Pilgrim's Pride Q1 2025 Earnings Report

Pilgrim's Pride EPS Results

• Actual EPS: $1.31
• Consensus EPS: $1.26
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: $0.77

Pilgrim's Pride Revenue Results

• Actual Revenue: $4.46 billion
• Expected Revenue: $4.53 billion
• Beat/Miss: Missed by -$68.09 million
• YoY Revenue Growth: +2.30%

Pilgrim's Pride Announcement Details

• Quarter: Q1 2025
• Date: 4/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 9:00AM ET

Pilgrim's Pride (NASDAQ:PPC) Corp. engages in the production, processing, marketing, and distribution of fresh, frozen and value-added chicken and pork products to retailers, distributors, and foodservice operators. It operates through the following segments: U.S., U.K. and Europe, and Mexico. The company was founded by Lonnie A. Pilgrim and Aubrey Pilgrim on October 2, 1946, and is headquartered in Greeley, CO.

Pilgrim's Pride Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning and welcome to the First Quarter of twenty twenty five Pilgrim's Pride Earnings Conference Call and Webcast. All participants will be in listen only mode. At the company's request, this call is being recorded. Please note that slides referenced during today's call are available for download from the Investors section of the company's website at www.pilgrims.com. After today's presentation, there will be a question and answer session.

[Operator]

I would now like to turn the conference over to Andrew Rojeski, Head of Strategy, Investor Relations and Sustainability for Pilgrim's Pride.

[Andrew Rojeski, Head of Strategy, Investor Relations & Net-Zero Programs at Pilgrim's Pride]

Good morning and thank you for joining us today as we review our operating and financial results for the first quarter ended on 03/30/2025. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter, including a reconciliation of any non GAAP measures we may discuss. A copy of the release is available on our website at ir.pilgrims.com along with slides for reference. These items have also been filed as Form eight Ks and are available online at sec.gov. Bobby Ossandre, President and Chief Executive Officer and Matt Galvanoni, Chief Financial Officer will present on today's call.

[Andrew Rojeski, Head of Strategy, Investor Relations & Net-Zero Programs at Pilgrim's Pride]

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 the 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.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Thank you, Andy. Good morning, everyone, and thank you for joining us today. For the first quarter of twenty twenty five, we reported net revenues of 4,500,000,000.0 a 2.3% increase over the same quarter last year. Our adjusted EBITDA was EUR533 million, up 62% versus Q1 of twenty twenty four. Our adjusted EBITDA margin was 12% compared to 8.5% last year.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Our performance reflects our disciplined execution of our strategies, emphasis on our teams and our focus on what we can control throughout our business. In U. S, sales and adjusted EBITDA increased compared to prior year. Big Bird capture benefits from elevated commodity values and improvements in production efficiencies, where Skaze Ready grew given strong demand in retail and expanded key customer partnerships. Small bird improved with QSR growth and operational excellence efforts.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Diversification efforts to prepare accelerate through portfolio expansion across retail and food service. Improve in Europe last year through sustained benefits from business integration, mix enhancements and network optimization. Opportunities to scale profitable growth further developed given multiple awards from key customers and launch of robust innovation. Sales of core branded offerings also rose further diversifying our portfolio. Mexico continued to drive our strategies as sales to key customers increased double digits and sales of our branded portfolio and Prepare continues to grow.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

To support this growth and diversify our geography in Mexico, our efforts to expand capacity in fresh and prepared foods remain on schedule. Turning to supply in U. S, USDA indicated ready to cook production for The U. S. Chicken that grew 1.1% compared to the first quarter of twenty twenty four, as increased average live weights offset declines in headcount.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Similar to 2024, increased mortality and reduced hatchability challenged our broiler production. To offset these impacts and provide production growth, hatchery utilization remained at record highs. Considering continued growth in sets and placements, USDA currently projects growth of 1.7% for 2025, reflecting a response to the supportive demand environment that Chicken has experienced through recent quarters. As for overall protein availability, the USDA anticipates 1.6% growth due to expected growth of chicken along pork production increases. Regarding demand, the cost of eating out increased more rapidly than eating at home.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

As such, retail propel further growth for chicken. Within the fresh aisle, boneless skinless breast, the anchor of the fresh category realized substantial growth in demand, even with less promotional activity, giving its record price spreads to other proteins. The remainder of the fresh category in chicken also experienced momentum for 2025, producing strong growth across almost all major meat groups. Boneless thighs have experienced record double digit growth based on availability and consumer acceptance. Not only has fresh chicken grown materially, both daily and frozen departments has also added demand at a sustainable rate.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

In exports, winter weather port disruptions in January, concerns over potential port strike and increased domestic demand for dark meat products reduced the volumes throughout the quarter and compared to prior year. However, these dynamics enable further momentum in pricing during the early stages of the second quarter and may be further amplified by strong domestic demand for boneless dark meat. U. S. Inventories are slightly below the five year average, potentially adding more support to domestic and international pricing, thereby limiting export volume.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

While the potential of a high path avian influenza outbreak still exists, the first quarter of twenty twenty five was relatively muted compared to the second half of twenty twenty four. As such, several markets released their temporary county and state level bans. Assuming typical seasonality, the second quarter may experience an increase in high path AI activity. Nonetheless, our geographic diversity of production locations across U. S.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Will continue to provide the flexibility to transition production for export if outbreaks occur. As for China, the relationship with The U. S. Is currently in transition and it appears both countries are positioning themselves for a broader negotiation in the future. While China is an important global agriculture importer, the potential impact may be limited as exports of U.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

S. Chicken products, notably the pause, has significantly declined since 2023 given the high pet AI bands. To date, other trading partners around the world continue to navigate tariffs enabling strong demand. This is partially attributed to the attractive value of chicken compared to more expensive proteins along with disease and supply issues in other chicken producing countries. Turning to feed, corn prices experienced volatility throughout the quarter.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

In January, a strong rally emerged giving reductions in the final U. S. Corn and soy yields. However, this gain subside by the end of the quarter as South America realized greater than expected production. Moving forward, more corn supply is anticipated as the March USDA prospective plantings report indicated additional acreage for the 2025 growing season.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

As for soybean meal, prices fell during the first quarter as South America realized record high production given favorable weather. Increased soybean processing capacity across the globe also drove further soybean meal production, resulting in ample supply. In wheat, global stocks may contract for the nearly completed crop year. However, strong crops in Australia and Argentina should limit the likelihood of a significant price increase in the short term. Major wheat producing regions, including The EU, Ukraine and Russia are prime for higher crops in the upcoming year.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

The UK also anticipates higher production in 2025. Given these anticipated increases along with a substantial build in U. S. Supplies, with pricing expected to decline. Moving forward, U.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

S. Weather will be the primary driver of corn and soybean meal prices. Trade disruption due to tariffs, disputes would also be important with the soybean complex more exposed to tariffs changes compared to the corn market. In The U. S, consumers are still aware and concerned about high inflation and higher prices.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Within retail, grocery buyers' behaviors indicate a growing habit of purchasing less per trip while shopping more frequently, signifying a stretched household budget. In food service, declines in traffic suggest a reduction in dining out occasions among customers, which enabled their spending to go further in other areas. Given the affordability of chicken and our strategies, our team was well positioned to continue to unlock value for the consumer. As such, our team maintained their focus on driving differentiation through quality and service for our key customers. In Big we focus on operational excellence to upgrade mix, enhance yields and maximize throughput.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

These efforts were further amplified by improvements in live operations. Based on our progress and attractive market fundamentals, profitability in Big Bird grew considerably. Small Bird also improved profitability compared to the prior year, giving lower grain costs and operation efficiencies, especially at our expanded operation in Athens. Despite strong volumes in QSR and deli throughout the quarter, prices for Whole Birds and Deli were lower compared to last year, unlocking value for key customers and consumers. Equally important, we are launching a variety of innovations to further strengthen our competitive advantage.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Kids Ready experienced strong retail demand throughout the quarter. As such, we work closely in partnership with key customers to ensure increasing availability. Considering the traction of our higher attribute offerings in the marketplace, along with improvements in production efficiencies, we experienced an improvement year over year. Prepared foods grew over 20% compared to prior year from increased distribution across retail and food service. Diversification through brands play a critical role as sales of Just Bare and Pilgrim's collectively rose over 50%.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Commerce continued to be a key enabler for branded growth as sales rose over 35% compared to last year. As such, we will continue to accelerate our growth through our relationship with leading online suppliers, traditional retailers and food service providers. In Europe, profitability improved compared to last year through business integration, mix enhancements and manufacturing optimizations. During the quarter, the consumer environment remained attractive as wage growth exceeded inflation. In grocery, poultry, pork and chill meals category grew benefiting our portfolio.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

While food service experienced a decline in visits, our demand increased. We continue to cultivate growth through partnership with key customers. As such, we secured long term arrangements with selected retail partners, many of which were driven by our differentiated sustainability and animal welfare practices. We further amplify our growth through innovation as we launch over 80 new products through March. Diversification through key brands continue to gain traction as both sales and volume grew compared to last year.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Fridge Raiders continue to grow ahead of category averages and recently became one of the top 100 brands in UK market. Richmond also realized similar success where rollover increased distribution through new accounts. Moving forward, we will continue to invest in promotional activities and media efforts to increase brand awareness among consumers. In Mexico, overall profitability remained steady year over year, but with significant volatility throughout the quarter. The increase in exchange rate between the peso and dollars impacted our costs and we experienced demand pressure in the live commodity market during the month of March.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Nonetheless, we drove profitability growth through our strategies. As such, sales to key customers in retail increased by 11%. Diversification efforts through branded and value added offerings also accelerated. In fresh, our branded portfolio grew by 15% compared to last year. In prepared, net sales rose 9%.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Both Pilgrim's and Just BARE brands continue to gain distribution and market share and the sales of Ala Mesa, our tacos and typical Mexican food have grown nearly 50% establishing a new record sales for the quarter. We also continue to invest and evaluate opportunities to further drive profitable growth. In U. S, our growth in prepared foods is exceeding our current capacity and we are committed to expand our production both in our existing plants and through a greenfield. In fresh, we're also growing faster than the category, especially with our differentiated offerings to key customers.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

We are always looking for opportunities to unlock additional processing within the existing locations and we also committed to convert one of our commodity plants to differentiated trade pack for a key customer. We continue to evaluate alternatives to expand our protein conversion capacity and add value to our products. To that end, we are assessing multiple sites and refining our analysis to assess best alternatives, just as we did with our new plant in Douglas, Georgia. In Mexico, our investments in capacity expansion for fresh in Veracruz and Merida remains on schedule and we anticipate completion in the first half of twenty twenty six. Based on those investments, we can further enhance our buyer security and supply chain capabilities, strengthening our relationship with key customers.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Similarly, our investments in Prepare are proceeding as planned with our new line expected to be operational at the end of Q4, further enabling branded growth. In sustainability, we continue to drive operational efficiency throughout our supply chain to reduce our greenhouse emissions footprint. Equally important, third party reports have demonstrated that they've decreased our Scope one and two emissions intensity below target levels. Moving forward, we'll continue to explore alternatives to enhance our climate resiliency throughout our value stream. With that, I would like to ask our CFO, Matt Galvanoni to discuss our financial results.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Thank you, Fabio. Good morning, everyone. For the first quarter of twenty twenty five, net revenues were $4,460,000,000 versus $4,360,000,000 a year ago with adjusted EBITDA of $533,200,000 and a margin of 12% compared to $371,900,000 and an 8.5% margin in Q1 last year. Adjusted EBITDA margins in Q1 were 14.3 in The U. S.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Compared to 9.4% a year ago. For Europe business, EBITDA margins came in at 8.1% for Q1 compared to 6.4% last year. In Mexico, EBITDA margins in Q1 were 8.4% versus 9.2 a year ago. U. S.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Net revenues were $2,740,000,000 versus $2,580,000,000 a year ago, a 6.2% increase. U. S. Adjusted EBITDA came in at $392,500,000 compared to $242,900,000 in Q1 twenty twenty four. Recovery in the commodity chicken markets compared to a year ago along with moderate grain costs and continued operational improvements drove strong year over year profitability improvement in our Big Bird business.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

The case ready and prepared foods businesses have continued to increase distribution with key customers driving both year over year and quarter over quarter profitability improvements. These improvements offset a $10,000,000 headwind from challenging weather conditions in the Southeast during the first half of the quarter. In Europe, coming off strong seasonal results in Q4, adjusted EBITDA in Q1 was $99,500,000 versus $81,500,000 in Q1 twenty twenty four. The business has benefited from its continued structural reorganization, including integration of support functions and manufacturing optimization programs, while cultivating key customer partnerships with continued innovative offerings. We incurred $16,600,000 restructuring charges during the quarter and supported this integration program.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Mexico generated $41,200,000 in adjusted EBITDA in Q1 compared to $47,500,000 last year and $36,900,000 in the fourth quarter. The year over year negative FX impact to Mexico approximated $8,500,000 Sequentially from Q4, the Mexican business profitability improved primarily due to more balanced supply demand fundamentals. SG and A in the quarter was higher year over year primarily due to an increase in legal settlement and defense costs and increased incentive compensation costs. Our effective tax rate for the quarter was 24.1%. As I noted in our February call, we anticipate our full year effective tax rate to approximate 25%.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

We have a strong balance sheet and we will continue to emphasize cash flows from operating activities, management of working capital and disciplined investment in high return projects. Our liquidity position remains very strong. Even following our $1,500,000,000 special dividend paid on April 17, we have over 1,600,000,000 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.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Credit facility not expiring until 2028. Our liquidity position provides flexibility and allows us to explore various growth opportunities. As of the end of Q1, our net debt totaled approximately $1,100,000,000 with a leverage ratio of less than 0.5 times our last twelve months adjusted EBITDA. When adjusting for the $1,500,000,000 special dividend, our leverage ratio was 1.1 times, still below our target of two to three times adjusted EBITDA. Net interest expense for the quarter totaled $17,000,000 We anticipate our full year net interest expense to be between 110,000,000 and $120,000,000 As discussed at our Investor Day, we will continue to invest in growth.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

While additional considerations have emerged, we will continue to enable our growth ambitions through financial discipline. In The U. S, we recently completed a plant conversion to an air chill operation. We are now the largest NAE organic and air chill producer in The U. S.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Demonstrating our focus on offering differentiated product attributes to our key customers. Our plans to increase capacity in The U. S. In small bird, prepared foods and protein conversion also remain on track. As such, we continue to pursue site selections, refined capital estimates and progress engineering work.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

In Mexico, our investments in fresh and prepared continue to progress and remain on schedule as we have secured a variety of long lead equipment. We spent $98,000,000 of CapEx during the quarter and we'll continue to ramp capital spending in support of our growth projects. At this time, our full year CapEx estimate remains at approximately $750,000,000 Our capital allocation approach will remain disciplined as we continue to align our investment priorities with our overall strategies to drive growth, enhance margins and reduce volatility. Operator, this concludes our prepared remarks. Please open the call for questions.

[Operator]

Yes. Thank you. We will now begin the question and answer session. And the first question comes from Ben Theurer with Barclays.

[Benjamin Theurer, Managing Director at Barclays Corporate & Investment Bank]

Yes. Good morning, Fabio and Matt. Thank you very much for taking my question and congrats on a very strong quarter. First question, maybe just for you, Matt, following up on your comments you just made around capital allocation progress, etcetera. Just maybe can you elaborate a little bit more as to what has caused probably a slightly lower level of CapEx in 1Q?

[Benjamin Theurer, Managing Director at Barclays Corporate & Investment Bank]

You said a couple of considerations here, but at the same time, you're still sticking to the €750,000,000 So how should we think about the CapEx over the next couple of quarters? And what are those additional considerations? So that would be my first question, around CapEx. And then I have a quick one.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

No, that's fair. Thanks, Ben, for the question. The way we're looking at this, it's more timing related, right? I mean, one of the things we talked about during Investor Day was it takes a while sometimes just to get to the starting line for some of these bigger CapEx projects and us working on-site selection and overall estimates and permitting and things of that nature take some time. We are going to see our rate we do anticipate seeing a ramp up of capital spend over the next number of quarters.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

The $750,000,000 we're not going to come off that number right yet. We'll see how things progress, but we're committed to the growth projects and just kind of moving forward. But we're going be disciplined, right? I mean, we really want to make sure that we're spending the right amount for the right pieces of equipment, the right sites, etcetera, etcetera.

[Benjamin Theurer, Managing Director at Barclays Corporate & Investment Bank]

Okay, got it. Very clear. Thank you very much. And then just maybe on the current market dynamics, obviously, I mean, we're seeing cutout values and pricing in general still at very good levels. Now have you seen and maybe there has just been a little bit of a weakness in certain items.

[Benjamin Theurer, Managing Director at Barclays Corporate & Investment Bank]

Is there anything related to consumer softness? Are you seeing anything that even within chicken drives down trading? Or have you seen any impact of just like the general geopoliticaltariff noise affecting somehow consumption in a good or in a bad way?

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Okay. Yes, I think it's

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

evolving market condition, right? So just like I mentioned on the prepared remarks, I think there is a concern for the consumer about high prices and inflation. It started some years ago, it's not something new. And as they are watching their spending closely, they are moving more from food service to retail. We're seeing higher inflation on the food away from home when compared to the food at retail.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

So we're seeing a movement from one segment to another. That is leading to the shift of meal occasions. And with that, we are seeing some very strong demand on retail. The biggest portfolio or the biggest part of the chicken that is sold in retail is breast meat and we're seeing some very strong demand there in the retail. Despite that strong demand on breast meat, we're seeing some very strong demand also on boneless dark meat.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

We were seeing some double digit growth on dark meat category. So that strong demand on retail is pressuring the promotional activity and is pressuring the supply. And because that happens every grilling season where we buy big bird meat to augment the supply for retail, that is happening even before the grilling season. It's happening right now. And that is pressuring also the commodity market, because by buying this Zigbar meat and putting on the retail, that reduces the supply on the food service category.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

We're talking about this movement from foodservice to retail impacting the demand for chicken in retail. But also on foodservice, as operators are trying to respond to this reduction in food traffic, they are increasing their promotional activities and they are increasing the number of low price items in their menu. And with that, chicken is gaining traction and gaining menu penetration. So chicken also increased in food service, mainly on the QSRs and the non commercials, but we are seeing traction also in the food service despite the reduction in the food traffic that we are everybody is experiencing. So chicken is winning on the retail because of the movement of food away from home to food at home, but also gaining traction in food service with menu penetration and more promotional activities.

[Benjamin Theurer, Managing Director at Barclays Corporate & Investment Bank]

Okay, perfect. Thank you very much for that color, Fabi. I'll pass it on.

[Operator]

Thank you. And the next question comes from Andrew Strelzik with BMO Capital Markets.

[Benjamin Wood, VP - Equity Research at BMO Capital Markets]

Hi, good morning. This is actually Ben on for Andrew. So my first question has to do with the EU, UK business and the margin performance there. You guys have spoken in the past about more of a like a steady state 7%, eight % margin that you can eventually reach. I'm just wondering when you think about the cadence for this year, do you anticipate the next three quarters kind of looking similar in terms of margin expansion to what we saw in first quarter?

[Benjamin Wood, VP - Equity Research at BMO Capital Markets]

And how do you view the local consumer in Europe? We've heard a couple of anecdotal reports about some potential weakness there. So I was just hoping you can kind of bridge that together. Thanks.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Sure. Just on our operations. So we integrated our three business over the last two years and with that and I think Matt mentioned some of the restructuring. So we're putting all this business together and we are seeing the benefits coming to the bottom line of that streamline on our back offices and streamline on our operations. We're also seeing that we change the, let's say, the momentum there from integration.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Now we're moving to a more expansion and true innovation. So that's exactly what we expected when we put these three business together to realize all the benefits from the integration at the beginning and now moving to a more rapid expansion through innovation. So we expect the growth in performance from year over year to continue. In terms of the consumer, I think we were seeing the inflation in Europe to moderating and we're seeing the wages increasing ahead of the inflation. That was creating a better scenario, especially for our portfolio on the branded side.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

When the consumer in Europe are facing challenges in inflation, they typically tend to go for private labels on the prepared food side. So our Richmond brand was not growing as expected in the past, but now we're seeing some the Richmond brand and the Frigidrators brand are growing ahead of the market. And that indicates that the consumer has more confidence. I think specifically in UK, there was an increase in the national insurance that created some uncertainty about jobs and inflation at grocery lately. I think we saw many reports from retailers that, that will cost some billions of dollars for them and there will be some layoffs because of that.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

So that was maybe a momentary issue in UK. But overall, in Europe, we were seeing an improvement in consumer confidence.

[Benjamin Wood, VP - Equity Research at BMO Capital Markets]

Thank you. And just my last question. In terms of Mexico, obviously, had a big FX hit there during the quarter. But just from a fundamental standpoint, how do you think about the cadence for the rest of the year in terms of kind of rolling in some of your investments and then also versus just the flow of supply and demand in the local market. Do you think things are getting stronger there in the economy?

[Benjamin Wood, VP - Equity Research at BMO Capital Markets]

Is there some hesitation amongst consumers given all the trade chatter? Just trying to get a better sense of how you're framing up Mexico, I guess, a month after we last saw you at the Investor Day. Thank you very much. Appreciate it.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Sure, sure. Yes. As I mentioned, Mexico is a growing economy. We are seeing growing in the consumer spending over there And chicken has always been the entry point in the protein. As the consumer has more available spending, they will go to a higher protein diet and chicken is the entry point.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

So we're really excited about the opportunities to continue to grow in Mexico. With that, as I mentioned, we are expanding our operation in Veracruz and we are expanding to a new geography, which is the Merida region in the Peninsula, So we can diversify our operations and reach a bigger market in there. We are also believe that with the expansion in consumer spending, prepared foods and convenience becomes a source of growth as well for us. So that's why we are expanding with a new line in our operations there that will be fully operational by Q4. So over the long term, we're really excited about the growth perspectives in Mexico.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Now quarter over quarter, as we mentioned, it could be quite volatile. And the biggest source of the volatility is the live market that still exists in Mexico. That creates lower biosecurity than we see in all other places of the world. Because of that, the supply and demand can be mismatched in any given quarter because of diseases and because that market is really easy for entrants to get in and to get out. So when you see very high profitability, as we saw in Q2 last year, we see these marginal players to come and produce live chicken to be sold to the consumers.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

And that creates more volatility in that market. And in a way, that's why we're trying to diversify from that segment with more branded and more prepared foods. But it's still a very profitable segment. So that volatility in the live market impact our results during any given quarter.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

And Ben, I would just say relative to Q2 last year, Mexico had a very strong quarter last year. FX impacts kind of year over year Q2 to Q2 of this year will still probably be in that 15 ish percent area, depending of course where the peso goes from now forward. But my crystal ball, that's kind of how I would think about it. But it's a very, very strong Q2 last year. Business is great, but just keep that FX impact in mind for Q2 this year.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

And in terms of consumer confidence because of trade, I think we've seen that Mexico is one of the largest trade partner with The U. S. And I think there was a lot of talk about all the products aside from steel and cars being off any type of tariffs. So I think there is less uncertainty in Mexico than in other places.

[Operator]

Thank you. And the next question comes from Heather Jones with Heather Jones Research LLC.

[Heather Jones, Founder at Heather Jones Research]

Good morning. Thank you for the question. I guess I want to start with The U. S. As far as volumes.

[Heather Jones, Founder at Heather Jones Research]

They were much stronger than I was looking for. And then you had good growth in The U. S. Year on year in Q1 of 24.2%. And so I just wondering if you could help us think about how we should think about your pounds growth in The U.

[Heather Jones, Founder at Heather Jones Research]

S. As you bring Douglas on back up to speed, but then I guess you're having your conversion of Russellville to a smaller bird at some point this year. So just how should we be thinking about pounds in The U. S. For '25?

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Yes, Heather. I think we have a strategy of always supporting the growth of our key customers. And as I mentioned, we are growing ahead of the market. So we saw a strong role in retail, especially for our differentiated offerings. And with such, we increased our volumes in the retail category.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

I think the whole industry continues to be constrained in terms of overall growth. But I think we're all working really hard to get a better live operation and that's what we've been doing during Q1. I think despite a lot of challenges, especially in terms of respiratory diseases that we are seeing throughout the South, we were able to improve our live operations and improve our volumes, especially to, as I mentioned, in the retail segments. Going forward, I think we will continue with that strategy Heather. And yes, you're right.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

With the conversion of a big bird plant to case ready plant, we will reduce the volumes in that operation, but we expect that to be more impactful for next year.

[Heather Jones, Founder at Heather Jones Research]

Okay. So just to finish up on that question, you all are expecting if these continued improvements in live go along, you're expecting to have meaningful volume growth for the full year in The U. S?

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

We expect to be a little bit ahead of the market.

[Heather Jones, Founder at Heather Jones Research]

Okay. And then going to your greenfield plants. So, I think you're pursuing one and prepared and then another protein conversion. And just wondering, is the timing uncertain? Because I read like in local media reports of you all getting pushback on like some locations on the protein conversion side and all.

[Heather Jones, Founder at Heather Jones Research]

Like is that side proving more difficult for permitting approvals or what's the primary driver of timing on those two fronts?

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

I think there is always some negotiation with local municipalities, right? I think we heard some noise too, but a protein conversion plant today is very good operation without any smell. I think the technology has improved really well. So there is minimal disruption, if any, in terms of the smell to the municipality. I think there is still a lot of, let's say, preconceived ideas about what a rendering operation is that sometimes triggers some of this bad breath sort of say.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

But I think as we go to locality, we explain our strategies, we explain our vision of creating better future for team members to help the communities and with the new technologies, I think then we can move along. A great example was the Douglas, Georgia operation that we just started. We are having a great partnership with the location there with the municipalities. So if there is any pushback from municipalities, this is sometimes a short term operation. The timing, it is about finding the right location and starting and having all the permits.

[Heather Jones, Founder at Heather Jones Research]

Okay. Awesome. Thank you so much.

[Operator]

Thank you. And the next question comes from Ron Sharma with Stephens.

[Pooran Sharma, Managing Director at Stephens Inc]

Great. Thanks for the question. I'm just going to start off with maybe if you could discuss wings in general. We're seeing strong strength in breast and the back half of the bird. But it seems like wings are headed the other way.

[Pooran Sharma, Managing Director at Stephens Inc]

Just wondering if you could give us some color. What are you hearing from like the commercial side of the business? And do you expect seasonal demand to kick in? You have NFL season starting here in the fall. Would love to hear your thoughts on that cut.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Sure, Paret. Thank you for the question. And you're right. I think when you look at the cutout for the big bird, we see some really strong fundamentals. But when you go into the parts, I think the boneless has been the strongest part.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

The leg quarters, as I mentioned, continue to be very well supported, both internationally and domestically. I mentioned the growth in boneless ties in the retail that is double digits. And the wings have been the category that has been less strong and it's actually lower than last year, significantly lower than last year and lower than five year average. And the reason for that is the shift that we mentioned on the food away from home to food at retail. Wings are mainly a food service item.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

So when we see some weakness in the food traffic that impacted directly wings. Also last year, we saw some strong pricing and demand for wings, which trigger some promotional activity and menu substitution to boneless, because when they say boneless wings is actually boneless breast. So we see then this seesaw impact on the wings and boneless breast on the foodservice. As we see the low prices of wings, we are seeing more feature activity on the wing on the bone in wings and we're seeing more promotional activity for the foodservice, especially the wing concepts. So we expect the price of wings to go back into the normal seasonality.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

It's normal to see this behavior on the wings. And I think when you analyze a long term, we have always these seesaw issues on wings where one year we have significant higher prices than the averages and then the next year we see some softening. And then what we see in the following year is that the prices come back to the previous level and even higher. Because as we always mentioned, there are only two wings per burden. We are being challenged by heads in our industry.

[Pooran Sharma, Managing Director at Stephens Inc]

Great. No, I appreciate that color. I guess my follow-up will be, I guess, on the lines of that, you're being challenged on production. That's obviously kind of helping with the elevated price situation along with relative affordability. But just wanted to see if you're concerned at all about the uptick in cold storage, particularly in breast that we've seen over the past couple of months.

[Pooran Sharma, Managing Director at Stephens Inc]

We've also seen production up, call it, mid single digits since March. But despite that, you continue to see these elevated price points for breasts. So just wondering if you could tease that dynamic out a little bit more for us?

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Of course. I think the first going to the cold storage. I think first, if you look at the leg quarters and other items, the cold storage numbers are significantly lower than last year and very low compared to normal five year averages. I think the increase in boneless was more a promotional activity, especially one foodservice operator that put a lot of breast meat for the promotional activity. But also it is a little bit of the foodservice operators expecting higher prices and building inventory, so they don't have to buy breast meat in the commodity market when the prices go even higher.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

When you look at overall production for The U. S, we and USDA are expecting the growth that we saw in Q1 to moderate during the next quarter to an annual growth of 1.4%. We'll continue with the same issues as we mentioned with this new breed. We're seeing more eggs per hand, so we increased the number of egg sets, but then we are being challenged with the hatchability, one of the lowest we ever seen and one of the highest mortality we ever seen. I alluded a little bit to the respiratory diseases and that's what we are seeing throughout our operations.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

But that is impacting feed conversion, but it is also impacting a lot of the mortality of the birds. And that's when you see the increase in exits on the range of two point four percent, two point five percent and then you go to the number of birds or headcount is actually down. So all that growth is being muted by the challenges in hatchability and liveability and we have not seen a significant improvement on those. Of course, as I mentioned, we've been improving our operations. We've been really pushing on having a better care of the individual birds.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

I think this is a bird that needs individual management rather than a flock management. And we are seeing some improvements, but it's nothing that is significant and we'll go back to prior numbers of hatchability and mortality. Great. Thanks for the color.

[Operator]

Thank you. And the next question comes from Yasmeen Deswande with Bank of America.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

Hey guys, thank you so much for the question. So I wanted to dig in a little bit to your U. S. Business. Sales and pricing came in a bit better than expected this quarter, but this is a second quarter where U.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

S. Gross profit was a little bit behind. So could you possibly outline some puts and takes for the quarter as to why gross profit on a gross profit perspective things were a bit behind?

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Sure. And I think we need to remind everyone of our portfolio. As we always mentioned, we have a diversified portfolio of sizes of birds, diversified portfolio of offerings and diversified portfolio of pricing. So in the big bird category, we see very strong pricing because of the commodity everyday pricing. And I think there is little differentiation in that segment.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

We have some differentiation through no antibiotics ever offerings, but it is a category that moves more in line with the commodity markets that we can see every day. So in that segment, it is an immediate, let's say, price change compared to the market. On all the other segments, we have more stable pricing and more stable margins as we've proven when the commodity markets were weak and when we have significant changes in foodservice and in retail. So our pricing is way more stable because we base our pricing to our retailers or reinvestment levels and with the changes in cost. And as we saw, the cost of our products coming down because of the moderating in prices of grain over the last several months, we passed that advantage back to our key partners.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

And as you see in the retail to the end user pricing, chicken prices are lower year over year. So our portfolio don't follow 100% the commodity market and that was on purpose because we believe that we can capture the upsides as we've proven with a very strong profitability in Q1, but we can protect the downsides when we have more stable pricing. And that is when you compare our portfolio to just pure commodity portfolio, you don't see the same spikes in prices and you don't see the same challenges when the prices are lower.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

Okay. Got it. And I guess to follow-up on that a little bit. You talked earlier about shifts in meal occasions and spend moving from foodservice to retail. So I'm also wondering if growing faster in retail versus commodity created a gross profit mix headwind in the quarter.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

So if you have to supplement the retail channel with commodity meat. If you

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

think that is a great point. Yes, if we compare the profitability of the more stable business that we have with the profitability of the commodity segment, that will not follow the same trajectory. But of course, if you look at the same quarter last year, then the profitability of those more stable segments will be far superior to the commodity. And once again, that's how we created the portfolio. But you're absolutely right, the profitability of a commodity operator or a commodity portfolio right now, it is higher than the profitability of the more stable segments.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

Great. Thank you, guys.

[Operator]

Thank you. And the next question comes from William Perez with Santander.

[William Pérez Vega, Environmental Superintendent at MINESA - Sociedad Minera de Santander]

Good morning, Fabio, Matt and Andrew. Good Thank you for taking the questions. Two questions here. First one is, if you could give a bit more detail on the CapEx for the year in terms of expansion and maintenance and what would be the main locations here in terms of expansion, so we could have some sense in terms of capacity going into 2026? And the second question here, Fabio, you mentioned a lot about mortality.

[William Pérez Vega, Environmental Superintendent at MINESA - Sociedad Minera de Santander]

If you could just try to explain to us a bit how much of that is related to diseases, how much is about genetics And what we could expect going forward on mortality mainly on hand, because it seems that this is also impacting the supply of chicks as well?

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Yes, I'll take the first question relative to the CapEx. I think it's important to understand relative to this growth CapEx that we laid out at Investor Day, many of those dollars and many of that effort will be for projects that really will not expand capacity until 2027 or later. We will have some things that will be more impactful next year. We talked about the conversion of one of our big bird plants to a case ready facility for a key customer that would be more impactful starting in 2026. But really right now when we think about capacity expansions and the time it would take to get many of those up and running and finished, we're not talking 2026 type of changes in general, we're talking more outer years from there.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Don't know, Fabi, you want

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

to take the next one? Yes, of course, let me. And I think it's a good question. As you see the higher mortality in the broilers, but we are seeing the same higher mortality on the breeder. And that's why from the pullet placements that we are seeing, we're not seeing the size of the flock growing in the same sink, right?

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

I think also the breeding flock is not growing as much as expected, given the very strong profitability in our segment because of the high utilization of our hatcheries. So, an older bird will always have even lower hatchability than we are seeing in the current optimal hand. So when you have that, then we will put a lot of stress in our hatchers. So that's why we are seeing the commercial flock or the layered flock smaller than in prior years. And that you mentioned the distinction between diseases and genetics, but they are connected.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

I think we always take one step back on where we got here and that was this new breed. As we try to solve the problem that we have in the years before in terms of quality of the meat, what we call the woody breast, we introduced this new breed. This new breed is also great for conversion and great for yields. So we don't think that we will go back to previous breeds just because of the mortality, because once again what the industry looks is for a more better conversion and better yields, which is a more let's say sustainable bird and more competitive bird. But the genetic and the diseases are somewhat connected.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

I think we've been talking about managing individual birds as these birds grow so fast, we need to keep an eye on individual birds even on the laying flock. And also when we look at the genetics, we believe that there is less of the resistance being passed from generations. So this breed broilers are a little bit weaker in terms of respiratory diseases. But as the time goes by, we'll learn how to manage, we will adjust our houses and we'll get back to a better mortality situation than we had before.

[William Pérez Vega, Environmental Superintendent at MINESA - Sociedad Minera de Santander]

Thank you, Matthew and Fabio.

[Operator]

Thank you. And the next question comes from Priya Uri Gupta with Barclays.

[Priya Ohri-Gupta, Analyst at Barclays Capital]

Hi, good morning. Thank you for the call. Just two questions from me, mostly for Matt. Matt, can you talk a little bit about the working capital that we saw in the quarter was fairly sizable. It looks like a number of the line items seem to have contributed and how we should think about that flowing into year end?

[Priya Ohri-Gupta, Analyst at Barclays Capital]

And then the second one is just around your open market bond purchases in the quarter. So what's the thinking there? It was a little bit surprising and admittedly a small size, but just how you're thinking about that going forward? Thanks.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

Yes. Priya, on the first question relative to working capital, you go back five, six years and I was going back to 2020, you look at first quarter on a working capital change, other than last year, it's always been challenging, right? It's more it's always negative. First quarter is always one of those ones between paying out incentive compensation and other changes that happen. We see more of a negative trend in the working capital changes in Q1.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

So we anticipate that to turn around. Last year was a bit of an anomaly in that grain pricing kind of dropped precipitously last year, which really kind of will save benefit. And we also had a very purposeful reduction of finished goods inventories during Q1 of last year. So that was really more of the driver last year being a bit more of the anomaly of very favorable working capital change during Q1. Relative to the open market purchase that was just more opportunistic.

[Matthew Galvanoni, CFO at Pilgrim's Pride]

I think there's some things that we're looking at and considering. We do believe we'll be generating a fair amount of cash here this year. We look at the view relative to how the year should play on and we consider a lot of different options relative to how to handle our capital allocation, which does include repurchases of debt, which we did last year and we've set a little bit of a small opportunistic opportunity during the Q1 and we'll be kind of assessing what we're doing here going forward.

[Priya Ohri-Gupta, Analyst at Barclays Capital]

Great. Thank you.

[Operator]

Thank you. This concludes the question and answer session. I would like to turn the conference back over to Fabriel Sandri for any closing comments.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

Thank you everyone for attending today's call. 2025 started off in a strong note for PPC. As such, I'd like to thank our team members for their commitment to living our values, driving our methods and executing our strategies. We must continue these efforts and maintain our unwavering focus on team member safety and well-being. Given this approach, we can grow sales, enhance margins and reduce volatility in our business.

[Fabio Sandri, President and Global Chief Executive Officer at Pilgrim's Pride]

More importantly, we can achieve our vision to be the best and most respected company in our industry, creating a better future for our team members. To that end, I look forward to accelerating our efforts in the remainder of 2025 and beyond. Thank you everyone.

[Operator]

Thank you. This concludes today's conference call. You may now disconnect your lines.

Participants

Executives

• Andrew Rojeski, Head of Strategy, Investor Relations & Net-Zero Programs
• Fabio Sandri, President and Global Chief Executive Officer
• Matthew Galvanoni, CFO

Analysts

• Benjamin Theurer, Managing Director at Barclays Corporate & Investment Bank
• Benjamin Wood, VP - Equity Research at BMO Capital Markets
• Heather Jones, Founder at Heather Jones Research
• Pooran Sharma, Managing Director at Stephens Inc
• Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch
• William Pérez Vega, Environmental Superintendent at MINESA - Sociedad Minera de Santander
• Priya Ohri-Gupta, Analyst at Barclays Capital