fabio Sandre, 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 ks and our regular filings with the SEC. I would now like to turn the call over to Fabio Sandri.

Thank you, Randy. Good morning, everyone, and thank you for joining us today.

I look forward to reviewing our Q4 and full year 2024 results today in the queue and invite everyone for our upcoming Investor Day on March 14. For a more detailed view on our long term vision, strategies and method. For the fourth quarter of twenty twenty four, we reported net revenues of $4,400,000,000 along with adjusted EBITDA of $526,000,000 and adjusted EBITDA margin of 12%. Our Q4 performance reflects the execution of our strategy of a diversified portfolio they can capture market upside while offering differentiated products that answers to consumer demand Combined [indiscernible] 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. Kids ready and small birds also drove profitable growth to improve performance reduction efficiencies and increased key customer demand in retail USR And Belly. 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 QM branded offerings, Its service 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 continued to grow from prior year. Similarly, momentum for our branded offerings increased throughout the marketplace further diversifying our portfolio. For the fiscal year twenty twenty four, net revenues were $17,900,000,000 with adjusted EBITDA of $2,200,000,000 translating into an adjusted EBITDA margin of 12.4%. [indiscernible] we have experienced improved shipping demand lower grain costs and positive commodity cutout values. And these factors were combined with key customer growth. And progress in operational excellence, profitability increased compared to prior year. Our Europe business undertook a variety of steps to improve our manufacturing network, simplify our structure, and drive innovation. Based on these efforts, we're strengthening our marketplace presence [indiscernible] In Mexico Commodity sales benefited from reduced input costs and balanced supply demand that generated more stable pricing. These factors were further amplified by growth with our key customers that include interest of our branded offerings among consumers, improving margins compared Turning to supply in the rest, the FDA indicated ready to production for The U. S. Chicken should be 2.5% compared to the fourth quarter of twenty twenty three.

Increases in headcount accounted for the production growth. As average liabilities were comparable to last year. Throughout 2024, the industry in airflac consistently declined year over year. However, sustained efficiencies improvements in the flock, coupled with reductions in exports of eggs, driven an increase in egg sales. Resulting in record pasture utilization. Similar to our year end year, ability continues to be challenged. Given the benefit from seasonality based on the FDA data. As a result, industry rates still trailed our prior year. Limiting realization of increased tax.

FX hedges continue to lag historical averages, FDA data also suggests the industry has placed [indiscernible] challenges. Improved fleet conversion, And liabilities also further mitigated those issues. The USDA's most recent production report indicated that ready to cook production increased by 1.3% for the year. Driven by significant growth in the second half. For 02/1935, the FDA is projecting growth of 1.4% with increases in excess and placements partially compensated by continuing challenges in actuability and mortality. The USDA also reports overall protein availability to grow only 1.2% with a significant decline in overall beef availability. Leading to a supportive demand environment for chicken. As for the demand in U. S, fresh proteins in retail benefited as the cost of eating out increased more rapidly than heating at home. [indiscernible] [indiscernible] Significantly lower than two years ago and stable compared to prior year. While dark meat continues to increase in domestic demand. While the entire fresh meat department experienced sales growth during the quarter, significant pricing advantage compared to the other proteins continue to enable growth and steady plate option. We remember of keeping at retail continued to build on the strong foundation set earlier the year. Growth in both the deli and solvency value added demonstrate Cheetham's ability to meet the needs of consumers seeking to rationalize spending.

Without sacrificing convenience. In foodservice, a bottle and volume sales both grew in commercial and non commercial distribution sub channels. Both were specifically bolstered by strong demand for value added products. Volume and dollar growth also indicates continued transition from full service restaurants to KSRs. Suggesting consumers are favoring a relatively less expensive [indiscernible] to stretch their dollars farther. U. S. Export volume was lower year over year. While pricing remained at positive levels. Domestic demand for dark meat in the web continues to be the key for increased values and limited export availability. At the end of Q4, overall inventory declined as food storage inventory dropped 1% month over month and was 8% lower compared to last year. Both breast meat and duck meat once again fell year over year. We still anticipated export demand to remain strong despite some redirection of trade flows triggered by multiple high-tech AI outbreaks in the Eastern and the United States. [indiscernible] have reduced BIN levels to zones and counties. As such, the geographic diversity of our production locations in U. S. Continue to provide flexibility to transition production should breaks occur. In addition, Taiwan has recently established a release procedure to follow if disruptions emerge, which further mitigates the impact of potential [indiscernible] [indiscernible] somewhat mitigated price gains from healthy corn export demand.

In contrast, soybean meal fell as new soybean meal processing capacity increased supply for the next consumption. Taken together, [indiscernible] [indiscernible] soybeans in their January crop report. Even with those changes, both corn and soy realized improved yields.

Nonetheless, corn stocks in U. S. And globally are expected to contract versus the prior year. Given this contraction of likely trade in range and market volatility for corn is expected to increase. During the first half of twenty twenty five. The limited demand from China for corn and potential for strong growth in U. S. Corn acreage versus last year has currently limited upside so far. In contrast, soybean stocks are expected to grow in both The U. S. And globally compared to As Brazil increased production is expected to more than offset crop losses from dryness in Argentina, As such, soybean meal is anticipated to be well supplied across the globe. In wheat, global stocks are expected to decline slightly compared to last year. Number one, winter wheat plantings in the fall of twenty twenty four throughout The U. S. And Europe better than expected harvest in Australia and Argentina and increased acreage in The UK may improve availability and pricing for next year. Moving forward, we'll continue to monitor changes in global grain demand planting and development of the second crop any fluctuating in patients and conditions moving forward. Turning to The U. S. Our diverse five point across both sizes benefited from elevated demand compared to seasonal trends.

As such, commodity cutout values were notably higher than the average of the past five years. Furthermore, input costs were slightly throughout the quarter as declines in soybean oil more than offset an increasing quarter. Given this environment, profitability in our Big Bird business improved significantly compared to last year. Our progress in operational excellence to improve yields mix and labor productivity further amplified our performance. In case ready, retail demand remains strong as consumer increasingly fluctuating given its relative affordability. Growth with our key customers continued following as our sales improved significantly above the category average. And these factors are combined with the continued focus on quality and service. Case Ready's profitability improved considerably. Compared to last year. Israeli also continues to cultivate its competitive advantage to differentiated offerings and operational capabilities. To that end, during the quarter, we converted one of our locations to an air chill technology. In partnership with a key customer. A result, we consolidated our middle shipping in differentiated categories and reinforced our key customer relationships. Given these recent investments along with our leadership in the organic, and the North America and our shipping categories, Chicken Finger Ready continues to enhance its competitive advantage through higher attributes differentiated offerings.

Additional growth opportunities continue to emerge as we have our key and generate robust demand from consumers. Mobile also benefited from further demand in QSRs and Delhi, as our key customers continue to increase their market When combined with our advances in operational excellence, our profitability grew substantially compared to Q4 of twenty twenty three. Our diversification to prepare foods continues its momentum. In the fourth quarter, our sales to keep customers significantly outpaced the category average. Brands continue to play an instrumental role as the share of Just BARE increased by over 200 basis points compared to last year. In addition, the recent re launch of Pilgrim's gained traction continued consumer affinity. Even high quality and true increased distribution, Similarly, our foodservice business continued to grow through additional distribution and improved the last few through our portfolios. In Europe, we continue to improve our business, through integration of our support functions and optimization of our manufacturing Through this effort, with consistently driven margin expansion, while cultivating a more nimble, customer focused organization to scale profitability growth 02/1935 and beyond, [indiscernible] During the quarter, the firm became increasingly attractive as consumer sentiment improved as wage growth continue to surpass inflation, As such, our poultry and chicken mills business benefited from carryover in both value and volume in grocery.

Our branded portfolio realized similar gains given its growth through the quarter, led by Frigidaire and Rollover. As each grew faster than the category, We continue to leverage the Richmond consumer affiliation and expand its portfolio. It recently received grocery's best new product one for its roast chicken sausage, Our foodservice business also experienced similar success as net sales increased double digits. Innovation remains a priority to drive profitable growth. To that end, we strengthened our partnership with key customers to innovate with a series of investments in line extensions, and packaging update. When combined with a working brand, we have launched and renewed a significant portion of our portfolio of products. With several launches in this fourth quarter. Our efforts continue to be remarkably well received by customers utilization now accounts for over 6% of our net Our efforts in sustainability also have generated commercial benefits for key customers. During the quarter, we recently awarded incremental business with our animal welfare standards. We will continue to explore opportunities throughout the trade based on our differentiated Turning to Mexico, margins increased from better supply demand fundamentals continued execution of our strategy. In the live board market, commodity values increased throughout the quarter and overall grain costs fell slightly compared to Q3 of twenty twenty four.

Key customer relationships strengthened as retail fresh volumes grew into high Noteworthy change, the volume rose over 15% and the momentum in our fresh branded offerings continue. As long as we are nearly 10% compared to the same quarter last year. We continue to diversify our portfolio through value added offerings given the growth in our prepared food business. Our feed customer volumes continue to grow in both retail and foodservice. And our innovation pipeline has been well received through the trade. Efforts to reduce our operational risk in live operations and extend our production capacity remain on track. Our ramp up for production in Medida Specifically as planned and our relocation of the breeder farms remain on track. Recently brought on online additional production in the KFCU in our Provenir plant as well as we continue to explore opportunities for We also continue our journey of stability. To that end, we've driven a reduction in our scope one and two emissions intensive across all regions. In addition, continue to explore solutions from leading industry partners that leverage our operational capability. As such, we've collaborated with Green Gas USA to transform our biogas into renewable natural gas at our center Based on this effort, can reduce emissions while further supporting the renewable energy market.

Moving forward, we continue to drive efforts to further reduce our emissions footprint. With that, I'd like to ask our CFO, Michael Valvano to discuss our financial results. Good morning, everyone. As I review our financial performance, please note that our fourth quarter twenty twenty three and fiscal year twenty twenty three periods were fourteen week and fifty three week periods respectively. Which will impact the period over period comparison. For the fourth quarter of twenty twenty four, net revenues were $4,370,000,000 versus $4,530,000,000 a year ago, with adjusted EBITDA of $525,700,000 and a margin of 12% compared to $309,500,000 in the 6.8% margin in Q4 last year. For fiscal year twenty twenty four, net revenues were $17,900,000,000 versus 17.4 with adjusted EBITDA of $2,210,000,000 and a 12.4% margin compared to $1,030,000,000 and a 6% margin last year.

Adjusted EBITDA in The U. S. For Q4 came in at $371,600,000 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 improvements. Also driving improvement in the quarterly U. S. Results were increases in prop [indiscernible] These businesses continue to deliver high quality and strong customer service, allowing us the opportunity to increase 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 $95,000,000 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 $10,900,000 of pension settlement charges. This pension obligation termination is now fully complete. For the fiscal year, our U. S. Net revenues were $10,630,000,000 versus 10,030,000,000.00 in fiscal twenty twenty three. With adjusted EBITDA of $1,560,000,000 and a 14.7% margin, compared to $531,500,000 in dollars and a 5.3% margin last year. The U. S. Business maintained its momentum throughout the year with increased sales volume and delivering operating efficiencies with the backdrop of supportive commodity markets and lower trade costs.

In Europe, adjusted EBITDA in Q4 was $117,100,000 versus $102,500,000 in 2023. A 14.2% increase. For the full year, Europe's adjusted EBITDA improved 28.3% to $4.00 $7,000,000 in 2024 from $317,000,000 in 2023.

Europe drove improved profitability through further operational excellence including plant closures, consolidation of support functions, and streamlining the overall management organization structure. These efforts over the last two years have provided the foundation for further cost savings and have allowed us to partner more efficiently with our key customers in the region. We recognized approximately $93,000,000 from restructuring charges during the year. While we continue to pursue efficiency measures, we anticipate the vast majority of the charges for these programs are behind. Mexico made $36,900,000 in EBITDA in Q4 compared to $6,800,000 last year.

When considering the full year, Mesco made $248,500,000 in adjusted EBITDA, or 11.8% adjusted EBITDA margin bettering last year's 8.7% margin. Through the year, the supply demand fundamentals were well balanced in Mexico. Our GAAP SG and A expenses in the fourth quarter and for the full year were higher than prior periods primarily due to increased legal settlement expenses and higher incentive compensation costs. Partially offset by cost efficiencies primarily achieved in Europe. Net interest expense for the year was approximately $100,000,000 excluding the gain on the realized debt purchases we completed earlier in the year. Currently, we forecast for 2024 net interest expense to be between $65,000,000 and $75,000,000 Our full year effective tax rate was 23%, recorded a discrete tax planning item in the fourth quarter, which lowered our full year effective tax rate from our pace through the first three quarters of the year. For 2025, we anticipate our effective tax rate to approximate 25%. We have a strong balance sheet and we'll continue to emphasize cash flows from operating [indiscernible] management of working capital and disciplined investment in high return projects. As of the end of the year, our net debt totaled approximately $1,150,000,000 with a leverage ratio of approximately 0.5x our last twelve months adjusted EBITDA.

Our liquidity position remains very strong and at the end of the fiscal year, we had approximately $3,100,000,000 in total cash and available credit. We have no short term immediate cash requirements with our bonds maturing between 02/1931 and 02/1934 and our U. S. Credit facilities not expiring until 2028. Our liquidity position allows us to explore further growth opportunities including meet our key customers' needs. We finished the year spending $476,000,000 of CapEx. This included the conclusion of the construction of the protein conversion point in South Georgia and other growth projects to support differentiating product attributes for our key customers. We will continue to prioritize our capital spending plans to ensure the safety of our team members optimize our product mix and strengthen our partnerships with key customers. Currently, we forecast spending between $450,000,000 and $500,000,000 in CapEx in 2025, primarily to sustain our operations and for other more routine growth projects. We are intently focused on growth opportunities. First, over the last few years, we have invested in our plants to meet both growth targets and product attributes requested by our key customers. And we will continue to do so as we cultivate these relationships. Also, we foresee investments in additional protein conversion capacity and manage risk by reducing our exposure outside protein conversion operators.

Finally, as we've discussed extensively, our U. S. Prepared Foods business has grown our branded portfolio through innovative and differentiated products. And we anticipate expanding our capacity to meet the growth trajectory of this portfolio. Finally, we have a great business in Mexico and have organic growth opportunities in both fresh and prepared. These near term growth opportunities align to our overall strategy to portfolio diversification, focus on key customers, operational excellence and our commitment to team member health and safety.

Please note, we may revise CapEx spending estimates to accommodate our growth aspiration. We will continue to follow a disciplined approach to capital allocation profitably grow the company and continue to align investment priorities with these overall strategies. We are looking forward to our Investor Day in March 14 to share with you our strategic outlook and more detailed views on these growth opportunities and further commentary on our capital allocation philosophy. Operator, this concludes our prepared remarks. Please open the call for questions. Thank you. Will now begin the question and answer session. In the interest of allowing equal access, we request Today's first question comes from Ben Thore with Barclays.

Hi, good morning and thanks for taking my question, Favio.

I had congrats on the results. Yes. So to start off, maybe just to talk a little bit about the 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 yen 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 $450,000,000 to $500,000,000 It kind of feels a little low of what you can do given the $2,000,000,000 in cash that you have available versus what tends to be long term average more like €500,000,000 So anything that you can share maybe in terms of the thoughts around dividends or any other way of cash return just given where rep leverage is? Thank you very much.

Sure.

Thank you, Ben.

If you're right, there is always some seasonality in the [indiscernible] typically Q4 is the weaker quarter in the year. It's because of the seasonality of the consumption, because of Thanksgiving and Christmas. We saw this year with 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 flavored food category and on the fresh category. Also on the deli. Where we saw the street category leading the demand in the retail. And in the foodservice, we also saw despite a reduction in the traffic that especially affected the food service 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 the bad weather and the continued problem with hatchability and morphology. Production was close to 1.4%, but the big board category, which will open more commoditized one, was actually flat. So we saw an increase in demand because of the factors that I mentioned. We had a flat production in the commodity category. Sustain the prices at the 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 will see price is actually going up almost every day in the Good Morning Pick category. And Ben, this is Matt. It's a completely fair question relative to where our cash position sits today and our overall leverage. I think I'd go back to what I mentioned in the prepared remarks that right now we're guiding at a $4.50 to 500 on we'll call it, sustaining CapEx plus more more routine or smaller growth projects As I mentioned in in before and in the prepared remarks, Now look, we aren't 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 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.

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

Hey, guys. Good morning. Thank you for the questions. 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. S. Even seasonally still came in a bit below ex [indiscernible] 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 of the 10 ks 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 by sub channel would be helpful as we think about 4Q relative to your own expectations and relative to where the street was?

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 a third of our portfolio. The other two thirds of our portfolio are more in the small board skate and the ready operations, which then stable. And I think as we mentioned, because our contracts and pricing in those other segments [indiscernible] or a negotiation that will keep the prices Unless something changes, either in cost or in the supply and demand. And when we 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 $100,000,000 in operational improvements. But Those segments are more stable. And that's why we are able to capture the oxide when the market is really strong, but perfecting the downside. And I think that's what makes our bottom line less volatile. And we've been working in this for over time to make sure that we, again, can benefit from the commodity cycles and can capture the upside while protecting the downsides.

Also on the prepared foods, and through distribution and we of course, is an offset to the commodity cycle as a lot of the raw materials for this is the commodity So I think that's why Q4 was not even stronger than it could be. But when you look at year over year, it was a significant improvement. And I mean, look into the Yearly I think we saw how the portfolio reacts when prices really changes. So we are more stable Great. Thank you for that. And Matt, maybe just a couple of quick ones modeling wise for '25 I think you said net interest expense of $65,000,000 to to 75. I just wanted to make sure that I heard that correctly. And then just the two others, if you could help us with D and A and then just how you're thinking about SG and A expense as well? Very much.

Sure. I would from an SG and A perspective, I would kind of model if it's at this $130,000,000 to $135,000,000 a quarter I think that will give you a good range there to use Relative to D and A, in about a $440,000,000 number, [indiscernible] $440,000,000 And then the interest expense, the net interest expense, that's based on kind of the current guide on the capital expenditures of the $450,000,000 to $500,000,000 and just using that kind of as the the baseline to kind of look at that relative to cash generation during the year and cash use based on an estimate what we can do for net interest, income too.

Got it. Thanks very much, guys.

Thank you. 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 improvement in cut out values that you talked about [indiscernible] how to think about given that margins in Mexico 2025 or through 2025, I assume that first quarter margins are probably going to be up year over year, but trying to better understand what's going on in Mexico and how to think about the outlook there?

And look for them, 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 I look at year number typical more stable and double digits in terms of EBIT. So we once again, we believe in the economy of Mexico and continue to invest there I think what we saw this year was strong demand for the chicken products. I think we saw also that with the high prices of the commodities, in 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 this many times. There is still a market in Mex 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 [indiscernible] as the profitability is strong or weak.

In that segment, which [indiscernible] Full activity there. I think we've been able to improve our presence in that market continue to grow in that market as well, which is stable in Mexico, we continue to differentiate our portfolio with the growth of prepared foods, and the growth for our branded offerings.

And that is the maximum that is the mark that continues to be highly volatile. And this year, think we saw some diseases in Mexico that impacted the life 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 live birds increased the risk in terms of biosecurity. That's why we have in Mexico, which is higher than in U. S. That's what creates [indiscernible] 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 goal to grow our production. 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, great year overall.

So just something just to consider when you think about Q1 twenty twenty five, we are lapping 9.2% margins, which were solid. So Got it. Okay. Okay. That's clear and that's helpful. My other question is going back to the The U. S. Side. And if I think back to the summer, U. S. Margin excellent, but breast prices were basically around the five 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, 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 it set up more similar to last year especially in the context of feed costs, which especially on the corn side have gone up a little Thanks.

Yes. I think the demand for the meat continues to be really strong as a notion. Last year, we saw prices close to five year average. I think the five year average that also highly impacted, but because of our very high prices during the 2022 So I expect the demand to continue to be strong if we look into the supply We are seeing with the exits and Chick's Place and Baison what we are seeing on the hatchability numbers and mortality numbers that then according to The U. S. Being able to be close to one point four percent And that is more in the first semester rather than the second semester? Beef and if you look into the overall protein available Because to one percent when you look at all the other proteins, especially the beef targets really below and the USDA is expecting And because of the delta price we're seeing at retail bonus spread compared to ground beef, it's what we typically compare. Is at the highest level in history. There's a strong demand in retail for the Chicken Province. [indiscernible] goes over the supply in the case ready category because it takes big bird meat, which is a commodity meat, to augment the strong demand, especially during the summer. [indiscernible] Tends to increase the commodity pricing.

On the commodity segment So I expect a continued strong demand for chicken especially during the summer and I think the prices will react accordingly.

Great.

Thank you very much.

Thank you. The next question is from Heather Jones with Heather Jones Research. Please go ahead. Good morning. Congratulations on the quarter. Good morning. 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. Ex 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 this comment, which countries has switched to doing just county level?

Yes. I think the biggest reduction in terms of exports if you look into the line of sight, has been 43,000,000, especially Taiwan. So I think Taiwan was the one that is creating a new procedure It's not I don't know specific specific on county levels, but they are changing. Their protocols.

To take the band levels more into some zones. [indiscernible] and that was a big change for this year. Again, overall, [indiscernible] mentioned many times, I think there's 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 [indiscernible] [indiscernible] even our houses are very spread as you know very well. And each fund has typically three to four houses, so it has 110 to 150,000 barns in each of one of those family farms. So I think our biosecurity and our geographic diversification helps on creating less impact on IPAT AI. In terms of losing birds, as you mentioned, the export bans are the ones that are really impact 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 fruitings and even all other chicken geographies. And are seeing also strong demand in here in The United States especially for the bond market, and that is limiting the availability of exports of light water 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 was a little light. And I understand that you've got a diversified business and two thirds of the business, the pricing doesn't move around a lot. 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 So I was just wondering if you could talk qualitatively to how The 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? [indiscernible] you for the question. Once again, yes, that was a devastating storm that we have in the Douglas. We helped the community invest in the community, we're donating $1,000,000 to help with the efforts to improve and rebuild the community. And we unfortunately could 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. If you're not focusing the losses of Douglas in just that complex. Of course, it looks more impacted than others. We also have some impact in Live Oak because of the storm. We're moving those around and again with efficient operation there and we are with a great efficiency in all the other countries through these movements [indiscernible] Think we're also impacted a little bit in the quarter by the change in our facility that we moved to AirFuel. I think we stay down for close to a week. In that facility. I think those were not very impactful for the quarter on material things that we [indiscernible] 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 we see a great level of commitment from the authorities also on helping on financing those houses and the permitting.

On those houses.

Perfect. Thank you so much for that color.

Thank you. The next question comes from Puraan Sharma with Stephens. Please go ahead.

Thank you and congrats on the quarter.

I just Sure. Yes, I just wanted to focus on I think you kind of mentioned this in the prepared remarks, but 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 a fix on the way. Could you maybe just remind us what those fixes are and what are the potential timelines here?

Of course. [indiscernible] we've seen this hatchability issue for a while now. It all started with a new And both we agreed 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. Yields and conversion costs. And this [indiscernible] to answer those questions. So we have improved numbers close to 1% to 2% every year on those categories. [indiscernible] 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 hedge. And as we look into the numbers, Actually, 2,035 is starting with a lower number than we saw in 2024. There is also some seasonality because of the weather 2025 is actually starting lower from 2024, which was the lowest on record for the hedge ability It is about [indiscernible] [indiscernible] on the life site. And The United States is structured to have minimal interaction with the bugs. So we leave the bugs in the houses [indiscernible] But because of the difficult management of these birds, we need to have individual [indiscernible] [indiscernible] [indiscernible] We have that in Europe, in Mexico and in somewhat in Brazil.

So we're seeing better hedge ability there. But it is the structure of the houses and the way we manage the We've changed and we've been changing our protocols [indiscernible] Spending more time to manage this, but specifically the weight of these birds. Because the weight impacts the hatchability [indiscernible] 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 first. And as I mentioned, that folks in the biosecurity we also have partner forms that do the that keep the blubers for us. And it is all scattered throughout the country. And we'll need to invest in those houses and change all the management and that is take a lot of time. So there's no single bullet for the improved in hatchability, but we expect to get better at managing this breed with time.

Okay, great. I appreciate that commentary. And I guess Just furthermore, just flushing out your commentary here, 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 not challenge, 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 while, but I don't think it is a persistent or a significant events 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 Belgian region. That was the impact for that operation. I think we've always had That's sides 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.

Great. I appreciate the color. Congrats again on the quarter. I'll jump back in the queue.

Thank you. The next question comes from Priya Ori Gupta with Barclays.

Good morning. Thank you and 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 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 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 can walk us through where you puts and takes between The U. S. And the Mexican businesses and how that dynamic could Thanks for the questions, Preeti. I'll start and then I'll pass it over to Fabio after.

You think about our cash flows for 24, when I look at our working capital contributions were significant, I mean, we were In that over $300,000,000 just in working capital for 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 providing us a nice benefit last year. Now do I 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 would have to be more flattish We should still have very, very strong free cash flow. But I just don't think that working capital is going to be the type of benefit that we saw '24. Yes. We saw a significant reduction in our finished goods inventory as well as as we all saw closing inventories in The Whole U. S. And going out year over year.

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?

And you mentioned Mexico, right?

Mexico is our largest trading partner. What we export and we export close to 24% of The U. S. Exports to Mexico. And it's typically leg quarters [indiscernible] So it's a very important source for Mexico. It's more than 70% of the Mexican imports of chicken come from The United States. So I don't expect massive or any [indiscernible] in that trade I think the Mexicans are very concerned about food inflation 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. Mexico is with our economy. As I mentioned, we have continued to invest in growing our operation there. But there's also other proteins that they import [indiscernible] I think that also, I don't expect big impact in debt straight. 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. Having the operations there. I think the other [indiscernible] part of the trade, it's corn that grows a lot from United States to Mexico. And I also don't expect any disruption from in that trade once again think the Mexico country is very concerned about food inflation and having the access to the USA corn, which is the cheapest in the world, is very important for their common Great.

Thank you so much for the color.

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, 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 to Arabia. Following our strategies, we captured the effect from enhanced market conditions who are present with key customers, further diversify our portfolio and improve 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. 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.