Benjamine Theurer

Benjamin M. Theurer inquired about current growing conditions, specifically the sustainability of cutout levels and pricing compared to historical data, and the factors influencing Q1 supply, including hatchability issues. He also asked for details on Pilgrim's Pride's capital allocation strategy, the $900-$950 million CapEx forecast for 2026, and the potential carryover of these investments into 2027, particularly for projects like Big Bird conversions and prepared foods expansion.

Answer

CEO Fabio Sandri explained that the breeding flock is down 1.9% year-over-year but younger, leading to USDA projecting only 1.2% supply growth for Q1 and 1% for the year. He noted that while hatchability is below the five-year average, current birds offer better yield and feed conversion. Regarding CapEx, Mr. Sandri detailed investments in a new Georgia prepared foods facility (extending into 2027), geographical diversification in Mexico (ongoing into 2027), and Big Bird conversions (completed in 2026), with a potential Small Bird plant conversion in 2027.

Benjamin M. Theurer inquired about current chicken supply dynamics, including hatchability and production growth forecasts for Q1 2026, and Pilgrim's Pride's capital allocation strategy, specifically the projected CapEx for 2026 and beyond, detailing ongoing and future growth projects.

Answer

CEO Fabio Sandri clarified that the breeding flock is down 1.9% year-over-year, with USDA forecasting 1.2% supply growth for Q1 2026, attributing hatchability issues to breed characteristics while emphasizing overall bird profitability. He further outlined CapEx plans, including the new Georgia prepared foods facility extending into 2027, Mexico regional diversification, and Big Bird conversions primarily in 2026, with potential Small Bird plant deboning conversions in 2027.

Benjamin M. Theurer followed up on U.S. volume performance, which was down across segments, asking about regional differences and a deeper dive into subcategories like residential, industrial/commercial, and infrastructure.

Answer

CEO Jaime Muguiro noted weaker U.S. volumes in Q3 in Florida, California, and Arizona, partially offset by growth in Texas, Colorado, and the Mid-South. He projected continued strong infrastructure demand and growth in industrial/commercial (data centers, chip factories), but anticipated weak residential demand for 2026, with recovery expected in 2027. He forecasted low single-digit U.S. demand growth next year.

Benjamine Theurer from Barclays asked about the drivers behind transactions being weaker than volume in Mexico and Central America over recent quarters, and what strategies Coca-Cola FEMSA plans to implement to boost transactions next year, particularly through packaging and price points. He also inquired if the company plans to anticipate some of the excise tax pricing in Q4 or wait until January.

Answer

CEO Ian Craig explained that in challenging economic environments, consumers shift from single-serve to multi-serve, especially refillables, which naturally impacts transactions by seeking a lower price per liter. He highlighted the focus on 'magic price points' and maintaining household penetration, specifically addressing the gap in traditional channel refillables with new liter and a quarter glass and upsizing Red Pet to three liters. Regarding pricing, Ian Craig stated the base plan is to prepare for and pass through the excise tax commencing in January, allowing modern trade sufficient time to process the changes.