Pilgrim's Pride Corporation Stock

Good morning, and welcome to the Second Quarter of 2026 Pilgrim's Pride Earnings Conference Call and Webcast. [Operator Instructions] At the company's request, this call is being recorded. Please note that the slides referenced during today's call are available for download from the Investors section of the company's website at www.pilgrims.com. After today's presentation, there will be an opportunity to ask questions.

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

Good morning, and thank you for joining us today as we review our operating and financial results for the second quarter ended on June 28, 2026. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAAP measures we may discuss. A copy of the release is available on our website at ir.pilgrims.com, along with slides for reference.

These items also have been filed as Form 8-Ks and are available online at sec.gov. Fabio Sandre, President and Chief Executive Officer; and Matt Galmanone, Chief Financial Officer, will present on today's call.

Before we begin our prepared remarks, I would like to remind everyone of our safe harbor disclaimer. Today's call may contain certain forward-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. Further information concerning these factors have been provided in yesterday's press release, our Form 10-K and our regular filings with the SEC.

I would now like to turn the call over to Fabio Sandri.

Thank you, Andy. Good morning, everyone, and thank you for joining us today. For the second quarter of 2026, we reported net revenues of $4.6 billion with an adjusted EBITDA of $360 million. Our adjusted EBITDA margin was 7.8% compared to 14.4% last year. During the quarter, chicken demand remained firm across all regions, leading the growth in meat protein consumption.

Equally important, we continue to drive growth projects to strengthen our portfolio, drive sales growth and enhance margins. In the U.S., demand for chicken continued to grow in both retail and foodservice. Operations improved compared to previous quarter, given the completion of our plant upgrades and progress in the efficiency of our live operations. Volumes to key customers in fresh remained steady, whereas prepared grew double digits as Just BARE continued to lead growth and velocity in the frozen fully cooked category.

In Europe, poultry and ready meals drove overall sales growth as their affordability and convenience resonated with value-conscious consumers. Margins were compressed given competition from imported pork into U.K. and increased costs driven by the Middle East conflict. Mexico also increased volumes compared to last year, driven by exceptional growing environment for birds. We continue to grow our branded offerings in both fresh and prepared and the previously announced growth and diversification projects all remain on schedule.

We continue to focus all aspects in the environment, social and governance matters within sustainability. Our approach to team member development and retention were recently recognized across regions for the workplace satisfaction, including America's Greatest Workplace by Newsweek in the U.S., Employer of the Year by the Grocer in Europe and exceptional Companies Award by the Institute for the promotion of Quality in Mexico.

Turning to supply in U.S. USDA reported ready-to-cook production increased 4.5% over same period last year from higher headcount and modestly higher live weights. Eggits rose 2% from improved layer flock productivity, where sheet placements grew 2.4% from moderate improvements in hatchability. A significant part of the growth came from much better livability than previous years.

Given the size of the layer flock, recent pullet placements and production environment, the USDA anticipates chicken production growth to slow down in the second half of the year to around 2.5%, closing the year at 3.3%. As for other proteins, USDA expected limited growth in pork, along with a minor increase in beef availability as higher imports partially offset domestic production headwinds.

When these factors are combined with increased chicken supply, USDA estimates overall net protein availability will increase by 2.2% compared to last year. Within the U.S., the affordability of chicken provided a great option to household budgets pressured by persistent inflation and elevated energy prices. As a result, chicken continued to be resilient as volumes increased across both retail and foodservice channels.

In retail, the fresh meat department posted dollar sales growth across all major proteins. From a volume standpoint, chicken delivered the highest growth among all proteins compared to the same period last year. Boneless skinless breast volumes increased year-over-year as pricing remained steady and the spread versus ground beef remained at record levels. Boneles skingless dark meat continued to deliver strong growth as volumes rose compared to the first quarter of 2026.

In Deli, consumer demand for convenience ready-to-eat options drove growth in rotisary logs and cutup portions. Sales and volumes for appetizers, including popcorn chicken and wings also rose compared to the same period last year. Demand for convenience and value also permeated the frozen prepared category as chicken grew compared to last year.

Within foodservice, chicken volumes remained positive despite mixed industry performance and traffic trends as operators continue to expand chicken as a value-oriented protein offering. Overall, foodservice volumes increased despite continuous concern about food traffic with chicken gaining many penetration. QSR and noncommercial channels presented the largest growth with chicken-focused chains lead growth in QSR. Despite continued healthy growth in chicken across all channels, demand was more than offset by the increase in supply. As a result, counterseasonal movements emerged in the commodity chicken market, lowering cutout values compared to previous quarter.

In exports, overall poultry exports remained steady compared to last year as trade flows continue to navigate through a variety of circumstances. Our volume growth was strong, and we outpaced the channel through an increased presence in several key markets. Within the Middle East, trade to GCC countries continue to flow through alternative courts, giving a comprehensive inland transportation network, enabling a resilient supply chain.

For Asia, recent meetings between government officials from the United States and China created a favorable outcome for the U.S. poultry exports. As such, China released 17 states from its avian influenza ban, allowing shipments of raw products to resume. Additional opportunities exist as other states that are currently free of high path avian influenza have yet to be fully recognized. Further meetings scheduled later in the year may result in the release of these states and resumption by China to follow the Phase 1 agreement.

Turning to feed. Corn was volatile throughout the quarter. Early in the period, concerns about disrupted fertilizer supply and higher energy costs associated with the Middle East conflict elevated prices. Corn markets eventually fell given favorable U.S. planting weather, higher level of U.S. planting acreage relative to the forecasted expectations and better-than-expected production in South America. Looking ahead, higher risk premiums for corn may emerge pending outcomes in the Middle East and reactions by China to potential trade policy changes by the U.S. Nonetheless, yields for the U.S. crop, along with weather in the Midwest will be the key drivers for corn pricing in the short term.

The soy complex shows similar volatility given the Middle East conflict, along with additional uncertainty from the pace and volume of Chinese purchases of U.S. soybeans. Another year of record soybean production in South America, along with increased soybean acreage in the U.S. versus last year, reinforced healthy stock levels. Given the potential of increment buys of U.S. soybeans by China, a risk premium will continue to exist within the soy market.

Soybean oil continues to be the stronger leg of the soy complex, keeping the soybean meal price relatively lower. In wheat, global stocks remain at comfortable levels despite a decline in production from all-time high last year. Availability may be further enhanced later this year as U.K. anticipates a production increase of 25% versus prior year. However, recent concerns regarding shipments in the Black Sea given the conflict between Ukraine and Russia may trigger an increase in price. In the U.S., the investment in converting our plant in Russellville to a case-ready operation to further strengthen key customer partnerships was completed as planned. We also continue to improve our sales mix given the recent installation of dark meat deboning and portioning equipment in several big bird plants.

Given this work, our portfolio was more prepared to manage the counter seasonal declines in commodity cutout values, enhancing profitability from the first quarter. In fresh, volumes grew compared to the same period last year. Margins expanded from the previous quarter, given the completion of the plant upgrades and continued improvements in live operations. Case ready volumes rose compared to last year from incremental distribution and stable velocity throughout retail. We also secured several promotional events with several leading retailers to further drive demand during the next quarters.

Small birds also grew as volumes to key customers exceeded channel averages. Our big bird [indiscernible] provided additional product to support the growth of prepared foods, mitigating the impact of commodity market declines. To support the growth of our key customers, we recently announced the investments in [indiscernible], Georgia to expand production and do more deboning of small birds. Based on this work, we will further align our portfolio to meet the fast-growing boneless chicken categories, such as chicken sandwich and tenders.

Momentum to further diversify our portfolio through Prepared Foods continue to accelerate. Overall volumes increased nearly 14% compared to the same period last year. Retail sales of Just BARE increased over 30%, 6x the category average. We also received additional recognition for the taste and quality of Just BARE as recent survey of Chefs by the -- all Recipes named it Nugget one of the best in the category.

Given its extensive growth and consumer acceptance, it has achieved nearly 15% market share, making it the second largest brand in frozen fully cooked. We continue to drive growth of our branded presence in retail through innovation. To that end, we have created expansions to expand -- just BARE presence across different occasions and consumer segments. Similarly, we are securing partnership to deliver and launch new flavor offerings through the retail and club for the Pilgrim's branded in retail.

We are building further awareness of our superior taste and culinary focus of the broader Just BARE fresh prepared portfolio through media partnerships. Recently, our innovation was featured on the award-winning television series, the Bear and further supported by selected dining experience, meal kits and press coverage. Based on this work, we've generated over 950 million earned media impressions.

In foodservice, we continue to increase our presence of branded offerings as market share has increased in both commercial and noncommercial channels. Moving forward, we will continue to cultivate our presence through innovation, digital engagement and new product development. Our investment in the Walker County, Georgia to further support our growth remains on track with commissions slated for the second half of 2027. In Europe, our diversified portfolio continues to adapt to meet evolving marketplace needs. The affordability of our poultry and meals resonated with inflation [indiscernible] consumers as each were among the fastest-growing categories in retail.

Our volumes to key customers rose faster than both the grocery channel averages and prior year, reinforcing our partnerships. In the branded segment, volume in the rollover grew double digits and garnered significant retailer acceptance and consumer interest. Fridge Raiders remained relatively steady as additional distribution was secured throughout grocery, enabling further growth for the remainder of the year.

While Richmond's margins remain attractive, the pace of volume growth lags our expectations as extensive promotion activity, along with significant retailer support of premium private label offerings has intensified competition pressures. Given Richmond's market presence and further profitability growth potential, we will continue to emphasize sales execution, investment in brand building and drive innovation.

In foodservice, QSRs continue to experience declines in store visits, resulting in lower volumes and sales. We will continue to work closely with leading food service providers to expand our portfolio of value-focused offerings, generating additional traffic.

Despite increasing costs from the Middle East conflict and competition from imported pork into the U.K., overall profitability was comparable with last year. Within pork, continued reductions in the existing herd along with further diversification in prepared should alleviate margin pressures. In addition, our pricing arrangements for customer-specific offerings allow for recovery from raw material escalation.

Turning to Mexico. The country experienced a counter seasonal very positive growing environment for birds. As a result, production expanded from elevated livability and higher live weight. Increased production of domestic eggs and additional pork imports further grew overall protein availability in the country. Nonetheless, demand for chicken was very strong, absorbing the additional supply. We continue to grow our differentiated branded offerings.

In fresh, volumes of retail branded products grew over 30% compared to last year. Just BARE once led the growth as volumes increased over 2.5x. Prepared Foods offerings continue to gain marketplace traction as volumes rose across retail and foodservice. [indiscernible] branded offerings led growth as volumes grew double digit across both channels. Operational excellence efforts made significant progress given improvements in productivity and live operations, further enabling our business to navigate these challenging market conditions.

We continue our investments to drive sales growth and reduce the volatility of our portfolio. To that end, we completed our expansion of the prepared line at Porvenir and started production as scheduled. Our investments in live in the South and Peninsula are also on track and ramp-up continues. We continue to emphasize all aspects of sustainability throughout our operations. As part of this effort, we've made repeated investments in team member training to reinforce our values throughout our organization, build technical skills and develop management capabilities.

Given our continued focus, we've been recognized as a leader in workplace satisfaction across multiple publications, including Newsweek in the U.S., the Grocery in Europe and Institute for Promotional Quality in Mexico. With that in mind, I'd like to ask our CFO, Matt Galvanoni, to discuss our financial results.

Thank you, Fabio. Good morning, everyone. For the second quarter of 2026, net revenues were $4.63 billion versus $4.76 billion a year ago, with adjusted EBITDA of $360.0 million and a margin of 7.8% compared to $686.9 million and a 14.4% margin in Q2 last year. Adjusted EBITDA margins in Q2 were 8.7% in the U.S. compared to 17.1% a year ago. For our Europe business, adjusted EBITDA margins came in at 7.6% for Q2 compared to 8.2% last year.

In Mexico, adjusted EBITDA margins in Q2 were 3.9% versus 16.3% a year ago. U.S. net revenues were $2.65 billion versus $2.82 billion a year ago. Adjusted EBITDA in the U.S. for Q2 came in at $231.5 million compared to $482.7 million last year. U.S. margins declined year-over-year primarily due to the 27% decrease in jumbo cutout value. However, sequentially, U.S. margins improved while both lapping the impacts of significant plant downtime in the first quarter and through improved performance in our live operations.

U.S. Prepared Foods continues to demonstrate robust growth with year-over-year volumes increasing nearly 14%. In our U.S. GAAP results, we incurred legal settlement expenses of $136 million in the quarter, primarily due to reaching settlements with certain parties associated with the ongoing broilers litigation. Also, we took a $26 million charge in the quarter, primarily related to an asset impairment associated with our previously announced forthcoming shutdown of the harvesting facility in Chattanooga.

In Europe, adjusted EBITDA in Q2 was $105.8 million versus $111.8 million last year. The business benefited from strength in poultry and meals offerings during the quarter, along with the continued benefits of its structural reorganization. The strength in poultry and meals helped compensate for pressured pork margins due to higher European imports in the U.K., increased costs driven by the Middle East conflict and decreases in foodservice traffic.

Mexico generated $22.6 million in adjusted EBITDA in Q2 compared to $92.3 million last year. As Fabio mentioned earlier, Mexico's results were impacted by year-over-year changes in bird growing conditions, increasing supply in the live markets and lower-priced competing proteins. SG&A costs in the quarter were higher year-over-year, primarily due to an increase in legal settlement and defense costs. However, these costs were partially offset by lower incentive compensation accruals and marketing expense during the quarter. Our effective tax rate for the quarter was 39.3%. However, our year-to-date effective tax rate is 25.3%. We continue to anticipate that the full year effective tax rate will approximate 25%.

We have a strong balance sheet, and we continue to emphasize cash flows from operating activities, management of working capital and disciplined investment in high-return projects. During Q2, we completed a $250 million tender offer of our 2033 bonds. At the end of the quarter, our net debt totaled less than $2.5 billion with a leverage ratio of 1.43x our last 12 months adjusted EBITDA. We had nearly $1.6 billion in total cash and available credit at the end of the quarter. GAAP net interest expense for the quarter totaled $46.1 million. However, excluding the loss on the early extinguishment of debt, our net interest expense was $28.5 million.

Excluding the impact of early extinguishment of debt, we anticipate our full year net interest expense to be approximately $115 million to $120 million. We spent $230 million in CapEx in the second quarter. The spending this quarter included the finalization of the Russell Hill conversion, continued progress in our new Prepared Foods plant in Georgia and the investment in LJ, Georgia to enhance our mix in support of key customers in the foodservice space. At this time, we maintain our full year CapEx estimate of approximately $900 million. These near-term growth projects align to our overall strategies of portfolio diversification, focus on key customers, operational excellence and our commitment to team member health and safety.

Operator, this concludes our prepared remarks. Please open the call for questions.

[Operator Instructions] And our first question here will come from Ben Theurer with Barclays.

Just real quick, maybe digging into your expectations for the second half. And if you could help us maybe understand a little bit what you're seeing in terms of supply as it relates to the U.S. market and how it should impact third and fourth quarter. You flagged in the presentation a little bit of an uptick, if you want to call it an uptick, at least a little bit on some of the pricing, particularly on wings from this like very low levels, slightly more improving, but tenders still being very much down on a historic basis.

So as we think about the cutout value and how that flows into that business that is more commodity price exposed for you guys, what are your expectations in terms of just how it's going to flow through into profits for the third and the fourth quarter? That would be my first question. And I have a very quick follow-up.

Yes, -- as we mentioned, we saw a significant increase in supply during Q2, 4.5%. I think the initial expectation was a little lower than that. What we saw was we started with the egg sets and the industry set 2% more eggs in the quarter. We expected a little bit better management, and we saw that a little bit improving in hatchability. So the chick placements were 2.4%. I think what was different this quarter is that we saw an improvement in the growing conditions of the birds and the livability was significantly better than last year.

As you remember, last year, we have a lot of issues in the industry with the respiratory diseases and low PAT AI. So we saw some more mortality. And this livability actually translated into more than 1% increase in total supply. So the headcount was a little higher than everybody anticipated. And that is what created a 4.5% growth in the supply in Q2.

Coming to Q3 and Q4, starting with the breeding flock, I think we saw the same number as last year. So we don't expect a significant improvement in number of eggs. So I think it's all about the increase in exits and how that will translate into ready-to-cook pounds. We don't expect that effect of increased livability for Q3 and Q4 as those issues were more concentrated in Q2. We're also seeing a little bit of warm weather, which typically impacts the growth of the birds, especially now in July, August. So we're expecting and USDA is expecting growth in the second half to moderate.

For the third and fourth quarter of 2026, the USDA is expecting 2.5% increase in the supply, which is more in line with the strong demand that we are seeing for chicken. I think when you go to the pricing, and you need to go into individual segments and into individual pieces.

I think first, we'll start with overall trends that are happening in the consumer, right? I think we're seeing several trends and changes in the environment that are supporting the demand for chicken in both retail and foodservice.

Starting with the foodservice, I think we are seeing the fight for traffic. Foodservice is struggling with traffic. And because of that, they are focusing on promotional activities. And we're seeing that they're using chicken for those promotional activities to generate traffic. That's why we saw an increase of 3.1% -- 3.4% actually in the volume of chicken in the foodservice category.

And then we see the retail where consumers are strapped for money. They are looking for a control over their budgets, and they're going to the retail to buy protein. We saw a growth in retail of 2.8% on the chicken category, especially on the prepared side, where we've seen our brands really resonating with the consumer on the prepare, on the justpair.onsumers are looking for affordability and also for convenience. So we saw significant growth in prepared, but we saw some significant growth in fresh as well with the industry or the volume in chicken growing by 1.8%.

Going more specifically into the cuts, right, we saw the wings bouncing back after getting off the menus on the food service, and we are seeing some increase in availability in wings in retail. So we expect wings demand to continue to increase, especially starting now the football season and the basketball season. I think on the boneless breast, we've been talking about this for more than a year right now, right? The delta between ground beef and boneless breast continues to widen, and I think it's the highest it's ever been. I think that is helping the demand for boneless breast.

And more important than that, we are seeing some significant promotional activity on the retail coming into the fall and coming into the next months. That is happening because I think the retail is also looking for foot traffic. They're also increasing their promotional activity and boneless breast has been a significant and important part for that. On the boneless dark meat, we're also seeing some great trends with changing demographics and changing culinary preferences and boneless dark meat has been the fastest-growing category in the retail. So we're seeing some very positive trends overall for protein and for chicken and special, both in foodservice and retail. And that can help for the pricing and for the demand as long as the supply is in line with what we expect.

Okay. Perfect. And then one real quick one for Matt probably. As it relates to the CapEx cadence, I mean, I think you just said $900 million for the year. Initially, it was $900 million, I think, to $950 million. So should we assume closer to the lower end of that, just given the run rate of the projects? Or is there anything that you've kind of like postponed -- or what's driving that guidance more to the lower end of the previous guidance for the CapEx versus what was $900 million...

No, sure. I think year-to-date, we're at $465 million. And kind of looking at the $900 million, we have a lot of the projects that kind of gone through already with all the Russellville conversion, some of the other plants we have. Of course, we've got continuing spend on Walker County with the new Prepared Foods plant and then with LJ, but we've got some of the bigger projects behind us and spent in the first half of the year. So at $465 million, my guide at $900 million kind of just gets you kind of almost equal first half, second half, but maybe just slightly below in the second half compared to the first half of the year.

And our next question will come from Peter Galbo with Bank of America.

Maybe to follow up to Ben's initial question and ask it slightly differently. Fabio, I know you gave a very comprehensive answer. But just is there an expectation that as we get closer to the fall that we might see the industry kind of go through its normal seasonal cuts on production? I know that, that was obviously last year kind of something that didn't happen that typically, again, we would expect to happen seasonally. So just given where the commodity markets sit, like are we in a more normal environment this year where production cuts are kind of expected for the industry?

Yes, it's normal for the industry to do the seasonal cuts. As we all know, our industry always produced to the expected demand. And during the fall, given the Thanksgiving and other events, we don't see a strong demand for chicken. So it is normal to have that seasonal cuts. Last year, I think they waited a little because of the high prices that we were seeing during the -- especially in the commodity segment in the second quarter last year. But the seasonal cuts always happen and they start around the end of August and September.

So our industry always produces to the demand. Like I mentioned, I think it was unexpected or it was welcome, but unexpected increase in livability that we had in Q2 because the exits were only increasing by 2%, which was in line with the expected demand growth that we have for chicken for the whole year. I think the livability was what increased the production a little bit over what the industry was expecting. And I cannot speak for the industry as well, again, but for [indiscernible], we will always adjust our production to demand for our key customers.

And I think you mentioned one important point, which is the portfolio, right? As we always mentioned, we have a differentiated portfolio. We have the small birds -- we have the case ready, the big birds and the prepared foods, and we're seeing some strong growth in the prepared foods. So -- and with all the investments we did in the big bird plants, a big portion of our production is using on the growth of our prepared foods, especially on the portion side. So I think that's also important. But overall, long story short, our industry will always adjust the demand to the production to the expected demand.

Great. Okay. Maybe if I could ask on Mexico. Obviously, a very, call it, dynamic first half with a lot of moving pieces there and maybe things will start to normalize out in the second half. But if you could give us some perspective on -- we've gone through a challenged first half, both from a top line and a profitability perspective, just kind of how that shapes up for the back half of the year.

No, sure. Thank you, Peter. Yes, Mexico, we always mentioned that Mexico could be very volatile quarter-over-quarter, but it's resilient in double digits year-over-year. I think we're seeing a little bit of a persistent low margins, at least to our expectations in Mexico, but the reasons are a little bit different from Q1 than Q2. Typically, what we see in Q2, similar a little bit to what I mentioned in U.S., it is that the growing conditions are not favorable in Mexico. This year, very different from other years, we saw some outstanding growing conditions. So the industry normally increases set expecting this worsening or this bad growing conditions. And because of this year, mortality was much lower than expected or livability was much higher than expected. And we saw a significant increase in the supply of chicken in Mexico, almost double-digit increase in volume.

At the same time, we are seeing in Mexico the same behavior than U.S. on the egg on the shell egg. We saw a significant increase in the supply of shell eggs and the consequent reduction in price. And in Mexico, because it is a growing economy and chicken is the entry protein, but egg compete more with chicken than in other countries. So we saw a significant increase in chicken, a significant increase in eggs with a lower price. And we also saw some significant imports on the country of pork from the United States.

With all that, we saw a very large increase in the supply of protein in the country. Nonetheless, demand continues to be excellent because we saw that it was able to absorb all this growth in protein, which signifies to us that our strategy of growing in Mexico, it is the right one. We are, as I mentioned, building 2 complexes in the Peninsula and in the South to grow our geographical diversification. And we continue to invest in our brands and in our prepared foods. So the changing in the consumer behavior in Mexico towards more convenience can also be supported with our brands. So I think Mexico, once again, it's very volatile quarter-over-quarter, but we expect very good margins year-over-year, given this demand for chicken and for overall protein that continues to grow.

And our next question will come from Ben Machy with BMO Capital Markets.

So my first question is around U.S. chicken demand. So you spoke about and referenced ongoing strong demand for U.S. chicken. But we've seen foodservice industry traffic trends soften in recent months and grocery industry trends remain somewhat soft. So I was just wondering if you could frame the demand side of the equation maybe relative to like 6 to 9 months ago and just how it's evolving there.

Sure, sure. Yes. I think, again, like I mentioned, I think we -- I need to get back to overall trends and changes in the environment. The consumer continues to be looking at their budgets with greater efficiency, and they are strap in their spending. It's interesting that we look at in service, when consumers are asked about the first thing that they will cut from the budget, 75% of the consumer will say that they will cut dining out. So I think that's the foot traffic impact, right? When the budget is constrained, 75% of the consumers will say that they reduce dining out. That will help the demand on retail.

And then what foodservice is doing about it, it is increasing the promotions to get this food traffic that is trying to cut their budgets. And that's where chicken has been winning on the food service and increasing menu penetration. I think we're seeing the menu penetration for chicken increasing every single quarter and be used for attracting the consumers. And when you drill down into all the segments in the foodservice, we're seeing the QSRs growing the fastest. menu penetration and chicken volume in QSRs increased by 4.1%.

I think the noncommercial, also, we're seeing a resume of the in-person operations in companies and hospitals and hospitality. We're seeing growth in chicken of 5.9%. The only segment that was stagnant and a little -- just a little bit of growth was the foodservice restaurants, and that's the segment that is being more impacted by the consumer cutting their budgets. And then that helps the chicken on the foodservice despite the weakness in the food traffic. And then we go to the retail.

And like I mentioned, the retail volume has been growing, especially on the prepared side. And when we go for the same survey when the consumers asked that they cut from the budget, 29% saying that they cut from grocery spending, but only 3% say that they are willing to cut meat and poultry consumption. 68% of the consumers say that meat is a nonnegotiable or important item at retail. And that's what we are seeing this resilient demand for protein and chicken on retail, growing by 2.8%. So I think that is the overall consumer sentiment and the several trends that are helping with the demand for protein.

Okay. And my follow-up question has to do with the European U.K. business. The top line continues to actually trend constructively with volumes up almost 1% there. The margins, however, have kind of stagnated. And so I'm just wondering, I know that the pork business has been under pressure, and you're not getting out of it what you maybe have hoped for a couple of years ago when you acquired it. What -- is there any way to quantify like how big of an impact pork is? And is there a time line that you would expect that to recover? And just where do you see this margin profile going from here from roughly like 5%? And that will be my last question.

Of course. Thank you, Ben. Well, I think, first of all, we finished all the reorganization, and we really have one integrated company in Europe, very diversified, as we mentioned. We have the fresh chicken, the fresh pork, the prepared foods. We have the branded business, the meals business and the foodservice business. So when we look at all these different segments, I think they are balancing each other really well to what's happening to the consumer in Europe, which is very similar to what's happening to the consumer in the United States. So we are seeing growth in the chicken demand in Europe.

Our challenge to grow there, it is to build more housing. I think that has been the challenge, but it is in the works for us to be able to grow the supply of chicken for the increased demand there. So chicken was really growing in Europe. The meals business also is growing really fast with the convenience and pricing being a great alternative to these consumers in Europe.

Then we go to the segments that are not growing as we expected. First is the QSRs or the foodservice segment that we have in Europe. That segment, it is stagnant year-over-year. And we're working with our key customers there to enable just like in U.S., more promotional activity to increase foot traffic and increase volumes. The second is the branded business. We are seeing a lot of competition from private label and the consumers when they are trying to save money, they tend to go to the cheaper private label. But we are also increasing our promotional activity on the branded segments and expanding innovation, especially on the Richmont brand, so we can achieve growth in that segment.

And then we go to the one that is being struggling for us in Europe, which is the pork business. Because of the China increase in the pork supply, we're seeing a reduction in European exports to China. When those exports reduced, especially from countries like Spain and Denmark, we saw a significant increase in the supply of pork into the U.K. We have a differentiated operation in the U.K., which is high welfare. So it's a higher value, let's say, proposition. But we saw this increase in the supply of very competitive cheap pork into the U.K., and that impacted more on the wholesale business, less the retail, where we have a very differentiated offering, but all the wholesale prices went down.

So I think that's what impacted the pork operations in there. We are seeing some herd reduction in other countries, and we expect the prices to to react. I don't think that there will be some increase in the export to China in the short term. I think it will be more on the reduction of herd in Europe. And then we'll see less imports of pork cuts into the U.K., especially in the wholesale market. So overall, again, a portfolio that is highly diversified, and we are investing in innovation and brand growth and in chicken growth to be able to increase our volumes in Europe.

And our next question will come from Pooran Sharma with Stephens.

Fabio, you kind of alluded to this in the prepared comments, and you've said this in the past, but wanted to talk about the benefit of lower raw material costs for your Prepared Foods business, which sounds like it has strong momentum. You said Just BARE up 30% in retail. Given kind of just the downturn in pricing, can you remind us how long of a lag it takes for you to see benefits from your Prepared Foods business?

Super. Yes. Like I said, I think looking at the overall portfolio, what we want is to grow our branded business in the United States. That will compensate the volatility in the big bird commodity market. Once again, we don't want to reduce our commodity operation. We want to reduce the volatility of the overall portfolio with the growth of prepared foods. We invested in our big bird plants in more portioning, so we can have internal supply. We used to have more than half of our supply from outside, and we are increasing that to much less than half of our needs in terms of raw meat for our prepared foods from external. And that's what we want, quality and assurance of supply of the no antibiotics ever material that is important for our Just BARE brand.

There is no lag because all of our internal transferring are always based on market pricing. So we run our Prepared Foods operation just like a stand-alone and the overall portfolio will benefit from that exposure. So we price our products in the prepared foods based on competition from the market and based on the value that they generate. As I mentioned, the Just BARE brand adds a lot of velocity to the retailers when they are on the shelves, both on the prepared and on the fresh side.

So I think it is more about improving our operations in the big bird category, achieving all the efficiencies that we want so we can improve the profitability in that category. The Prepared Foods profitability has been strong since the raw materials are very competitive, as you mentioned.

Great. Appreciate the color there. And just on the follow-up here, I think recently, on the July WAS, we saw quarterly production estimates raised. But on the table egg layer front, we've been hearing of heat stress impacting birds. And so you can't get an optimal sized egg there. And I know it's different genetics when you go over to broilers. But just being in the same geographic location, will we see maybe the opposite of last year where you saw better growing conditions in 3Q? Will we see maybe worse growing conditions in 3Q this year, just given implications for heat stress thus far? And then do you think that is reflected in USDA estimates at all?

Yes. I think that is a great point, Pooran. And as I mentioned, I think in Q2, out of a 2% increase in eggits, which is what the industry believe is going to be the increase in supply, we saw 4.5% increase in ready-to-cook pounds. And as I mentioned, I think livability was the biggest unknown or different factor during Q2. I think to your exact point, given the heat wave, that increase in livability should not be a bigger factor in Q3. And that's why I think the increase in eggsits and chicks place, it's more in line with the end with the increase in ready-to-cook. And we normally see that.

I think last year, you have a great point. During the fall, we saw some great growing conditions. The weather was mild. We didn't see big stretches of hot weather, and that helped in Q3 2025, an increase in production, especially in September. So I think you're right, if the weather continues to be what it is with some hot weather in the South and other regions where there is a big production of chicken and payable eggs, I think the egg set increase will be more in line with the [indiscernible] increase. And then that is incorporated into the [indiscernible]. I think [indiscernible] is expecting the same conditions as last year. And if livability is not as good as last year, we can see actually a reduction in the production compared to the increase in exits.

[Operator Instructions] Our next question will come from Leah Jordan with Goldman Sachs.

I wanted to go back to the response in the question before last, you talked about some of these actions reducing the volatility of your business longer term. So after you've completed these plant upgrades, we've got a few more value-added projects that are still on the come. I was just seeing if you could walk through how you're thinking about mix and operational efficiency as margin tailwinds into the back half and into next year, just to kind of support that reducing volatility outlook.

I think it's a great point. Again, operational efficiency is at the core of our beliefs and our values, right? We always need to be the best at everything that we do regardless of the segment we are in. Then we try to reduce the volatility through our portfolio. And I say reduce the volatility. I don't think that we want to or can create a portfolio that is going to be total immune to volatility because we want to capture the upsides in the commodity segment when they happen.

What we want is to really create a protection from the downsides where because of our portfolio, the company will be not stressed in the results. So what we want is to always keep a great base of profitability, giving geographical diversification and giving the business diversification in U.S. with the small birds that are more stable with the case-ready that is also more stable. But we want -- and the prepared foods that can counter, as I mentioned, a little bit of volatility in the big bird segment, which we are -- again, is the segment we are seeing the highest volatility.

So long term, what we want is to continue to grow our Prepared Foods operation. And growth in line with our key customers. I think this is the other point, and that's important. We're always looking into our portfolio and seeing if there is opportunities for the long term. And the LJ conversion is a great example. We've been seeing the reduction in the demand for bone-in category, especially on the 8 piece, and we're seeing the increase in the demand for the chicken sandwich segment. And that's why we're doing the change in the LJ operation to increase the deboning and support our key customers for their growth.

And Lee, I'll just chime in relative to next year as we wind down the completion of our Walker County facility for the prepared food, that will -- that's going to benefit us to be -- have less exposure to co-packers and some potentially better margins for us as we go forward to help that higher offtake of our own internal need also with all the work that we've done on the portioning side in the big bird plant.

And our next question will come from Heather Jones with Heather Jones Research.

Just first question, that is really quick clarification. Fabio, you mentioned something about strong margins year-over-year, and it was in relation to a Mexico question. Is that just the long term that you expect the margins to be strong over the long term? Are you talking about you expect margins to be up strongly year-on-year for Q3?

Yes. Compared to Q3 last year, I think we saw some weakness in the second semester in Mexico. So I think we can have some growth in the margins in Mexico in the second semester. But I think it's more about the growth in the demand of a growing economy like Mexico, where their imports are a significant part of their protein consumption and our operation in the country continues to grow. So long term, we expect double-digit margins. Again, quarter-over-quarter could be very volatile.

Right. Okay. And then a bigger picture question is just I know that supply has surprised to the upside in the first half and thus far in Q3 in the U.S. But it also seems to be that there's been some incremental softening in demand and even more so over the last couple of weeks, which I guess is related to the cyclos 4 that's affecting foodservice traffic. So just wondering if you could give us your big picture view as to when we look at pricing and margins, have you tried to pinpoint what you think is attributable to supply? And what do you think is attributable to demand and just how you're thinking about that going forward?

That's a great question, Heather. I think on the foodservice, we've had these issues before in the industry, and we always bounce back. I think it's always a small or short time. We saw that in Panera in Chipotle and others in the past, right? I think from time to time, we have -- but I think we have a great food supply, and we have great resilience, and we have good health conditions overall in the restaurants in the United States. So I expect that only to be a small reduction in any specific week.

Again, the consumers continue to go to food service, food service. It is a great option for the consumers. But the foot traffic continues to be an issue, like I said. And again, chicken is a great opportunity for generating foot traffic through promotional activity. And then we're seeing that already happening. I think during Q2, to be honest, I think we saw less promotional activity in the food service, but yet we saw the growth of 3.4% in the segment and like I mentioned, especially on the QSR.

I think what can change in -- to be honest, on the demand is in retail in terms of promotional activity. We have not seen great promotional activity in boneless breast during the first semester. And we're seeing some strong indication. And we saw some price decreases, some significant price decreases in boneless breast in retail during Q3. And I think that can lead to a bigger or stronger demand, especially for that cut because boneless dark meat has been growing a lot, like I mentioned. But especially for the breast meat, I think the promotional activity, the reduction in pricing in the retail is going to be a significant improvement into the demand going into Q3 and Q4.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Fabio Sandri for any closing remarks.

Thank you, everyone, for attending today's call. During the quarter, chicken demand remained firm across all regions as affordability continued to resonate among consumers. We made significant progress in our investments to drive growth and mitigate downside risks as volumes and margins improved from previous quarter in the volatile commodity markets.

Our investments in Prepared Foods at Walker County and small birds in LJ will further strengthen our portfolio. We will continue to work with our commitment to have the best team and our relentless pursuit of operational excellence. When these efforts are combined with our commitment to quality, service and sustainability, we can further build our legacy and achieve our vision to be the best and most respected company in our industry, creating the opportunity of a better future for our team members. Thank you, everyone.

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

Good morning, and welcome to the First Quarter of 2026 Pilgrim's Pride Earnings Conference Call and Webcast. [Operator Instructions] At the company's request, this call is being recorded. Please note that the slides referenced during today's call are available for download from the Investors section of the company's website at www.pilgrims.com. After today's presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Andrew Rojeski, Head of Strategy, Investor Relations and Sustainability for Pilgrim's Pride.

Good morning, and thank you for joining us today as we review our operating and financial results for the first quarter ended on March 29, 2026. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAAP measures we may discuss.

A copy of this release is available on our website at ir.pilgrims.com, along with slides for reference. These items have also been filed as Form 8-K and are available online at sec.gov. Fabio Sandri, President and Chief Executive Officer; and Matt Galvanoni, Chief Financial Officer, will present on today's call.

Before we begin our prepared remarks, I would like to remind everyone of our safe harbor disclaimer. Today's call may contain certain forward-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. Further information concerning these factors have been provided in yesterday's press release along our Form 10-K and our regular filings with the SEC.

I would now like to turn the call over to Fabio Sandri.

Thank you, Andy. Good morning, everyone, and thank you for joining us today. For the first quarter of 2026, we reported net revenues of $4.5 billion with adjusted EBITDA of $308 million. Our adjusted EBITDA margin was 6.8% compared to 12% last year. During the quarter, we were able to navigate a volatile market in the commodity segments, protecting the downside with the most stable parts of our portfolio.

We also drove extensive progress in our growth investments, strengthening our portfolio of differentiated products that could provide higher and more stable margins while supporting the growth of our key customers. In the U.S., demand for key customers for retail tray pack remains strong in fresh. Prepared Foods grew from expansions across retail and foodservice. However, sales and profitability fell as jumbo commodity cutout and deli small bird values were significantly lower than last year.

Margins were also impacted by planned downtime from plant upgrades to improve the mix and interruptions from winter storms during February. Europe's diversified portfolio maintained steady sales and margins compared to last year amid changing consumer confidence towards more value offerings, especially poultry and fresh and frozen meals.

Back-office integration and network optimization continues to improve productivity and support further growth. Mexico fresh sales remained steady and branded sales increased double digits compared to last year. Prepared Foods continued to grow in retail and QSR. However, margins were compressed as excess production in the live commodity market and increased imports persisted throughout the quarter.

Our projects to diversify our footprint in fresh to different regions of the country and increase our presence in prepared foods remain on track. Once fully operational, these projects will unlock additional sales growth and further diversify our profitability, enhancing our margins and reducing volatility.

Turning to the supply in U.S. USDA reported ready-to-cook production increase of 3.4% year-over-year from increased headcounts, continued improvement in live performance and higher average life weights. Egg sets grew 1.1% compared to the same period last year, extending recent gains from a more productive layer flock. Similarly, chick placements increased 1.7% versus last year, reflecting modest improvements in hatchability during the period.

Going forward, given the size of the layer flock and the growth in pullet placements, combined with the elevated hatchery utilization, the USDA expects chicken production to increase 2% for 2026, primarily driven by growth during the first half of the year. As for the other proteins, the USDA anticipates minor increase in beef supplies as higher imports offset domestic production headwinds and limited growth in pork production.

When these factors are combined with additional chicken supply, the USDA expects net protein availability to rise by 1.6% compared to last year. Within the U.S., consumer sentiment declined to a 3-month low at the end of the first quarter as inflation rose amid higher energy prices. Consumers saw more value-oriented offerings. With this environment, chicken remained attractive given its relative affordability, resulting in increased volumes across channels.

In retail, the fresh meat department posted dollar sales growth across proteins as volume grew in chicken, beef and pork. Results were uneven during the quarter as strong performance in January was followed by softer-than-expected demand in February and March as winter storms disrupted shopping patterns and pulled some purchases forward as customers stock up early.

Chicken maintained a compelling value advantage on shelf compared to the other proteins. Boneless, skinless, breast pricing remained steady and spreads against ground beef continue to be at record levels. Boneless thighs continued their multiyear trend of strong volume growth, given sustained consumer interest. Deli continues to grow at a steady pace, given its role as a convenient and affordable meal solution for consumers.

Appetizers, particularly popcorn chicken formats, along with gains in whole birds drove moderate growth. Frozen prepared products continue to deliver positive volume growth, led by popcorn chicken, chunks and nuggets. In foodservice, chicken offerings expanded again as operators lean into value proposition and responded to elevated beef pricing. As such, adoption extended beyond traditional chicken-focused chains, particularly among QSRs.

While menu penetration increased, volume growth was constrained by inventory levels and uneven traffic patterns. Going forward, chicken continues to be well positioned as consumers increasingly prioritize strong perceived value. Chicken-focused QSRs delivered volume growth in the first quarter and outperformed full-service restaurants as inflation-constrained consumers continue to favor value-oriented quick service formats.

Noncommercial channels also posted growth, supported in part by favorable pricing conditions. As a result, chicken volumes in foodservice remained stable to slightly higher overall, even as broader sector performance and traffic trend stays mixed. In exports, we continue to monitor global trade movements. In the Middle East, all vessels operating to the Gulf Coast countries were suspended at the end of February, given the military conflict.

While the GCC is an important market for U.S. broilers export, strong domestic demand for dark meat, along with robust exports to Mexico mitigated this disruption. To date, we have not seen any material changes to dark meat values as pricing remained above 5-year average for the back half of the bird.

Moving forward, we expect several international markets to reopen as the occurrences of commercial high path avian influenza has recently slowed and previously restricted control zones are no longer subject to limitations given the absence of new cases. Nonetheless, we remain vigilant on biosecurity, and we continue to leverage our geographical footprint and cooperate with various governments to ensure international customer needs are continuously met.

Turning to the feed inputs. Pricing support for corn emerged from higher energy and fertilizer markets. However, generally favorable crop development in South America, along with larger-than-expected prospective corn plantings in the U.S. reduces risks of significant price increases. As a result, corn stay consistent with the 2025 level pricing. Stocks remain above 2.0 billion bushels, and the market focus is quickly shifting to planting and growing conditions in the U.S. for the upcoming season.

In soy, both beans and meal appreciated during the first quarter, given the expectations that China will make additional purchases from the U.S. for the 2025 and 2026 crop year. Better-than-expected exports demand, along with increasing domestic interest for U.S. soybeans also provided further support. However, above-average yields from South America kept global soybean markets well supplied, limiting market upside.

Like corn, the market focus for soy will be growing conditions in the U.S. The USDA currently forecasts soybean ending stocks to reach 350 million bushels, up 7% prior year. When combined with the expansion of the U.S. soy processing capacity and growth in global soybean stocks, meal prices are expected to remain manageable.

As for wheat, global stock remained well supplied, increasing 24 million metric tons versus last year. Nonetheless, futures appreciated from relatively low levels throughout the first quarter, given geopolitical risks. Moving forward, favorable growing conditions in the Eastern Hemisphere for winter wheat, along with an increase in planted acres and a historic yield in the U.K. should unlock additional value.

In the U.S., demand for chicken continued to grow across retail and foodservice. Equally important, we made significant headway in projects to reduce volatility, enhance margins and drive sales of our portfolio. Our progress has also improved our ability to meet increased key customer demand, especially during the upcoming months. In Big Bird, we implemented a variety of plant layout changes, equipment improvement and operation procedures across many locations to increase dark meat deboning and portioning capabilities to support key customers and our Prepared Foods operation that were previously done by external companies.

Because of these investments, each site incurred planned downtime, along with additional expenses from project mobilization and production ramp-up. During this time, we also continue to invest in our team members through training and education on revised plant operations. In case-ready, both sales and volume grew as tray pack retail offerings to key customers grew above category.

In early April, we also completed our conversion at the Russellville facility from Big Bird to retail to support the growth of one of our key customers. Our investments in Russellville and throughout the Big Bird network will create a more resilient portfolio, given our expanded capability to meet the growth needs of prepared foods, strengthening leadership presence in higher attribute offerings and portions and enhanced production efficiencies.

In Small Bird, overall demand remained strong as volume increased compared to prior year. However, consumers are increasingly transitioned from bone-in to boneless offerings. When this factor is considered with the existing supply, the value for deli WOGs continue to be below the 5-year average impacting our sales.

Moving forward, we'll continue to evaluate our production mix and ensure if sufficient flexibility exists to meet market demand. In addition, we will explore alternatives to reinvigorate the category through promotional investments and innovation, especially with our key customers. The recent inclusion in the Farm Bill that hot rotisserie will be included in the SNAP eligibility also provides a significant opportunity for the category.

During the quarter, many sites were impacted by weather-related events, resulting in unplanned downtime and reducing service levels. When these factors are combined with weakened commodity market fundamentals, impact of our growth projects and small bird deli values, the U.S. fresh sales and profitability was reduced compared to last year.

In Prepared Foods, our growth accelerated as we drove the highest retail volume in any quarter. Just BARE continues to lead growth in the frozen fully cooked category as retail sales rose nearly 40% compared to last year from increased distribution and improved velocity. In foodservice, our business continued to expand through growth in branded offerings along with increased distribution in schools and national accounts.

Our efforts to support further growth through the construction of our new facility in the Walker County, Georgia remains on schedule. In the interim, we continue to rely on our network of co-packers to support the strong demand for our products. In Europe, our diversified portfolio drove steady volumes and margins compared to last year. Given persistent inflation, consumers increasingly migrated toward value and convenience.

As such, our poultry and meal offerings resonated through groceries and each category grew faster than the overall channel. While fresh pork experienced similar growth, bacon and sausage categories declined. In our branded portfolio, Rollover benefited from marketing investments and grew faster than the category average, whereas Fridge Raiders maintained its presence in snacking.

Margins for the Richmond remained strong. However, volumes were challenged as promotional activity intensified and consumers changed to more private label offerings. To foster growth in the category, we'll continue to drive our investments in marketing and innovation, given Richmond's growth potential and market positioning.

In foodservice, challenges exist as consumers increasingly opted away from dining out and reduced visits to QSRs. Nonetheless, our poultry business remained strong as affordability and limited time offerings resonated throughout the marketplace. Even with the poultry's performance, overall volumes declined as demand for beef fell in Europe, limiting our growth.

Moving forward, we will continue to drive distribution through new offerings and promotional support. Our operational excellence efforts made progress as we exceeded our budgeted improvement targets. We'll continue to focus on improvements in productivity, yields and overall costs.

In Mexico, we continue to drive our strategies for profitable growth and reduced volatility. To that end, our fresh branded offerings continue to gain traction as sales increased double digits compared to last year. Just BARE led this growth as volume rose over 80%. In Prepared, sales rose nearly 9% compared to last year, further diversifying our portfolio. Like Fresh, our value-added branded offerings grew as sales from Pilgrim's rose 14%. While we've made progress in transforming our portfolio, elevated supply levels in the live commodity market and import pressures persisted throughout the quarter, reducing margins and overall profitability compared to last year.

Our expansion efforts remain on track with expansions to different regions in South and Peninsula part of the country and our prepared expansion in Porvenir. Based on these investments, we can improve our ability to grow with key customers, reduce operational risk and further diversify our portfolio.

Turning to sustainability. We continue to drive accountability and ownership down the organization to each of our plants. Based on this approach, with investments and operational improvements, we have surpassed our 2025 reduction targets against Scope 1 and 2 emissions intensity set at our sustainability-linked bonds. This achievement reflects our team's mindset and ability to leverage sustainability as a means to create a more efficient operation.

With that, I would like to ask our CFO, Matt Galvanoni, to discuss our financial results.

Thank you, Fabio. Good morning, everyone. For the first quarter of 2026, net revenues were $4.53 billion versus $4.46 billion a year ago, with adjusted EBITDA of $308.1 million and a margin of 6.8% compared to $533.2 million and a 12.0% margin in Q1 last year. Adjusted EBITDA margins in Q1 were 7.0% in the U.S. compared to 14.3% a year ago. For our Europe business, adjusted EBITDA margins came in at 7.8% for Q1 compared to 8.1% last year.

In Mexico, adjusted EBITDA margins in the quarter were 3.1% versus 8.4% a year ago. U.S. net revenues were $2.64 billion versus $2.74 billion a year ago, a 3.9% decrease. U.S. adjusted EBITDA came in at $185.5 million compared to $392.5 million in Q1 2025. U.S. margins declined due to significant reduction in the jumbo cutout value, lower sales prices in deli for small birds, impacts of the winter storms that hit the Southeast during the quarter, bird health issues and plant downtime from the implementation of our many growth projects.

Our U.S. Prepared Foods business continues to demonstrate robust growth with retail sales of -- Just BARE increasing nearly 40% in the quarter compared to last year. In Europe, coming off strong seasonal results in Q4, adjusted EBITDA in Q1 was $105.8 million versus $99.5 million in Q1 2025, a 6.3% increase. The business has benefited from strength in poultry and meals during the quarter, along with the benefits of its structural reorganization, including integration of support functions and manufacturing optimization programs.

Mexico generated $16.8 million in adjusted EBITDA in Q1 compared to $41.2 million last year and $8.5 million in Q4 2025. Sequentially from Q4, the Mexican business profitability improved with marginally better supply-demand fundamentals by the end of the first quarter. SG&A in the quarter was higher year-over-year, primarily due to an increase in legal settlements, associated legal defense costs, true-ups for year-end 2025 incentive compensation and unfavorable FX impacts for both Mexico and Europe.

Our effective tax rate for the quarter was 23%. As I noted in our February call, we anticipate our full year effective tax rate to approximate 25%. We have a strong balance sheet, and we'll 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 as we had nearly $1.75 billion in total cash and available credit as of the end of the quarter. Our liquidity position provides flexibility as we pursue our growth ambitions.

As of the end of Q1, our net debt totaled $2.55 billion with a leverage ratio of 1.25x our last 12 months' adjusted EBITDA, below our target of 2 to 3x adjusted EBITDA. Net interest expense for the quarter totaled $31 million. Following the completion of our $250 million tender offer of the 2033 notes here in April, we anticipate our full year net interest expense to be between $105 million and $115 million.

We spent $235 million in CapEx during the quarter, a substantial increase from Q1 2025 when we spent $98 million. The spending this quarter is primarily associated with the conversion of Russellville to support a retail key customer, progress on our new prepared foods plant in Georgia and the previously mentioned enhancements to a number of our Big Bird plants to improve our product mix and to support the growth of Prepared Foods. At this time, we maintain our full year CapEx estimate of approximately $900 million to $950 million.

As we face macroeconomic volatility, we are proactively managing cost headwinds in freight, packaging and other key input costs with productivity initiatives and through procurement actions. Through our key customer relationships, we have regular interactions to discuss structural cost changes in our business. We always focus on what we can control, which is operational excellence with cost discipline.

Our team is resilient, and we have consistently demonstrated that we can navigate changing market conditions. 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 Instructions] The first question comes from Ben Theurer with Barclays.

Two relatively quick ones. So first, you've talked about it in the opening remarks as well as in the press release about some of the initiatives you've been doing in the first quarter, which caused downtime. But then at the same time, there were issues around weather, the cold front and all that kind of stuff.

Could you help us understand maybe a little bit more as to what the financial impact was in the first quarter within your U.S. business on one side, like kind of like the onetime weather related and then on the other side, like these like transition costs that you were having. So just that we understand what the impact was between those on the results? And then I have a quick follow-up.

Yes, sure, Ben. I think we have significant impacts. I think, like I said, it is to improve our portfolio. So the impact is normally we overstaff the plants at the beginning because we need more people for the deboning operations and for the portioning operations. So we carry a heavier staff during at least 3 weeks before the shutdown. So we are prepared for the beginning of the operation. So there is a cost impact in terms of labor.

Also, there is a ramp-up cost because after we start, we need to train all the people and we need to get to the efficiency that we expected. That takes up to 2 to 3 weeks. And of course, there is the 1 to 2 weeks where the plants were shut down. So that was significant in those plants that we shut down for improving the portfolio. On the cold front, I think it is multifaceted. We have the direct impact, which is the plants don't operate on the days that we have those ice storms because in the south, they are not prepared for ice and storms.

So to keep the people safe, we decided not to operate during 1, 2 or 3 days depending on the locality. And that impacts our cost, but also impacts on the live operations because we have the birds on the field and those birds will need to be processed. And when we have 2 or 3 days without operating, you change the sizes of the birds that you expect. And those birds end up being processed on a Saturday or over time, and that impacts overall costs.

It's interesting to mention that -- and we have on the prepared remarks on the very strong January that we have. And when you look at every week, I think there was also an overstocking or a pantry loading on those regions on retail to prepare for the storm. And that's why we have a weaker-than-expected February as people start consuming what they have loaded in their freezers during January.

If you look at week-over-week, actually on week 4 of January, you have an increase of 25% of sales in retail. So that created out of stock for the retail, but also pantry loading for the consumers. So that's what created less than expected growth during February on the retail sales. So I think it is a multi vision of impact in terms of our operations because of the changes that we have on our portfolio and in the operations also because of the storm.

Okay. Got it. But you can't really quantify that, correct, just to confirm.

Yes. I think we can quantify the operation on the shutdowns, but then the impact on the market, which is actually the most impactful one or the impact on the live operations when we have birds that are not the exact size that we want, you need to downgrade them for a commodity sales rather than a specific sales for a key customer, which a much better pricing. It is the biggest impact. So that's why it is hard to quantify the overall impact.

Okay. And then just as we moved into March and maybe into April, things from a normalization point of view, clearly, we still have the very high production data. So what's that kind of like your outlook as you think into what you saw in the first couple of weeks of the second quarter and how to think about the second quarter in general, given just we're still running at a relatively high exits and placements data?

Yes. I think that's a great question. When we look at Q1, we were expecting a 2% increase on the quarter. But looking at the latest numbers from USDA, we are experiencing a 3.4% growth during the quarter. Most of this growth was in March. And as you mentioned, we started with exits that were limited at 1.1%. But after the storms and especially during the end of February, beginning of March, we saw some great growing conditions. And that increased livability that accounted for another 1% in terms of growth, another live weights that accounted for another 0.7%.

And we saw an improvement -- a rapid improvement in hatchability also during February that accounted for another 0.6%. More impactful than that is that almost all that growth came in March. So when you look at the growth in March, it was close to 5% to 6%. And when you account for where that growth was impacted heavily the commodity segment. So that's why we saw some significant improvement in the prices during January and then a mild February and some challenges in March and early April.

As we mentioned, given the egg sets that we are seeing and given the trend more to a normal levels of hatchability coming back during the summer and also livability as the weather gets warmer, we have lower livability and lower growth in the birds. We expected a more muted growth from those factors and more growth concentrated only on exits that we are running around 1.9%.

So when you factor all those, USDA is expecting growth in the range of 2.5% for Q2. Then going forward to Q3 and Q4, we are seeing more moderate growth. USDA is forecasting a total growth for the year of 2%, and we are seeing on the second semester growth below 1% on a year-over-year basis.

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

Sorry to beat the dead horse on this. But Fabio, please, can we get a quantification on what the downtime at a minimum was worth? I think it's just important to have that given you don't want folks probably to capitalize that going forward. So just kind of what that discrete item was worth in the quarter and then whether there's any kind of lingering impact into 2Q?

Yes. On the lingering effect, I think we don't have any significant lingering effect. The network changes during -- at the beginning of the year because we knew that we want to do those changes before the grilling season. We don't want to impact the market or our operations during the grilling season. The only ramping up operation is still on the Russellville front where we're still ramping up, but we don't expect a significant impact.

Like I said, I think it is is multifaceted. There is a lot of impact on our operations in terms of yields, in terms of growth, in terms of downgrading birds that end up in the commodity segment rather than a more specific production. That's why it's so hard, but I will say that it's significant.

Okay. Okay. And then maybe just to switch gears a little bit. You talked a little bit in your remarks about some of the SNAP changes that may be coming on rotisserie in particular. I would think that's -- given your expertise in that space, just that could be a nice tailwind. So maybe you can expand. I know it's really early days. There's nothing even formalized yet, but just kind of how you view that opportunity, particularly going forward in the U.S.

Thank you, Peter. Yes, that's significant for our Small Bird operation. As I mentioned, that has been a long-term trend of moving away from bone-in category to a more boneless category on the small birds. We've been talking about this for years on the chicken wars and as the bone-in category has been declining. And I think our strategy has always been to balance the bone-in on the 8-piece and 9-piece with the growth in the deli section of the retail, especially on the rotisserie.

I think that has been a great strategy for us. But lately, we've been seeing a slower growth on the rotisserie on the retail. If you look at -- in Q1, it was only 1.2% growth, and we expected a much higher growth on the rotisserie birds than that. And I think the SNAP can help a lot. I think it is an important tool for the consumers to be able to combat inflation, being able to get a hot rotisserie, which is a competition for the foodservice, but it is a much better value for them. So I think that could give a boost on -- especially on the -- it's a bone-in category, right? Because it's a whole bird for the whole category.

The next question comes from Andrew Strelzik with BMO Capital Markets.

This is Ben on for Andrew. So my first question is about the vaccination of the birds. And I was just wondering what kind of impact, if any, you've seen on your own supply chain productivity now that you started vaccinating.

Yes. I think I'll just take a step back. There are many types of vaccination, right? I think there has been a lot of discussion about vaccination against high path avian influenza. And that is something that we don't believe it is beneficial for the whole industry as it is isolated events, we have strong biosecurity and that could hamper or could reduce our ability to export our products as vaccination prevent us from access some important markets for the United States.

So vaccination for high path AI, we don't think it is a good alternative. And we don't think that is meaningful for the broilers market. Now on respiratory diseases, AMPV and some others, we vaccinated the birds last year after some big events, especially in Georgia. And I think that has helped the livability in the industry. If you look at the overall livability, as I mentioned, it contributed for 1% of the growth quarter-over-quarter.

So I think the vaccination against AMPV was important in some specific regions. And I think that helped on our livability and the industry livability, especially in some parts of Georgia. It is a significant cost to the live operations. And as we are seeing less occurrences and a more resilient bird, we may stop those vaccinations going forward.

That's super helpful. And my follow-up question is around freight and your exposure to -- or potential exposure to spot market rates for refrigerated freight. We've seen others in the industry deal with some pressure there. So just wanted you to remind us what your exposure is there? Are you more contracted out -- and are you not concerned with the availability of refrigerated freight in the near term here?

Yes. In terms of supply of freight, I think we're not concerned. I think we have a big fleet in the United States. We have a very efficient company. So I don't think that there is an availability issue. As for the cost, and I think there is an impact on the freight and there is surcharges, and we have contracts where we have the surcharge based on gasoline or diesel costs. And that is a significant cost to the whole nation.

I think just in terms of the portfolio of freight that we have, more than 70% of our sales are with freight included as a specific number. So that is a direct pass-through because freight is not part of our cost. It is just a delivery cost that the buyer will pay. And some of those also are picking up at our operations. So the whole freight, it is a cost -- or from the buyer.

So in terms of direct freight to the customers, it's either a specific line on the invoice that is a pass-through or is a pickup order that is not our cost. I think there is some impact on internal freight when we see the delivery of the birds and we see the delivery of feed to our growers. So there is that direct cost that impact us. But I think as we mentioned, we control what we can control. We're trying to identify opportunities to reduce the travel, reduce the freight, get more efficient trucks. So we were trying to reduce the impact of those in our direct cost.

I think, Ben, it's important just as Fabio talked about the freight costs that go direct to our customers, that freight cost is just from an overall freight spend is a much higher proportion than freight internally to move birds or to move feed between farms, et cetera. So...

The next question comes from Pooran Sharma with Stephens.

This is Adam on for Pooran. For my first question, with the Russellville conversion complete now, are you able to give any more details on the expected ramp in volumes and margins with that new case-ready capacity?

Yes. I think on the retail, we've seen over time is the more stable margin. And I would say it is double-digit margins, and it's much more resilient and stable than the Big Bird. And when you look at the overall portfolio, right, and this is what we're always talking about, we like the exposure we have to the big bird complex. But we understand that it's very volatile. So in Q1 last year, we see some very strong profitability in that segment.

Actually, it was the most profitable part of our portfolio. In this quarter, we see that profitability was much lower than that. And that's why we converted the plant is to have higher and more resilient earnings. It's also important to support the growth of our key customers. We talk about the growth in retail.

And as retail increased on the fresh more than 1% this quarter, our key customers increased more than 3%. And I think that's important to mention that we will need to continue to support their growth. So we will need more capacity on the tray pack business. So it's a growth opportunity for us to support our key customers, but it's also an opportunity for us to have more stable, higher margins.

Okay. And then for my follow-up, with Just BARE retail sales up 40%, you noted it was on distribution and velocity. Are you able to give any more details on how much of that growth is coming from distribution velocity or pricing or innovation and how you expect those drivers to perform in the back half?

No, I think it's a great point, right? Just BARE is a great part of our portfolio is on the prepared side, as we talk about more profitable and more stable. We just reached the $1 billion threshold. And I think that's over the last 5 years, which is an amazing growth. And as we mentioned, there is velocity and there is distribution. We continue to gain distribution. I think the velocity is more a sales tool for Just BARE because if the retailers have Just BARE in their portfolio and their freezers, they see the velocity of the category going up because that the velocity of Just BARE is much ahead of the overall velocity of the category.

So it is a sales tool that helps us gain distribution. It is our strategy, right? How can we help our key customers to grow faster than the overall categories. We do that on Fresh, and we do that also on the Prepared. And you also mentioned very important is innovation. We just launched the roasted category on the Just BARE. The Just BARE started as a lightly breaded product as you can -- as you all know.

And we just launched the roasted part of that portfolio. That helps with having more shelf space. And we are looking into also on the nugget side, if the presence of Just BARE can be very, very complementary to our overall portfolio.

The next question comes from Leah Jordan with Goldman Sachs.

But see if you could provide more detail on what you're seeing in terms of consumer behavior across your different regions. We're hearing about softness in Mexico and the U.K. and pressures could be building here in the U.S. So have you seen any notable shifts in products or channels that you would call out?

Yes, sure. I think it's a global trend, if you look, that consumers are looking and are over concerned about inflation, about the wage growth and overall consumer sentiment. And what they are looking is as food away from home keeps increasing faster than food at home, we're seeing a shift from foodservice to retail.

I think the good news for chicken on that trend is that the penetration on the foodservice despite lower traffic has increased, and that's why chicken has been growing in the foodservice category. But then going to the retail, as we mentioned, the consumer is doing more trips and lower baskets. So that is the trend that we are seeing and we continue to see, and I think that is global.

When you go more in the details by geography, demand in Mexico was strong during the quarter. I don't think that the pressure on prices in the region was because of demand. Chicken is the most affordable protein in the category. I mentioned about the spread between ground beef and chicken to the record levels. Ground beef increased more than 30% over the last year and chicken prices are stable.

So the demand for chicken continues to be really strong even in Mexico. In Mexico, it was more about the availability of other proteins like eggs and pork at the same price as chicken and the availability of chicken. As we mentioned that the growing conditions in Mexico are typically very difficult during this time of the year because of drought conditions. We've been seeing more rains in Mexico, and that has helped with the growing conditions.

So the availability of chicken in Mexico was north of 10% in quarter-over-quarter. So that's what impacted the profitability in Mexico. But as we mentioned in Mexico, it's very volatile quarter-over-quarter, but it adjusts itself throughout the year, and we continue to expect in a growing economy, just like Mexico with good demand for our products for the supply and demand to be more in balance.

Europe, it's similar. I think the difference is that the volumes are not growing as fast. It's not a growing economy just like Mexico, but the chicken continues to be the best category for us and for the industry compared to the beef and even pork prices because of affordability. And then it comes to the U.S., and I think the same trend remains, right? The consumer looking for stretching their budgets, doing more trips with smaller baskets and chickens continue to be a great value for it.

And I think we talked -- just talked about Just BARE and I think the frozen category has been growing on the -- as well because it's affordable, but also convenient. And we have the perspective of the growth in the whole birds or the deli segment rotisserie in the retail if the SNAP vote goes.

And Leah, it's Matt. I'll just complement something that Fabio talked about with the U.K. I think also chilled meals is doing quite well there. We're seeing the consumer there going back to what Fabio was talking about with at-home eating and the chilled meals where we have a nice presence. We've seen that increase quite a bit, and it's been a good play for us, too.

The next question comes from Thiago Duarte with BTG Pactual.

My question is related to CapEx. And the first part of my question is really what's the timing for the conclusion of the ongoing investments in the mix enhancements and capacity addition? And the reason I'm asking is because you're still running well above last year and what I believe your sustaining CapEx should be. So the timing for the conclusion of these main investments would be interesting to get.

And the second part of the question is related to how much incremental capacity or production volumes you effectively believe these investments will bring and how much it's actually basically the conversion of your fresh mix into more prepared mix? That would be an interesting color to get as well.

Thanks, Thiago, for the question. It's Matt. When you think about timing on CapEx, we provided the guidance that this year will be about $900 million to $950 million in total CapEx. Our sustaining CapEx generally runs in that $400 million range. So you can do the math that the growth or the efficiencies kind of payback CapEx is $500 million to $550 million in a year.

We spent $235 million in the quarter. We mentioned a lot of the different projects we have. We've got a lot of that behind us. We've got more to come just as you kind of finalize some things and get builds to come in, et cetera, et cetera. So we'll still see some of that roll through. But that $235 million, I think it really does sort of set up nicely for the pace that we talked about for the year.

Now of course, we've got the big spend we have relative to our prepared foods plant that we're building in Georgia. That's not planned to go online until the end of the first half of next year. So we will still be spending quite a bit there.

As it relates to kind of our -- the mix of our capital and the growth, I think what's been important we talked about, we want to support Prepared Foods, both by building the plant that we talked about in Georgia, but also a lot of the enhancements that we're doing to our Big Bird plants right now are to support that growth by doing portioning and things that external companies had done for us in the past.

And so some of that meat that we would be selling in the past on the market will be sold more so to our Prepared Foods business internally as we think about it that way. So I don't know, Fab, if you want to complement anything on that?

No, I think on the incremental capacity, if you think about the conversion of Russellville actually reduces a little bit the overall tonnage because a big bird plant runs 9 to 10 pound bird and a case-ready plant it's between 6.5 and 7. So I think that reduces a little bit. And that's why we're also investing in our Big Bird plants to be able to run a little bit more pounds.

Our intention is always to support the growth of our key customers. And when you look at the expectations on the market, it's around 2%, and that's what we want to continue to grow to support them. So around 2% in line with the market.

The next question comes from Heather Jones with Heather Jones Research.

I wanted to go back to what you were saying about the price spread for -- between ground beef and breast meat in the U.S. And there's been a lot of feature at food service and et cetera. But one of the things that I'm hearing and honestly seem to see it in the data is that the pickup in breast meat demand or chicken demand in general at retail hasn't been as pronounced as would have been expected given that price gap. And one, wondering if you agree with that? And two, if so, why do you think that is?

An increase from $4.70 a pound at retail to $6.29. And at the same time, chicken price boneless breast has remained stable at $4. So I think there is some elasticity that we see. But what I believe it's happening is that as consumers are, like I said, stretched on their budget, they're moving from foodservice to retail. And when they move from food service to retail, they have more available income because the price of a food away from home is 3x the price of food at home.

So they go to the retail, and they are buying the more expensive parts of beef, right? So they are getting the nice cuts. And then you have consumers that are trading down inside beef from expensive cuts to ground beef, and that is supporting the volume of ground beef. So it's a moving from food service to retail that supports the high parts of the beef. And then you have some trading down on the beef category from the high end to the ground beef.

And then we see some trading down from ground beef to chicken. But I agree with you, I don't think that the elasticity has been as prevalent as we expected given the spread in prices. And I think there is a limit to it, right? I think that is -- it reached a point where it's so high, the distance that I don't think is creating any more demand for chicken. But the demand for chicken continues to grow, again, in all categories in retail, not only boneless breast.

And I think another factor is what we -- the growth that we are seeing on dark meat deboning. And I think this is important to mention as well. We are doing that investment in our operations. I think the whole industry did that investment. The growth in the dark meat or in the boneless ties has been phenomenal at retail. And if you look at the prices at retail, the price of dark meat is actually higher than the price of boneless.

But overall, it is a growing category. So you need to take both of those cuts in combination. And when you look at those cuts in combination, I think you see a much better elasticity and a much better demand on the chicken category.

Okay. That makes sense. And then my follow-up is, if I remember correctly, you were converting -- you converted Russellville to case-ready and to NAE. And so oftentimes, when companies convert to NAE, there's an adjustment period. And so wondering if that -- if you anticipate any impact like livability, whatever to continue into Q2? Or is all of that now back at normal levels?

That's a great point. We converted to NAE because we want to differentiate our key customers, right? I think just to justify the NAE change. It is a growing category. It is to make the differentiating factor for that key customer is a different package as well. So it's a saddle pack. So I think that's a differentiating factor as well, very convenient for the end user.

At the beginning, we see some reduction in livability and in growth, but we have great housing. We have great procedures, and we expect to be similar growth conditions and similar mortality. There is always a little impact, but I don't think it is significant. And I think it makes sense when you look at the higher attribute and it helps our key customer to be differentiated in the marketplace.

The next question comes from the line of Priya Ohri-Gupta with Barclays.

Two quick ones for me. One, I was wondering if you could just give us some more color around some of the competitive dynamics you're seeing in the European market? And then secondly, Matt, if you could just walk us through some of the thought process around the -- taking out the 33s and how we should think about maybe your debt profile going forward, just given how underlevered you are?

Yes. Thank you. Again, on Europe, because of our differentiated portfolio, we are seeing different dynamics in each category. As I mentioned, chicken continues to be favored throughout the world, but also in Europe because of affordability and availability. So we saw some growth in volumes and in prices. The more challenging segment has been on the branded portfolio, especially on the Richmond side, the competition from private label.

Private label sausage is made with imported meat, especially from Germany and Spain, and we're seeing some very cheap imported pork meat from those geographies because of some challenges to get into China. So because of the lack of exports from Europe to China, we're seeing more available fresh pork from other countries other than U.K. U.K. has a high welfare. So on the retail, we see all the high welfare and it's well priced, and we have key customers and is actually doing well.

But on the imported meat that goes into the whole -- on the food service and into sausages, we saw some very cheap pricing. And that with the lower price on the private label, that impacted our volumes in the branded, especially on the Richmond. But we are working with innovation. We're working with gaining distribution, and we're working with more promotional activity to gain those volumes back.

And as Matt mentioned in another Q&A, the meals business is also doing really well. As the consumer is staying more at home and meals is a great affordable option for them. We're seeing our meal business, both the fresh and frozen to grow, and we also gained distribution on that.

So I think it is how we expected our portfolio to work. So we have similar margins or resilient margins compared to the same year -- same period last year because of the diversification of our portfolio.

And Priya, regarding your question on the tender offer, our thinking was we had room under the previous authorization from the Board on debt buybacks. There's an opportunity to take some higher coupon debt out. We're confident in our future cash generation. And I think as you mentioned, our balance sheet right now is underlevered.

And I think as we look at other growth opportunities, we're always looking to grow the company, could be through M&A and opportunities that we see out there. Our balance sheet is in the right spot to be able to do that if necessary to go back out to the market if necessary.

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

Thank you, everyone, for attending today's call. During the quarter, we were able to navigate a volatile market in the commodity segments, protecting the downside with the most stable parts of our portfolio. More important, the underlying fundamentals of our business remain attractive, given chicken's affordability, continued consumer momentum across retail and foodservice and ample grain supplies.

We continue in our journey, investing in our operations and in our teams to strengthen our portfolio, ultimately creating a higher return and reducing risk. This quarter, our team members simultaneously drove the business while navigating significant operational changes. This task was even more difficult given extensive weather challenges.

As such, I would like to thank our team members for their determination, discipline and commitment to our company. We must continue those efforts with an unwavering focus on team member safety and well-being, along with an unyielding attention to quality, service and sustainability.

Given continued progress, we can continue to build our legacy and achieve our vision to be the best and most respected company in our industry, creating the opportunity of a better future for our team members. Thank you, everyone.

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

Good morning, and welcome to the Fourth Quarter and Fiscal Year 2025 Pilgrim's Pride Earnings Conference Call and Webcast.

[Operator Instructions] At the company's request, this call is being recorded.

Please note that the slides referenced during today's call are available for download from the Investors section of the company's website at www.pilgrims.com. After today's presentation, there will be an opportunity to ask questions.

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

Good morning, and thank you for joining us today as we review our operating and financial results for the fourth quarter and fiscal year ended December 28, 2025, and Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter and the year, including a reconciliation of any non-GAAP measures we may 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 8-Ks and are available online at sec.gov.

Fabio Sandri, President and Chief Executive Officer; and Matthew Galvanoni, Chief Finance Officer, will present on today's call.

Before we begin our prepared remarks, I would like to remind everyone of our safe harbor disclaimer. Today's call may contain certain forward-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. Further information concerning these factors have been provided in yesterday's press release, our Form 10-K and our regular filings with the SEC.

I would now like to turn the call over to Fabio Sandri.

Thank you, Andy. Good morning, everyone, and thank you for joining us today. So for the fiscal year 2025, we established new financial milestones as net revenues reached $18.5 billion and adjusted EBITDA rose to $2.3 billion. Our adjusted EBITDA margin was 12.3%. In the U.S., consistent execution of our strategies, along with strong chicken demand, bolster out demand.

Demand for our key customers grew significantly over the category average for the year. Our brand building accelerated as the combined retail sales of just beer across fresh and prepared exceeded $1 billion, further diversifying our portfolio and resonating with consumers. Operational excellence efforts, improve efficiencies in processing and live operations in big bird, mitigating commodity cutout volatility throughout the year. Given these efforts, the U.S. grew both in top line and bottom line.

Europe completed several projects to enhance the efficiency of its manufacturing footprint, consolidated back office support and optimized mix and innovation. Key customer partnerships strengthened as sales and volume both increased compared to last year. Our portfolio of key brands continue to grow, further diversifying our portfolio. Based on these efforts, margins and overall adjusted EBITDA continue to improve.

Mexico grew sales through increased sales volumes of branded offerings across fresh and prepared and growth with key customers despite commodity pricing volatility. Equally important, we initiated a series of investments in both fresh and prepared to drive profitable growth while reducing the volatility of our business.

For the fourth quarter of 2025, we reported net revenues of $4.5 billion. We have adjusted EBITDA of $450 million, and our adjusted EBITDA margin was 9.2%. Our Q4 results reflect the robust nature of our strategies to drive strong margins during changing market conditions. In the U.S., fresh increased market share through continued focus on quality, service and innovation. Our Fresh business improved efficiencies, both in plant and live operations. Prepared Foods continue to drive category-leading growth across retail and foodservics, further diversifying our portfolio. investments to grow our presence in key customers, increased capacity in value-added and enhanced operational efficiency continues to progress as planned.

In Europe, we increased overall adjusted EBITDA compared to the same quarter prior year. Our Fresh operations drove the majority of the gains to improve productivity and enhanced mix. Key customer demand was stable, while our portfolio of key brands continue to grow.

Mexico faced difficult circumstances given increased imports of animal-based proteins and unbalanced fundamentals in the live market. Our diversified efforts continue to gain traction as branded Fresh and Prepared offerings both rose compared to last year.

Turning to supply. The FDA indicated that ready-to-cook production for the U.S. rose 2.1% year-over-year in 2025, driven by increased headcount, improved life performance and higher average live weights. Exits were higher than 2024, giving a more productive layer flock and record hatchery utilization. Hatchability improved sequentially in Q4 with seasonality and a younger flock but are still below the 5-year average. Chick placements were higher throughout the entire quarter compared to last year. After peaking in Q3, live weight declined and ended the fourth quarter consistent with prior year levels.

Looking forward, USDA reports a 1.9% year-over-year decline in the layer flock in January 2026, alongside the 3.1% drop in pullet placements compared to Q4 of 2024. Given these factors, along with other considerations, the most recent USDA estimates suggest moderate production growth of 1% in 2026 compared to last year. As for overall protein availability, projects growth of 1.5% in 2026, with challenges in the beef production, partially compensated by higher beef imports.

From a demand standpoint, consumer sentiment remains low given continued economic uncertainty. Inflation for food at home and away from home continue to impact consumers' available income. Nonetheless, chicken's affordability was sectionally appealing across channels and categories. In retail, consumers continue to stretch their budgets through more frequent trips with smaller basket sizes. Within the channel, the meat department continues to lead performance as it has remained a key priority for consumers.

Chicken experienced volume growth across all cuts versus prior quarter, boneless, skinless breast prices decreased 1% compared to last quarter, while prices of other proteins rose, especially ground beef that is setting new all-time highs. As a matter of fact, when compared to 2 years ago, prices of boneless at retail was reduced by 1.7%, while prices of ground beef have increased 22%. As a result, record pricing spreads emerged further strengthening demand for chicken. Similar to boneless breast, dark meat from boneless fires also continued to experience significant growth. Dairy increased slightly versus last year as velocity more than offset changes in mix, distribution and pricing. Consumers also look for convenience. And in the frozen chicken category, we saw significant growth with continued strength in velocity.

In foodservice, rising costs associated with dining out continue to pressure overall restaurant traffic, particularly in the full service formats. However, growth in QSRs and noncommercial channels compensated for these declines, supported by operators continued strategic focus on chicken through value offerings, limit time promotions and menu innovation. Chicken centric QSRs are leveraging the proteins affordability to drive traffic and engagement, outperforming the broader dining sector.

Within foodservice, boneless dark meat volumes are growing at double-digit rates across all segments. Wings are gaining momentum and tenders continue to deliver steady, consistent growth. In exports, industry volumes accelerated during Q4. Within piles, demand was primarily driven from the Southeast Asia and Mexico. Pricing remained high relative to historical levels and continues to be elevated in the first quarter of 2026. While trade disruptions have impacted certain markets given the high path AI outbreaks. The overall effect has been relatively muted on both pricing and volumes as most U.S. trading partners quickly limit restrictions to either the county or specific zones. As a result, trade simply shifts from other locations outside the impacted area during the restriction period. Moving forward, we expect exports to remain strong and well diversified across markets.

Turning to feed inputs. Corn moved marginally higher in Q4 compared to previous quarter. However, prices moderated in January as the U.S. corn realized new records in harvest area yield and total supply, while record demand currently exists, corn ending stocks are still expected to increase to 2.2 billion bushels, creating the higher stock to use ratio since 2019.

Soybeans and soybean meal rallied in Q4, given the resumption of U.S. soybean sales to China, strong domestic interest and export demand for soybean meal. Potential upside appears limited, given favorable weather in South America for soybean production and relatively slow pace of U.S. soybean exports. Since shipments are below average, the USDA anticipates ending stocks will rise by 350 million bushels, up 7% versus prior year. Global soybean stocks and processing capacity are also expected to increase, generating ample supplies of mail.

Global wheat stocks continue to be well supplied and production increased by 41 metric tons versus prior year. Every major producer experienced above-average crops reducing the risk of physical disruption in shipments. Additional tailwinds may emerge from increased wheat acreage planted in East U.K.

Within the U.S., our diversified fresh portfolio increased volume compared to the same period last year as consumers continue to seek affordability offerings for their meal occasions across retail and foodservice. Our higher attribute differentiated offerings in case-ready accelerated its Smartplace presence as volumes to keep customers increased nearly 2x the category. Sales and profitability rose compared to last year from sustained growth.

Small Bird also realized similar success as volumes to QSR remain robust despite a slow market for bone-in chicken and wholebirds, given continued market shift to boneless cuts extensive key customer partnerships and growth aspirations, we will evaluate and adjust our portfolio to match demand accordingly. In Big Bird, commodity cut values fell nearly 20% compared to last year. Nonetheless, the business was able to improve its efficiencies in live operations and in production. Equally important we further leverage our position as the leading supplier of NAE meat to support a robust growth of value-added offerings. To that end, Big Bird will continue to increase supplies to our internal prepared foods reducing volatility and enhancing margins for our portfolio.

During the quarter and the beginning of 2026, our team also undertook a variety of projects to strengthening our key customer partnerships and enhanced operational excellence, including investments within Big Bird to increase our portion in capacity and differentiated cuts. Through these efforts, our team managed through planned downtime and adjusted production across locations accordingly to ensure sufficient availability, maintain quality and above uphold service levels.

In Prepared Foods, sales grew 18% compared to the same period last year, given branded growth across retail and foodservice. Just bear momentum continues to accelerate market share in retail, it rose nearly 300 basis points compared to the same period last year. Equally important, it has the highest velocity of any brand within the frozen chicken. Further growth opportunities exist through increased distribution. Our innovation and approach to both flavors under the Pilgrim's brand also continues to receive accolades as people's Food award recognized our Chisialapeno nugget line as a category winner. In foodservice, we continue to build our presence, given continued growth with distributors, national accounts and schools. Our investment in the new prepared facility in Georgia to meet demand for our fully cook offerings remain on schedule.

Turning to Europe. Consumer sentiment continues to be relatively subdued. Nonetheless, we improved our profitability and maintain stable demand compared to the same period last year, given consistent execution of our strategies. Within retail, 2 mills and fresh offerings were among the fastest-growing categories. As such, our chicken business drove profitable growth, led by our differentiated PRO 3 offerings that select customers. Our added value business remains steady. Where pork experienced challenges from excess supply as animal health issues emerging in Spain, triggering export restrictions in the -- despite these challenges, our team maintained volume and increased profitability compared to last year. Our diversification efforts through key brands continue to progress as overall sales and volumes rose compared to last year.

Fringe raise bells increased share yet again given the effectiveness of recent changes to pricing and packaging. The momentum for the rollover continues to accelerate from additional distribution with new customers. The Richmond brand was challenged by low-cost private label offerings, but recent investments in promotional and innovation activity has been beneficial in resuming our growth trajectory. We continue to develop our innovation pipeline in close collaboration with our key customers. To that end, we have created a variety of new platforms in the meals focused on diet, health and ethnic offerings. To date, market acceptance has been promising, given incremental distribution awards and consumer interest.

If foodservice visits fell at QSRs giving concern regarding affordability. As a result, our volumes were impacted, especially during the late half of the Q4. To reverse this trend, several of our QSR customers reignited promotional activity during 2026.

In Mexico, Challenging market circumstances arose in Q4 given increased imports of animal-based protein. As a result, the short-term supply of meat and poultry in Mexico increased to levels not previously experienced. These conditions were further amplified by weakened market fundamentals in the live commodity market as improved growing conditions, increased supply. Nonetheless, we continue to drive our strategies, growing volume in retail, QSR and food service channels compared to last year. We also increased volumes by double digits in our fresh branded portfolio versus Q4 of 2024.

Just bear continues to be extremely well received as sales have grown more than 2x compared to last year. Similarly, repair sales volumes increased by 8% versus last year, led by key customers in foodservice and QSR. Based on these efforts, we continue to diversify our portfolio and reduce the volatility for our business.

Despite these short-term challenges, we continue to have growth ambitions in Mexico, given its long-term growth potential, status as a net importer of animal protein and effectiveness of our strategies. Our growth plans will further mitigate the volatility of our portfolio, resulting in higher, more resilient earnings profile.

We have already begun implementation of our plan. In Fresh, our efforts to build domestic supply creates national distribution capabilities and diversify our geographical presence remain on schedule with growth in the South region in Veracruz and in the Peninsula region in Merida. In Prepared, we are doubling our capacity of fully cooked products through the expansion of our facility in Port Vania. We anticipate our increased capacity coming online during the second quarter, further enabling growth for the second half of the year.

Our growth intentions in Mexico are not isolated. And overall prospects for chicken remains strong globally, given relative affordability, emerging trends in consumer preferences and healthy attributes. As such, our growth investments previously announced in the U.S. can further capitalize on these trends reinforce our strategies and strengthening our competitive advantage.

Given this environment, our portfolio will also continue to evolve. To support key customer growth in Fresh, we are converting 1 of our commodity Big Bird plant to a case-ready plant. We expect this conversion to become operational during the first half of 2026. To support the expansion of Prepared Foods, we will install equipment upgrades, modify plant layouts and big bird, leveraging our internal supply of differentiated NAE portion raw materials.

Regardless of these investments, we fully expect to remain consistent in our quality and service levels given our extensive network of facilities and overall supply chain capabilities. More importantly, we will have fortify our key customer partnerships and improve operational efficiencies, which will reduce volatility, enhance margins and drive profitable growth.

In sustainability, our journey continues. We've made significant headway in the reduction of our carbon-based direct and indirect emission intensity used for processing compared to last year. External agencies continue to recognize progress in environmental and social manner as our scores improved compared to last year. Improvements in the team member development continue to be exceptionally well received as over 2,300 team members or their dependent have signed up for our better futures program of which 780 have begun their selected academic pathway.

With that, I would like to ask our CFO, Matt Galvanoni, to discuss our financial results.

Thank you, Fabio. Good morning, everyone. For the fourth quarter of 2025, net revenues were $4.52 billion versus $4.37 billion a year ago with adjusted EBITDA of $45.1 million and a margin of 9.2% compared to $525.7 million and a 12% margin in Q4 last year. For fiscal year 2025, net revenues were $18.5 billion versus $17.9 billion in fiscal 2024, growth of 3.5%, while increasing adjusted EBITDA by 2.5% and from $2.21 billion in fiscal 2024 to $2.27 billion this year, after back years with adjusted EBITDA margins greater than 12%.

Adjusted EBITDA in the U.S. for Q4 came in at $274.2 million with adjusted EBITDA margin at 10.6%. Our U.S. business continued its momentum in the quarter in fresh retail and with QSR key customers, driving above category growth in these categories. Big Bird achieved further operational improvements. However, we face year-over-year commodity market pricing headwinds negatively impacting profitability. Our Prepared Foods business continued its momentum of branded product sales growth with both retail and foodservice customers, driving year-over-year profitability improvement in the quarter.

For the fiscal year, U.S. net revenues were $11 billion versus $10.6 billion in fiscal 2024 with adjusted EBITDA of $1.63 billion and a 14.8% margin compared to $1.56 billion and a 14.7% margin last year. The U.S. business maintained its margin profile through increasing sales volumes and delivering operational efficiency.

In Europe, adjusted EBITDA in Q4 was $131.4 million versus $117.1 million in 2024, a 12.2% increase. For the full year, Europe's adjusted EBITDA improved 11.4% to $453.1 million in 2025 from $406.9 million. Europe drove improved profitability with growth in poultry sales and due the impact of a series of operating efficiencies implemented over the last few years. Our European business has streamlined organizational structure and focus on innovative offerings has positioned it to partner more efficiently with our key customers in the region.

We recognized approximately $31 million of restructuring charges during the year, down from $93 million in '24. While we continue to pursue efficiency measures, we anticipate the majority of these charges for these programs are behind us. Mexico made $9.5 million in adjusted EBITDA in Q4 compared to $36.9 million last year. When considering the full year, Mexico made $186.7 million in adjusted EBITDA or an 8.8% margin falling short of last year's 11.8% margin. Mexico experienced lower market pricing in the fourth quarter, driven by higher availability of imported animal-based protein.

Although we did report $77 million in litigation-related settlement charges, our GAAP SG&A expenses in the fourth quarter were lower than last year, primarily due to a decrease in legal settlement expenses and cost efficiencies realized in Europe. For the full year, SG&A expenses were flat to last year with slightly lower legal settlement costs being offset by higher brand marketing investments.

Net interest expense for the year was $110 million. Currently, we forecast our 2026 net interest expense to be between $115 million and $125 million. Our full year 2025 effective tax rate was 27.9%. We recorded a discrete tax item in the fourth quarter related to a catch-up for U.S. state unitary taxes which will not reoccur next year. As such for 2026, 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 activities management of working capital and disciplined investment in high-return projects. As of the end of the year, our net debt totaled approximately $2.45 billion with a leverage ratio of less than 1.1x our last 12 months adjusted EBITDA. Our liquidity position remains very strong. At the end of the fiscal year, we had over $1.8 billion of total cash and available credit. We have no short-term immediate cash requirements, with our bonds maturing between 2031 and 2034, and our U.S. credit facilities not expiring until 2028.

We finished the year spending $711 million of CapEx included in our 2025 capital spending where the growth projects in Mexico the Big Bird plant conversion to support a key retail customer, early progress in our new Prepared Foods facility in Walker County, Georgia, to support our just brand growth plan and other projects that Fabio previously mentioned. The Big Bird plant conversion in the Mexican projects are on track to be completed by April. Currently, we forecast 2026 CapEx spending to be between $900 million and $950 million as we progress through these and the other projects to support Prepared Foods growth previously noted by Fabio.

As mentioned in the past, our sustaining capital spend approximate $400 million per year. We will continue to follow our disciplined approach to capital allocation as we look to profitably grow the company and will continue to align investment priorities with our overall strategies of portfolio diversification, focus on key customers, operational excellence and commitment to team member health and safety.

Operator, this concludes our prepared remarks. Please open the call for questions.

[Operator Instructions] And your first question today comes from Ben Theurer with Barclays.

Fabio, Matt, 2 quick ones. So number one, maybe just on the current growing conditions, and you laid it out in your prepared remarks were kind of like the cutout levels and pricing is compared to historic levels and particularly versus the last 2 years. So as we look into the first quarter and with hedgeability coming down, how much of that would you say is like related to just the genetic issue coming back up? Or is it weather related, just given the cold weather we had over the last couple of weeks, even in areas where chickens are grown. So just about the market dynamics right now and how we should think about the supply side for 1Q.

Yes. Thank you, Ben. Yes, when we look at the supply, and we always start with the breeding flock. And when you see the size of the breeding flock, we are with a total number that is down 1.9% year-over-year. So we have less breeders. But I think in terms of age, they are younger, which will generate more eggs and help on the hedgeability. But nonetheless, it's a smaller number. Given that input and some other factors like the weather and the seasonality, I think USDA is projecting the growth of supply in chicken for the Q1 at only 1.2%. In total for the year, that will be only 1%. I think the hatchability issue is part of this breed that we have.

And there's a lot of questions about breed. And I think the important thing for us is that we look at the overall profitability of the bird, not only 1 trade or another. So when you look at the profitability of the Bird, we look at, of course, hedgeability but we look at conversions and we look at yield. And as of today, Big Bird, despite having hedgeability that's below the 5-year or below previous years, it still have the better yield and the better performance in terms of feed conversion and other birds. So I don't expect any significant changes in the breed. Of course, there is always new breeds coming online but it takes time for the new bridge to roll out.

Okay. Perfect. And then my second question, just around like within capital allocation, obviously CapEx. You've mentioned the $900 million to $950 million. That's a good $200 million increase versus last year and kind of like brings us to $0.5 billion investment for the year versus sustaining. So as you kind of like laid the land in terms of these projects, the Big Bird conversion, things in Mexico, Prepared Foods. What else is in the pipeline? I know you've made some announcements in Mexico a couple of weeks ago. So just help us understand framing that CapEx for now? And also how much of that CapEx kind of like carries then potentially into 2027 as you roll out more projects just to think about like the path of CapEx beyond 2026?

Great point. And I think we're always looking for the trends in the market and how can we support our key customers. And we can improve our portfolio, right? So in that regard, we're always looking to grow our Prepared Foods. And I think we mentioned our outstanding we have results, especially because of the just Big Bird. So we are building that new facility in Georgia. And that will take investments that started last year. It's going to take 2026 and we'll roll out to 2027. In Mexico, as we mentioned, we are also diversifying our geography, and we are growing in regions where we are not in. Typically, in Mexico, we are in the North region and in the Central region, we were not present in the South region and in the Peninsula and are increasing our investments in those 2 regions. And that is smaller and it's every year as we want to grow steady in those regions. So we will have some investments in 2027.

On the conversion to increase our support to a key customer, it's going to be all done during this year and the changes on the -- so internal supply of meat from our Big Bird to our Prepared Foods will be all done this year. I think the only thing that we can have for 2027, as we mentioned, we are seeing this trend of change of bone in small birds to a more boneless. I think we all discussed about the sandwich force many quarters ago, we've been discussing that, and we're seeing that trend, and we may convert 1 small board plant to a more deboning plant rather than a bone-in plant.

And your next question comes from Peter Galbo with Bank of America.

And Matt, Fabio, maybe just to pick up on Ben's question on the, I guess, the rally we've seen to start January in commodity prices. Just trying to think about -- and I know it's a hard crystal ball but like the sustainability of that, given some of it is the tailwinds to the category and other protein -- competing proteins being lower, versus kind of the storm impact and maybe that's having an upward pressure on prices. Just how do you think about maybe the sustainability of some of the price move we've seen into what is going to be historically and even seasonally stronger period?

Yes. Thank you, Peter. We are seeing several trends supporting the demand for chicken. Starting with overall, we're seeing these macronomic indicators that showing that the consumers have been watching their spending closely, and have growing concerns about the inflation. So as the inflation in food away from home is outpacing the food at home, consumers are looking for ways to save and they are moving to retail. So when we go to the retail, we see that they have more frequent trips and lower baskets and chicken demand has increased overall because, as we mentioned in the prepared remarks, compared to last quarter prices in retail for bolus breast has gone down 1%, while we see all the other competing protein prices going up.

I think that created -- as we mentioned, the highest spread on record. If you look at the prices of chicken compared to the prices of beef, we have a spread of close to $2 per pound and that is increasing the demand for chicken in the retail. When you go to the foodservice, despite this lower food traffic, I think the foodservice operators are trying to attract consumers with promotional activity. I just mentioned the sandwich wars. And we're seeing the many penetration of chicken going up in the food service. So we saw also a growth in the foodservice in the range of 2% to 3%.

So I don't think that we're going to see change in those Big Birds during 2026. And as I mentioned, in terms of supply, with FDA, because of the size of the breeding flock and the state where we are in, in terms of hatchability and the high utilization on the hatcheries, we are seeing the supply growing only 1%. So I think the trends are very positive, especially for the grilling season.

Great. Okay. And Matt, maybe just a couple of cleanups. If you could help us -- I think you gave the interest, tax and CapEx but maybe anything on G&A for the year and then how you're just thinking about the SG&A levels, which continue to be pretty impressive how we might think about that for 2016?

Yes. No problem, Peter. So from a D&A perspective, depreciation and amortization, we're looking to track about $520 million for the year for '26. 2025 was about $460 million, and then SG&A, what I would tell you is kind of think about it sort of $140 million a quarter. I think that will help kind of get you guys pretty close, maybe just a little north of that. for the full year using that $140 million a quarter.

And your next question today comes from Andrew Strelzik with BMO Capital Markets.

This is Ben covering for Andrew. So I'll start with Mexico. Just if you could dig a little deeper on what happened there during the quarter. And then we're wondering maybe what happens moving forward in the first half of is the supply-demand situation cleaned up there? Or should we expect some lingering pressure? Just trying to understand the dental cadence there?

Yes, sure. And as we've been saying, Mexico can be very volatile quarter-over-quarter. But on the year, we've always seen growth and very positive results there. In Q4, I think we have a series of events. Q4 typically is a good quarter for Mexico. But during this quarter, we saw some shifts in the export market. And Mexico was the most attractive market for especially breast meat from Brazil and other locations, and we saw a significant increase in the exports to Mexico on the breast meat. We also saw a significant increase in pork exports to Mexico, which increased a lot the supply of meat. That impacted more than North region.

At the same time, in the central region, that includes the Mexico City, we saw the growing conditions very favorable for chicken. And after a strong first semester, we saw that the supply of chicken increasing in that region. So we have the 2 regions affected by different aspects. So we saw this increase in supply in the center to impact the live market prices. And because of that, we saw the weaker Q4 than anticipated. That's why we are creating the portfolio they are creating and we're talking about growing to different regions. So growing in the South region in Veracruz and growing the Peninsula because these areas are more insulated from the north and from the central micro dynamics.

On the lingering effects, I think we are seeing now the market more into the normal season patterns we're seeing slowdown in the growing conditions in the center. And we always mentioned that there are several small players when the profitability is very high in that region, they come to the market. And when the profitability starts going down, they exit that market, and we are seeing that. So we are seeing a more stable supply and demand. And on the North put as well. We're seeing that all the freezers are completely full in the North region.

So I don't think that there will be any more increase in the exports to that region. So we see the volatility in Mexico, and that's why we are evolving our portfolio to be a more resilient earnings.

Got it. That's very helpful. And then my last question will be about the EU U.K. business. Very strong performance during the fourth quarter there over -- well over 6% operating margin. Was that -- how much of that was seasonally driven? I guess is the first part of the question. And then you pointed out in the 10-K, in particular, strength in domestic demand for fresh products. So if you could kind of tie that into the volume strength and profitability strength in the EU and U.K. And just thinking about starting 2026, I mean, if it wasn't seasonally driven in the fourth quarter, would we expect 6%-plus margin to sustain there? So that's my last question.

Yes. Thank you. Yes, there is always seasonality in the U.K., especially on the pork operation. But what we are seeing in Europe and is no different than other places of the heart is the strength of the chicken business. So we're seeing the affordability, the availability and also our strategies, and we are resonating with the key customers and consumers with a differentiated offering. So we are seeing a strengthening in the chicken business in the region. But I think there is seasonality in Q4 is typically stronger in Europe than other quarters.

So I think we will see significantly improvement quarter-over-quarter within this seasonality. So I think we will have a better quarter in Q1 that we have the same a year ago in Q1. Although we are seeing some weakness in that started during Q4 because of, again, the prices of specialty beef, our business in the region on the were a little bit impacted on the traffic but we are seeing some promotional activity on those QSRs. We expect an improvement during this Q1. Thank you.

And your next question comes from Pooran Sharma with Stephens.

This is Adam on for Peron. So obviously, the beef environment continues to be a tailwind for chicken. In as there's big moving pieces there, 1 Mexican cattle imports; and two, the pace of Hefforetention. Just wanted to get opinion on how those 2 factors on the 2 extremes, slow versus aggressive for attention and the resumption or lack of cattle imports could impact chicken demand and therefore, boiler margins?

Yes. I think when we look at the retail, and I mentioned that we saw the spreads at the highest number ever, right? And I think this is something that's been growing over time. And I think 2025 and 2026 has been exacerbated by the effect that you just mentioned on the price of the live animals here in the U.S. and some capacity reductions in the beef industry. I think it's very difficult to look at the sensitivity on how much that delta needs to be to trigger trade downs. But I think what we are seeing is that the consumer really impacted in the inflation, especially on the food away from home, and we're seeing all this demand for chicken in the retail.

And I think it's the same in the food service, as I mentioned, is a matter of availability because when you look at the USDA expectations for 2026 is for the production of beef going down. So it would depend a lot more on the imports and what type of cuts will come from these imports from South America and other regions. So we don't expect the prices of beef to reduce significantly during 2026, as we mentioned because of the retention that have started. So I think that could be something that we will see but I think overall, we are seeing a very strong demand for chicken boat in retail and foodservice.

That's helpful. And for my follow-up, I was wondering -- I think you touched on it briefly in your prepared remarks but if you could just give a brief state of the union of the disease pressure you're seeing like in Spain with -- I know we've seen somewhere between like 100 to 150 positive cases of ASF in Spain but -- anything else you can add there would be great.

Yes. Of course, our European business has been impacted because of that. I think what we are seeing is the ASF in Spain, Spain is one of the largest producers in the world of work. And because of the ASF, they being band from exporting to China because that those exports don't go to China, they end up in the European region, typically in U.K. and that is generating a lot of supply, especially for -- in the sausage business. And that is creating some impact in our branded business because our Richmond brand, it's a well-established brand in U.K. when it's competing with this external meat and all these private label sausage, it ended up impacting in prices.

And that's why we mentioned that the Richmond brand was facing some challenges during Q4 but we expect some promotional activity and the resilience of that brand is amazing. We've been growing year-over-year. So we expect that impact to reduce. Now how long that is going to continue on the ASF in Spain? And how is that going to impact long term the U.K., I don't think that, that is something that we can foresee. But I don't believe that it's going to be a long-term impact as we are seeing the hard being reduced throughout Europe.

And your next question comes from Leah Jordan with Goldman Sachs.

We to go back to your comments about Foodservice in the U.S. You talked about the consumer shifting to retail, which is a headwind for the channel but you continue to grow nicely. So just seeing if you could provide more detail on the demand you're seeing there. Any nuance between versus others? And how much can new business wins continue to offset any broader industry slowdown there? Or how do you think about lapping the strength that you've had over the past year in innovation and LTOs?

Yes. Thank you, Leah. Yes. Well, again, like I mentioned, the foodservice traffic is a challenge and has been challenged over last year, and the foodservice operators are looking for promotional activity to drive traffic. When we drill down into the segments, what we are seeing is the slowdown in the full service restaurants, compensated by increases in the noncommercial especially hospitality, schools and growth in the national accounts. When we look at the promotional activity has been even the known chicken QSRs are doing a lot of promotions with chicken. And we saw the increase in the overall industry close to 3%.

So we don't expect that to change during 2026. For the factors that we already mentioned on the availability of lean beef on the burgers, and the ability of other proteins and the affordability and versatility of chicken.

Great. And then just for my second question, just wanted to ask about just bear a little bit more. You've seen some nice acceleration across prepared foods overall. But just bear has been really strong for you with the share gains that it's had I know we're still waiting on that new plant to open. But how do you think about growth for that brand over the coming year, considering distribution and velocity. And then you think ultimately, longer term, how do you think about continuing to increase brand awareness or helpful penetration there?

Thank you. So it's a great point. And I think the brand awareness is still not at the levels of national expansion that we expected. But we are seeing that Jesper is the #1 in terms of velocity that we are. And I think that's very important for the retailers. As we are discussing with our key customers on the distribution side, if you have just bear in your shelves, you can see that the shelf is turning faster than with any other segment. I think it's innovation, which is going to play for us to continue to grow.

I think we have a very strong core products but we can innovate and stretch that brand to some other different being chopped and formed because it's a whole muscle today, but there's a lot of opportunities in the shop and form. And the just brand promise is exactly what the consumer is looking for today, which is a clean label, no additions of antibiotics or any other items that the consumer is looking today at the labels and compare it, and that's why that is resonating so well with the consumer.

So it's gains in distribution because we're still not very national. We went from 1% to 13% market share in a matter of 5 years but still have a lot of distribution to gain and the velocity that will continue because of how the brand and the brand promise is resonating with our consumers.

And your next question comes from Thomas Henry with Heather Jones Research.

On Europe, could you elaborate on any trends besides the seasonality driving the strong volume performance? And any expectations of these continuing to '26.

Yes. I think it's a normal seasonality. We see the end of the year, a lot of promotion activity in terms of hands and bacon and other cuts. But as long-term trend, what we are seeing throughout the year is the growth of chicken. That's more important than the seasonality. I think the consumer is facing the same challenges in Europe that they are facing in the United States on the inflation. And when you look at the breakdown of the growth in total grocery is growing 4%, but chicken is growing 8% to 10%.

So there is the seasonal effects, and we saw some growth in the fresh pork close to 5% this quarter but the long-term trend is a more growth in the chicken side. And of course, with the innovations that we are doing, the partnerships that we are doing in Europe on the mills, we're also creating some new lines that are generating great results. The mills are a very affordable way for a family to have their needs -- so I think it's something that we are investing together with key customers on differentiating, creating better experiences for our -- and differentiate in terms of technicity for the consumers.

And your next question comes from Guilherme Palhares with Santander.

Just 2 quick ones. The first is where do you see today the capacity of genparents of shipping in the U.S. And the second one, if you could talk a bit about the new trade permit of EU towards the Brazilian chicken and whether this could have any impact on the business there?

Yes. Thank you. On the grandparents, the information we have with the USDA information when we talk about the size of the breeding flock, it improves the grandparents. And when we look at the number, it is down 1.9%. And that includes the processors and includes the current parts. So I don't see any -- or we don't have any information about significant increase in the grandparent size of that. On the impact of the [ Mercosul ] agreement or the U.K. Europe and Brazil, what we are seeing is the normal continuation of a long-term export from Brazil, which is 1 of the largest chicken exporter to Europe I think Brazil typically export breast meat, and that breast meat goes to the food service.

When you look at the U.K. consumer, they give great value to the provenance. And our chicken business and our pork business in Europe are mainly on the retail side because we are local producers because the standards of producing in U.K., both chicken and pork are higher than everywhere else in the world. So the consumer pay a premium and they have this important trait of provenance. So when we look at the impacts of these agreements, it's more on the foodservice area. And we have a strong food service there that can benefit from cheaper raw material being from Thailand being from Poland or being from Brazil. So I think it is a good win for our foodservice production in U.K. but it doesn't have a big impact on the retail side.

And your next question comes from Priya Ohri Gupta with Barclays.

Matt, the last 2 years, the operating cash flow before looking at changes in working capital has been pretty consistent around $1.6 billion or so -- is there any reason that we should think about 26 looking different from that? And then secondly, just as we think about the working capital piece, what are some of the trends that we should keep in mind as to whether that will be sort of a positive or negative contribution to the cash from operations.

Thanks, Bria. Good talking to you. Generally, I don't see a major change kind of from your first question relative to everything. Of course, we are increasing our CapEx spend retention here for 2026 versus 2025 by, call it, almost $200 million. So that, of course, will come into play. But relative to working capital, I think when you look back to 2024, right? We had a lot of kind of tailwinds for us with the large grain cost decrease in '24 versus '23. Of course, things flattened out more in '25. What we really saw there on the inventory side is we had some more purposeful increases in what I'll call with or finished goods because we were able to procure some cheaper breast meat kind of opportune times, which increased some of our inventory levels.

Was kind of some of that I'll call it, headwind was really more just higher sales pricing. So overall, I would say, I don't see the repeat on the negative side on the inventory that we saw in '25. Of course, we'll have to watch and see what grain does though kind of where green sits today, we feel it should be more flattish, and then we'll just watch and monitor an AR. Hopefully, that helps.

Yes. That's really helpful. And then just 1 follow-up on the CapEx piece, a headline just talking about $1.3 billion in investments in Mexico through 2030. So as we think going forward? I know you gave us a little bit of context into '2727. But how should we think about that $1.3 billion specifically related to Mexico over 26% to 30%, if you can give us some directional sense?

Yes. Thank you. I think that is a long-term vision that we have, just like I mentioned, to grow in regions where we are not and grow our prepared foods. So that includes significant growth in the South region and in the Merida region as well as the duplication of our prepared foods facilities. And in that investment is included also some investments done by growers to support that growth. So it's not totally from us but it's because of our projects, and that will help close the gap in Mexico. Mexico is a big importer of meat, and we believe that we -- with our growth in Mexico, we can reduce the need of the imports by 35%, which helps a lot in the food security for the region.

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

Yes. Thank you, everyone, for attending today's call throughout 2025, we accelerated our performance through a leadership mindset, living our values and driving our methods. Given our teamwork, we delivered yet another strong year started with several weather events that impacted many regions where we operate. And I'd like to thank our team members and extend my deepest appreciation for their efforts every day and their dedication to our company and our communities. Moving forward, we must continue to drive our efforts with an unwavering focus on team member safety and well-being product quality and sustainability.

When combined with our strategy and approach, we can achieve our vision to be the best and most respected company in our industry, creating an opportunity for a better future for our team members and their families. Equally important, we initiated the next chapter in our growth journey through investments across all regions. Based on these efforts, we can further drive profitable growth, reduce volatility and enhance margins throughout our entire portfolio. To that end, and look forward to strengthening our legacy in 2026 and beyond. Thank you all.

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

Good morning, and welcome to the Third Quarter of 2025 Pilgrim's Pride Earnings Conference Call and Webcast. [Operator Instructions] At the company's request, this call is being recorded. Please note that the slides referenced during today's call are available for download from the Investors section of the company's website at www.pilgrims.com. After today's presentation, there will be an opportunity to ask questions.

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

Good morning and thank you for joining us today as we review our operating and financial results for the third quarter ended on September 28, 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 the slides for reference. These items also have been filed as Form 8-Ks and are available online at sec.gov. Fabio Sandri, President and Chief Executive Officer; and Matt Galvanoni, Chief Financial Officer, will present on today's call.

Before we begin our prepared remarks, I would like to remind everyone of our safe harbor disclaimer. Today's call may contain certain forward-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. Further information concerning these factors have been provided in yesterday's press release, our Form 10-K and our regular filings with the SEC.

I would now like to turn the call over to Fabio Sandri.

Thank you, Andy. Good morning, everyone, and thank you for joining us today. For the third quarter of 2025, we reported net revenues of $4.8 billion with an adjusted EBITDA of $633 million and an adjusted EBITDA margin of 13.3%. Our performance reflects the ability of our strategies to mitigate the impact of increasing volatile commodity markets, drive category growth with key customers on retail and foodservice and continue to close efficiency gaps in our operations.

In the U.S., our diversified portfolio continued to be able to capture upsides in the commodity market while protecting from downsides. Case Ready realized strong growth as sales to key customers exceeded category averages and Big Bird improved operating costs through production efficiencies and life performance. Small Bird experienced robust demand as chicken-focused QSRs maintained steady traffic.

Prepared Foods continued to expand through incremental distribution and portfolio expansion throughout retail and foodservice. Europe entered a new phase of its profitability journey through the new partnerships with key customers, investments in demand creation and acceleration of branded growth. Branded growth, product mix optimization and innovation will continue to be priorities during this evolution.

Mexico continues to drive growth with key customers and develop brand presence in both Fresh and prepared, further diversifying our portfolio from inherent volatility in the live commodity markets. Our investments in growth continue and all projects remain on schedule. Based on these investments, we can increase returns while reducing volatility in our business, creating the opportunity of a better future for our team members and unlocking value for shareholders.

Turning to supply. The most recent published USDA data indicated that ready-to-cook production for the U.S. grew 2.7% year-over-year, driven by increased headcount, improved live performance and higher-than-average live weights. Chicken egg sets were higher than last year, giving a more productive layer flock and record hatcher utilization rates.

Hatchability improved, exceeding levels from 2024 for the first time this year. As a result, chick placements were higher than Q3 of 2024 throughout the entire third quarter. When combined with positive growing conditions, live weights were higher than average and overall livability improved, increased production was seen in Q3. This scenario was more significant during the month of September.

Considering the factors supporting supply, USDA latest estimate forecast a 2% year-over-year increase in broiler production for 2025, suggesting an increase of 2.3% during the fourth quarter. As for overall protein availability, USDA projects a growth of only 0.8% for 2025. Notably, chicken is the only protein expected to see an increase, offset by decreases in availability of beef, pork and turkey.

With respect to demand, macroeconomic indicators are shaping consumer behavior amid low sentiment. Inflation has increased for food overall and at-home eating occasions. As consumers are trying to stretch their budgets, we are seeing more trips to the retail with smaller basket sizes and lower traffic at foodservice. Nonetheless, demand for chicken remains strong across both channels, given its relative affordability, availability and flexibility compared to other proteins.

In Fresh retail, boneless chicken breast experienced notable growth as the retail pricing spread against ground beef remained at record levels. Boneless thighs also realized significant gains driven by a narrowing price gap with boneless, skinless breast and continued consumer momentum.

While wing pricing remained relatively steady compared to last year, volumes continue to grow. The belly also drove growth through enhanced velocity as shoppers increasingly turn to prepared meals as a more affordable alternative to traditional ready-to-eat options.

Frozen prepared also saw gains from improved velocity, along with better production mix as nuggets and strips continue to capture a large share of new occasions. In foodservice, rising costs associated with dining out are impacting overall restaurant traffic. Nevertheless, operators continue to strategically lean into chicken through value offerings, limited-time offers and menu updates as a means to trigger or sustain consumer engagement. Value-added chicken-focused QSRs continue to leverage the affordability of chicken, outperforming the broader dining sector, showing greater resilience amid declining traffic.

In exports, we have realized values compared to last year and at levels higher than historical amounts. Other than China, we have not experienced any meaningful challenges from tariffs or other barriers in our traditional trade lanes. While we still anticipate seasonal declines in the upcoming quarter, demand should be robust compared to previous years.

We continue to be vigilant in our biosecurity measures, especially as commercial cases of high pet avian influenza have risen. As such, our geographic diversity and expansive network of international customers will continue to be critical to manage any potential outbreaks. As for feed, corn pricing remains stable as market fundamentals balance larger-than-anticipated U.S. supply from increased corn acreage against robust interest from export markets.

Based on the most recent data available, USDA expects record corn demand. Nonetheless, U.S. overall supply is expected to increase 10% versus last year, resulting in ending stocks of over 2 billion bushels. Overall, global corn stocks are expected to remain relatively flat. Soybeans fell through the quarter given increased crush capacity and record South American harvest during the first half of 2025, ensuring ample global soybean meal supply.

Most recent forecasts indicate that U.S. soybean stocks will be flat compared to prior year, whereas global soybean stocks are expected to build for the third year in a row. Global wheat production rebounded strongly as major exporting countries produced more than 23 million metric tons compared to last year.

Wheat prices moved lower during Q3, generating demand and clearing supply. In the U.K., production rose over 2 million metric tons compared to prior year. Further increases in wheat planting are anticipated this fall for harvest in the summer of 2026, which could increase availability. During the remainder of 2025, the corn and soybean meal markets will focus on final United States yields, the start of the South American weather season and changes to export flows of U.S. grain and oilseeds from the ongoing trade negotiations.

Turning to the U.S., chicken demand remains strong across retail and foodservice. Equally important, our diversification across bird sizes in Fresh and growth of Prepared Foods alleviated the impact of a decline in commodity market values during September. As a result, our margins were very comparable to last year. Case Ready benefited from relative affordability of chicken in retail compared to other proteins. More importantly, sales to key customers were significantly higher than category average, suggesting our higher attribute differentiated offerings continue to resonate with consumers. Big Bird enhanced production efficiency through improved yields, equipment upgrades and team member training.

Live operations also made significant progress through revised management programs, updated housing and improved bird health. While we experienced some volatility in commodity chicken values in September, Big Bird margins were compared to -- comparable to last year, given our operational progress and declines in feed costs. Small Birds benefited from steady demand from key customers among leading QSRs and improvement in operational excellence despite some reduction in demand in the bone-in category.

In Prepared Foods, net sales grew by over 25% through expanded offerings and increased distribution. Within retail, the Just BARE brand continues to lead the category growth as market share rose by nearly 300 basis points versus the same period last year.

The Pilgrim's brand line of products also continues to gain consumer traction and market price recognition. Velocity on our core items improved and the Food & Wine and Serious Eats both recognized our Ultimate Nugget line as the best chicken nugget in their September publications. In foodservice, Prepared sales expanded faster than channel average. Innovation played a critical role as over 80% of growth came from new items.

In Europe, we have undertaken a multiyear journey to drive profitable growth. Over the past 2 years, we consolidated our manufacturing network and simplified the organization to create a more nimble, key customer-focused organization. As a part of this effort, we remain focused on quality and service. Based on our work, we have continually received recognition for our supply chain capabilities over the past several years and are once again awarded Supplier of the Year by key retailers during the quarter.

With a solid manufacturing and corporate base, we are now focused on growth through our diversified protein platform with innovation, brands and key customer partnerships. Within Fresh, demand for our chicken continues to be strong. Additional opportunities exist to grow as chicken remains the fastest-growing category within retail.

Similarly, several leading QSRs continue to emphasize chicken given its affordability and availability, creating further prospects. Given this attractive environment, we are exploring investment to accelerate our growth in this segment. The pork business was more challenging during the quarter as the European hog pricing fell as demand softened from primary export markets, especially from China that started an antidumping investigation against Europe. To mitigate this scenario, we created differentiated higher attribute offerings in U.K., and we're able to secure a long-term arrangement supporting the growth of a key customer.

We will continue to pursue similar arrangements going forward. In our branded portfolio, Fridge Raiders achieved its highest-ever household penetration. Rollover continued to expand, giving incremental distribution. Both brands grew faster than the category. Our largest brand, the Richmond has experienced relatively steady volumes year-to-date. However, we have experienced increased competition from private label offerings given the availability of imported meat into the U.K. To reinvigorate growth and increase share, we will amplify our investment in promotions and continue to bring new and exciting products to the marketplace.

Also, we will continue to cultivate our presence in foodservice. To that end, we've increased our distribution and key customer QSRs demand remains robust as sales have increased by over 15% year-to-date. We will look to further expand our presence across pubs and bars through leading distributions.

In Mexico, we continue to diversify our portfolio and reinforce the foundation for profitable growth and reduce volatility. In Fresh retail, sales to key customers rose by nearly 9% compared to last year. Momentum for branded offerings continues to grow, led by Just BARE. Since Q3 of last year, our volumes have more than tripled.

Similarly, Prepared Foods sales are up over 9% compared to last year, led by our Ping's brand, which rose over 12%. In foodservice, QSR has been exceptionally strong as sales increased by 17%. Given our continued development of key customer partnerships, branded growth and expansion in prepared, Mexico becomes even more attractive given its enhanced return profile and growth potential.

We remain committed to investments in our growth agenda. In the U.S., our portfolio is strengthening with the conversion of a Big Bird facility to Case Ready, a new protein conversion plant a new state-of-the-art Prepared Foods facility in Walker County, combined with upgrades in processing and volume in Big Birds all remain on schedule. Once completed, these investments will enhance our competitive differentiation in Fresh, further diversify our portfolio through brands and enhance operating efficiencies. As a result, our U.S. business will become even better equipped to meet consumer preferences and key customer growth while better managing increasing volatility in the commodity market.

Similarly, our expansions in Fresh and prepared in Mexico continue as planned. In Fresh, progress continued at Veracruz and Campeche as breeder and broiler farmers have both started production. In Prepared Foods, construction is well underway with its initial production testing slate for the [ late ] in Q4. Given these investments, Mexico will improve biosecurity, expand distribution in Fresh and further diversify its portfolio through value-added.

Like the U.S., Mexico will become even more adept at managing volatility of the live commodity markets. Taken together, this investment will reinforce our strategies, reduce risk and increase returns for our business, creating additional value for our shareholders.

And earlier this week, we published our 2024 sustainability report, which provided an update on our progress against environmental, social and governance matters critical to our business. To that end, we continue to integrate sustainability throughout all aspects of our strategy and business to enhance environmental stewardship, conserve natural resources and cultivate team member development.

Since 2019, we have reduced our Scope 1 and 2 emissions intensity by 23% and improved our global safety index by over 77%. Usage of renewable electricity continues to be a focus area and now constitutes over 21% of our overall electricity usage. Team member development remains a key priority. Over the past year, we have provided more than 5.7 million training hours to improve skills and create opportunities within our company. Our Better Future programs continue to generate remarkable enthusiasm as more than 285 team members or their dependents have enrolled in tuition-free higher education programs.

With that, I would like to ask our CFO, Matt Galvanoni, to discuss our financial results.

Thank you, Fabio. Good morning, everyone. For the third quarter of 2025, net revenues were $4.76 billion versus $4.58 billion a year ago, with adjusted EBITDA of $633.1 million and a margin of 13.3% compared to $660.4 million and a 14.4% margin in Q3 last year.

Relative to net revenues, we experienced year-over-year sales growth of 2.3% in the U.S. in the quarter, driven by growth with our Key Customers in Case Ready and Prepared Foods volumes increasing. Mexico's revenues were up over 5% year-over-year due to an increase in sales volume. In Europe, year-over-year net revenues rose over 6%. Adjusted EBITDA margins in Q3 were 16.9% in the U.S. compared to 18% a year ago.

For our European business, adjusted EBITDA margins came in at 7.9% for Q3 compared to 8.6% last year. In Mexico, adjusted EBITDA margins in Q3 were 8.2% versus 9.7% a year ago. Moving to the U.S., our adjusted EBITDA for Q3 came in at $479.1 million compared to $499.4 million a year ago. In our Big Bird business, lower grain input costs and continued operational improvements partially offset year-over-year declines in U.S. commodity chicken market pricing.

Our Case Ready and Prepared Foods businesses continued their momentum with increased distribution with key customers. Case Ready's profitability was higher both year-over-year and quarter-over-quarter. However, even with a 25% year-over-year increase in net sales, higher commodity chicken input costs in previous periods was a headwind to Prepared Foods' Q3 profitability. Small Bird grew in QSR with our key customers, offsetting a more challenging environment in walks.

In Europe, adjusted EBITDA in Q3 was $110.4 million versus $112 million last year. This slight year-over-year decrease was driven by pricing actions we took to address lower European hog market prices. The impacts of these pricing actions were partially offset by year-over-year cost reductions from our network optimization programs and administrative reorganization efforts.

Mexico generated $43.7 million in adjusted EBITDA in Q3 compared to $49 million last year. Profitability decreased year-over-year primarily due to lower market pricing for chicken due to higher supply in certain markets as bird disease impacts were much less in those regions during Q3 2025. Relative to our SG&A costs, we incurred higher year-over-year legal settlement-related and incentive compensation costs.

Our effective tax rate for the quarter was 25.6%, with our year-to-date rate at 25%, which is what we expect for the full year rate. We had $1.7 billion in total cash and available credit at the end of the quarter. We have no short-term immediate cash requirements with our bonds maturing between 2031 and 2034 and our U.S. credit facility not expiring until 2028.

Our liquidity position provides us flexibility during times of volatility in the U.S. commodity markets and allows us to pursue our growth strategy, including organic growth to meet our customers' needs. We have a strong balance sheet, and we continue to emphasize cash flows from operating activities, management of working capital and disciplined investment in high-return projects.

Even after paying $2 billion in dividends this year, as of the end of Q3, our net debt totaled less than $2.5 billion with a leverage ratio of slightly more than 1x our last 12 months adjusted EBITDA. Net interest expense for the quarter totaled $29 million. We anticipate our full-year net interest expense to be approximately $110 million.

We spent $182 million in CapEx in the third quarter, an increase of $78 million over the third quarter in 2024. In the U.S., we made significant progress this quarter towards the conversion of our Russellville plant by the end of the first quarter of 2026 to support a retail key customer. Also in Mexico, our investments in Fresh and Prepared continue to progress and remain on schedule.

We remain focused on expanding our protein conversion footprint to upgrade our portfolio mix and reduce our exposure to outside protein conversion operators. Also, as we previously discussed, we continue to review options to expand our presence in Small Bird.

Finally, we are beginning here in the fourth quarter our construction efforts in Walker County, Georgia on our new Prepared Foods plant to support the growth of our Just BARE brand. We anticipate -- estimate our full year CapEx spend to approximate $700 million. These growth projects align to our overall strategy of portfolio diversification, focus on key customers, operational excellence and our commitment to team member health and safety.

Operator, this concludes our prepared remarks. Please open the call for questions.

[Operator Instructions] The first question comes from Ben Theurer with Barclays.

Two quick ones. So number one, obviously, we've seen the more commoditized prices rolling over in a more meaningful way versus what might have been usual seasonality performance. So I wanted to understand if you could first clarify a little bit more what you're seeing in the market? What's been the main driver of that? Is it just because of the hatchability, is it livability? And how do you think about that rolling into as we move into 2026 in terms of like a seasonal recovery into 1Q versus what probably is going to be a softer 4Q? That would be my first question.

And second, it's related to that. Can you update us as to within your portfolio right now, what percentage of your pricing contracts is actually exposed to that more commoditized bird size -- Big Bird pricing mechanism? Those will be my 2 questions.

Yes, Ben, thank you. Of course, pricing is a function of supply and demand, right? And what we experienced in Q3 in terms of demand is a similar scenario to the last years. The consumers continue to be watching their spending and have growing concerns about inflation. And with that and the inflation in food away from home, these foodservice operators have experienced lower traffic.

What they have done to combat the lower traffic is to resort to promotions and to attract customers, right? And those promotions have featured mainly chicken. So because of that, despite the lower traffic, we have seen chicken growing in the foodservice around 4% in volume. And we're seeing that especially in the QSR where the volumes have increased more 6%.

So with this lower foot traffic, we're seeing consumers going into the retail. And on retail, what they are facing is also some increase in inflation, especially on the beef category. If you look into the pricing between beef and chicken, the gap that we are seeing, it's over $2. Just as an example, 3 years ago, this spread was $0.50. And since then, the price of chicken went down 10%, while the ground beef prices have increased by 28%. So when the consumer is facing that scenario, he is choosing to eat more chicken. And we're seeing the demand for chicken growing close to 3% in this category as well.

So the demand remains robust. What happened during Q3 in the supply scenario was at the beginning, very similar to what we saw in the first semester. We have a smaller but younger breeding flock that generates more eggs, but we have struggles with hatchability and livability. And the total supply growth in the first semester was under 2%.

During Q3, we saw better growing conditions. So these better growing conditions impacted better livability and better hatchability. So despite the growth in Q3 being 2.7%, what we saw was that during September, some weeks have seen because of these better growing conditions, better livability, better sizes as well and the industry having to process on Saturdays to reduce weight, the increase in supply achieved close to 6%. And that was what impacted the commodity markets. And we have some sharp corrections in the -- especially on the boneless -- skinless boneless price.

As prices went down from $2.5 per pound to almost $1.20 per pound over the course of 4 weeks, we saw that creating some demand. And I think the good news is that right now, the prices are stable and actually went up $0.01 last week. So we're seeing that the strong demand is in line with the supply right now.

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Yes. On our expos, we have a very diversified portfolio of segments. As I always say, talk about our portfolio. We are the leader in the Small Bird market. We have a big presence, and we are one of the leaders in the retail category, and we also have a big exposure in the big commodity markets.

When you look into our portfolio, it's well diversified within those categories. In terms of how much it is exposed to the commodity markets, I would say that it's close to 25%, which is in line with our production or our share of production on the Big Bird category. Even in the Big Bird, we've been trying to differentiate some of our portfolio. And as we talked about in prior calls, we are the leader in the novel no-antibiotics-ever category and also in the Big Bird category. So we even being exposed to the commodity, we can achieve a premium in that category.

Okay. And you can't comment on like seasonality expectations for like 1Q, correct?

Yes. On what we are seeing, as I mentioned, I think the good news is that as of the last 2 weeks, we have seen a supply and demand imbalance. And actually, as I mentioned, prices started to go up. I think it's normal to have a lower demand during Q4 for chicken. And then when we started and this normal seasonality, prices start to rise in December to prepare for the strong promotional activity that we normally see on the chicken category, especially on retail during January.

So when you look at the USDA expectations, Growth continued to be expected in between 2% and 3% on the chicken category. We've seen this increase in excess consistently year-over-year. And we saw some seasonal cuts that were lower than prior years.

But again, supply seems to be very balanced in October. And I think also when you look at the overall protein availability in the United States during Q4, USDA is expecting a sharp cut in the beef production. So overall protein availability will be very limited during Q4. Chicken will be, I think, the only category that will be up, but USDA is expecting between 2% and 3%.

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

Just actually one question for me, and it's maybe more of a conceptual question. But Fabio, you mentioned the spread on beef to chicken and it seems to being at record, if not close to record levels. And you're just not -- you're not seeing the cross-product elasticity I would think you would in an environment where beef is at an all-time high and chicken is hovering in some instances on some of the cuts below the 5-year averages.

So I just want to understand, conceptually, as you all think about it, like why is that? It wouldn't make sense to me that beef could be at such a sustained high level and chicken prices would trade down even with seasonality. So maybe you can just explore on that topic a bit more because I think there's a lot of market participants who probably don't understand myself included, the rationality of what's happening.

Sure, Peter. Yes, it's a great question. I think as I mentioned at the beginning, what is happening is the consumer when facing the food away from home higher or the inflation in food away from home, he is moving to retail. So we need to first think about that transition. So when -- and when we look at the ticket of the food away from home, it's typically 3x the ticket of the food at home.

So what's happening is that the lower food traffic in foodservice is partially moving to retail. And when they go to retail, they want to have indulgement and they are buying the beef. So what we are seeing, it is -- you mentioned elasticity, right? We're seeing this change in the demand on retail, where we see consumers moving away from high foodservice prices to retail, and they are consuming the high-priced beef. So we're seeing the demand on the beef also increasing because of that change.

Now inside retail, we saw exactly what you said, the record spreads and then people moving away from beef into chicken. So this is the scenario that we are seeing. And that's why the prices of beef have been very well supported because they're being supported by the trade down per se from foodservice to retail.

And then inside retail, we're seeing the trade down from the high prices of beef, especially the ground beef to the boneless chicken, as I mentioned, with the highest spread we've ever seen, close to $2. So it's a little movement between categories as well, not only inside the retail that is supporting the beef category. And we are also seeing some lower beef availability as well, which is supporting these prices.

The next question comes from Andrew Strelzik with BMO Capital.

My first one, there were 2 things that you mentioned impacting the quarter. And I'm curious about whether you view those as just third-quarter impacts or if you think those continue into the fourth quarter or even into 2026. Those are the input cost headwind to Prepared Foods and some of the demand challenges on the export environment in the EU, U.K. segment. So if you could just kind of comment on how to think about whether those should continue or that was kind of confined to the third quarter.

Yes. I think just going forward, right, and moving back to U.S. once again to 2026. USDA is looking for chicken growth in between the 2% and 3% that we saw in 2025. All the drivers that made 2025 a strong year for chicken continue to be in place for 2026. The industry is operating with a very high utilization rate, especially on the hatcheries. The breeding flock continued to be at the lowest levels compared to prior years. And the pullet placements, which is the indication for the size of the breeding flock we're in line with the replacement needs.

So we are not seeing an expansion of the breeding flock. With the hatch utilization at the rates that we are seeing, we don't see a scenario where we have a significant increase in supply of chicken for 2026. And when we look at the competing proteins, I think USDA is expecting an even higher reduction, especially on the beef production, which will lead into -- I think it's a record low growth in net availability for -- in the United States of below 1%.

So that with the spread that we are seeing between the prices of chicken and the prices of the other proteins and the need for the -- both the retailers and the foodservice to promote and drive traffic, we're seeing a strong demand for chicken. Input cost is an important issue as well. And what we have in the United States, of course, we will monitor, as I mentioned, the weather in the South America that could change the pricing for the global corn and soybeans is the trade deals that are in discussion.

But overall, we saw the largest acreage ever planted in the United States, and we are seeing very good yields coming out of the field. So there is an ample supply of corn and soy. So we were not seeing any scenario where we're going to see a squeeze or a big increase in the input cost for us.

And Andrew, relative to your Prepared Foods question, I think it's important to the dynamic that we saw here in Q3 with relatively high commodity market pricing for chicken in July and August and then the steep drop in September, for us to flush that through the P&L within Prepared Foods, it takes a month or 2, right?

So we had much higher input costs in Prepared Foods inventory that flew through the P&L in Q3, that will then kind of recede more naturally as that inventory flushes through and the new inventory is being built on input costs that are much lower, right? So it's a bit of a timing situation within U.S. Prepared Foods relative to that input cost fluctuation.

And then on the export of U.K., as I mentioned in the prepared remarks, what we saw was that because of a China antidumping against Europe we saw a lot of commodity meat, especially from Germany, getting into the U.K. I think what we did and we will continue to do is to differentiate our offerings with the higher welfare that we have in U.K.

I think a great example was the 10-year contract that we did with a Key Customer where we're going to be able to differentiate their offerings, which help support their growth and isolates us from this competing more commodity meat that gets into -- especially into the U.K.

That always impact more on the sausage business because it is imported commodity meat. And that pressure a little bit to the prices on our Richmond brand. But as I mentioned, we will also continue to do some promotional activities, and we will lead through the innovation in that market to support the strong growth of that brand and the profitability of the overall portfolio.

Okay. That's super helpful. And then I wanted to see if you could elaborate on your comments about the EU, U.K. reaching a new phase of the profitability journey. And I don't think that's entirely surprising given the progress you've made on margins over the last couple of years and in the context of how you've talked about kind of normal margins in that segment.

But how then -- especially in the context of what was a little bit of a softer quarter than we expected in the segment this quarter, like how do we think about the profit growth? Or how are you thinking about that transition and how we should translate that to either margins or the profit growth for that segment kind of over the next couple of years?

Yes, that's a great point. And I think we, as we say, turn the page, right, in Europe. I think we were consolidated -- consolidating our network manufacturing. We are consolidating our back office. We have a new office close to London. So I think we are in -- with great grounds to now be able to grow. And I think growth could be through M&A and could grow, could be through some organic expansions. I think we have the right structure today. We have the right team to support those.

Of course, we will continue to improve our current portfolio organically, and it's through innovation. I think the best thing we can do in Europe is through innovation because when you look at what's happening in the marketplace, despite an improvement in the consumer confidence over the last period because we have experienced strong inflation, and then we have the wage growth accelerating and that was above this strong inflation.

And with that, the consumer confidence was increasing, which was helping our higher attribute offerings. I think over the last month, we saw some concerns about inflation again. And like I mentioned, with this impact from the price of pigs, especially in Europe, impacted a little bit our branded portfolio.

But what we can do is to continue to innovate and partner with our key customers to continue to support their growth. Also, we've seen the chicken business in Europe growing faster than the other segments. And we have some organic investments that we are putting in place to increase our production of chicken to close to 20% growth over the next 2 years.

The next question comes from Pooran Sharma with Stephens.

Just wanted to maybe just focus on Europe here. Just gave a lot of great color here with that last answer. But maybe just talking more on M&A. You just told us you're lining up some organic chicken production in Europe here over the next few years. Does this take your foot off the pedal in terms of your hunt for an M&A opportunity? Because I think in the past, you've said that maybe the next thing for you all would be some white space opportunity in Mainland Europe. And so I wanted to, a, get a sense if those organic investments slow down any sort of M&A initiatives in Europe? And b, if you could maybe just give us an update on what you're seeing in Europe? Is there anything attractive out there at this time?

Yes, sure. Thanks. And I think you're right. Where we are growing in chicken on the organic, it is in U.K. and Ireland. It's where we are present. We have a great key customer relationship. We are seeing the demand for chicken growing in U.K. and Europe. So we have the opportunity. And as I always mentioned, because of our differentiated products, we help our key customers to differentiate. And when they grow, we are allowed to grow. So this is not speculative growth. And that does not change anything on the M&A front. When you look at our portfolio in Europe, it's the most diversified that we have around the world.

So we are in the chicken business. We have the pork business, but we also have the sausage and the meals business along with foodservice a foodservice business in Europe. So we have a very diversified portfolio, and we're looking into opportunities in all those categories or segments. Specifically, as you mentioned, in chicken, we are present in U.K. and Ireland, and we see opportunities in other countries in the European Union for us to expand our expertise in chicken.

And then within U.K. and other countries in Europe, we see some opportunities on the meal segments. We see opportunities on the sausage and branded product segments. So I think there's a lot of opportunities in Europe as the market is more fragmented in Europe as it is in other parts of the world. So we're still committed to growing and expanding our portfolio and the organic initiatives are more focused on where we are.

Got it. Appreciate the color there. And I guess on my follow-up, I was just interested in something you said in the prepared comments. I think you mentioned that your September Big Bird margins may have been comparable to last year, which I found kind of impressive, just because our data shows somewhat of a different story. And so I was wondering if maybe you could help quantify some of these operational improvements or maybe even tease out how October Big Bird margins look in terms of PPC's view?

Yes. I thank you for the question, and I think we can clarify that in the quarter, the margins was comparable. I think we saw, as I mentioned, in September, a sharp decline in -- especially on the boneless price because of what I said an excess -- don't say excess production in the whole Big Bird category, but I think the killing on Saturdays, some of the industry was trying to control weight. So we saw some marginal supply, especially during September. So the margins during September were much lower than the margins compared to the rest of the quarter.

But overall, during Q3, the margins were similar to the same period last year. As I mentioned, after this sharp decline, the prices are stable right now and the latest change has been up. So I think that's the great news that shows that the supply and demand are in balance during this Q4. And with the prices that we are seeing in the Big Bird commodity, we're seeing some triggers of demand.

The next question comes from Guilherme Palhares with Santander.

Two here from our side. The first one is on leverage. Matt said that the company has already paid $2 billion in dividends this year. But of course, this is also related to last year. And going forward, we continue to see the balance sheet being so strong, right? So if you could give us a sense of how are you thinking in terms of the capital structure for the rest of the year as in Q4, you had that extraordinary dividend last year.

So how are you thinking about 2025?

And the second one, Fabio, you mentioned a bit the growth in terms of the supply. Is there any opportunities for the U.S. to grow in terms of exports as well to put some of that product in the shelves of other countries as well and gain some share on the trade?

Yes. I'll answer the first one relative to kind of Q4 and leverage. I think for us, we don't really see any major change in Q4. As you mentioned, we had -- and I had mentioned earlier in my prepared remarks about the $2 billion in dividends that we had paid out throughout this year. I think that, of course, was a significant, call it, impact to our leverage ratios at that point.

But nothing really overly significant. I did guide to approximately $700 million in total CapEx spend this year. We're in the $440 million range right now year-to-date. So we will have incremental CapEx relative to our quarterly run rate, which will be a use of cash. But generally speaking, we don't see a major change in leverage ratio as I look through the end of the year. And Fabio, if you want to comment on the other.

Yes. I think on exports, it is a great point, Guilherme. I think U.S. is very competitive in chicken production. We have the feed inputs here domestically. We have very, very competitive operations. I think our exports are actually down this year when compared to the prior year. And I think because the focus of the chicken production in the U.S. has always been the domestic market.

I think even on the leg quarters that we used to export, more and more, we are deboning that part of the bird, and we created the the dark meat deboning operations here in the U.S., and we're keeping that meat in the United States.

So it is because of change of demographic. It is because of change in consumer preferences. And we're seeing that category growing really fast. And as a matter of fact, dark meat deboning meat is actually at par with the price of breast meat, which tells a lot about the domestic market changing, right?

And because of that, we've been reducing the export of leg quarters, which used to be the, let's say, the flagship of the American exports. I think as we grow our production here in the U.S. as we are very competitive, we can capture some space on the exports.

China has been one of the markets that have been close to us because of even influenza bans that were created last year, and they will never open. despite some trade agreements that say that after 90 days without any case, the market should reopen. China never reopened to American meat. And I think the trade agreements, if they really happen on the grain side, could have some benefits for us also on the meat exports.

The next question comes from Heather Jones with Heather Jones Research.

I wanted to ask about Q4. So like you said, Fabio, the markets have stabilized. And I'm just -- and that the price decline has triggered new demand. But I was just curious, as we head into the holiday season and like you said, we didn't get the normal seasonal cutbacks this year and you've got SNAP dollar reductions coming in the next week or so. I was just wondering how you're thinking about the pricing outlook for the November period. Do you think there's any material downside risk to pricing for that period given those 2 items?

Yes. Thank you, Heather. Yes. I think as we always say, Q4 is a place where we see a lot of promotional activity in other meats, hams and turkeys. So it's never a time where we see very strong demand for chicken. But what we are seeing during the last weeks is very strong demand on the retail side. And I think the lower price of the commodity always support the retail because we can augment the production of the retail plants with very competitive breast meat prices that we can help our key customers to do promotional activity.

So I think that is what can help on the demand of chicken even in a period where we see typically the promotional activity on other meats. I think the SNAP is something that we are following very close. I think it is an important source for -- on the retail and for families to augment their budgets. I think the important point is that the SNAP, even if there is some disruption, will be paid in the future and will be retroactive.

So I think it is just a temporary or a small delay, hopefully. So that demand will come back again after the SNAP is paid. So yes, we are looking into that. But I think what we are doing in the chicken industry is doing together with the key customers is to do more promotional activity with the very competitive meat that we have right now because of the low price of the commodity meat.

Okay. And my follow-up is, as we're transitioning from what has been an extremely robust time for the chicken industry as far as margins to, let's call it, a more normalized time. Just wondering if you could update us on how your portfolio has changed versus, say, 3 or 4 years ago because it used to be your Big Bird segment was pretty exposed to commodity markets. But even within tray pack and to a lesser extent, Small Bird, there was still the preponderance of that business was exposed to market-based pricing in some extent.

Maybe there were matrices and ranges, but there was still some exposure to how the market was moving. I was wondering, has that changed in any material way? Like has your retail pricing become more fixed? Or I mean, how should we be thinking about that as we're heading into '26?

Yes. I think we've always been upgrading our portfolio in a sense. I think over the last 3, 4 years, we have achieved, let's say, the largest antibiotic-free player in the United States. And we are also the largest organic operator in the United States. And we are also the largest only vegetable feed in the United States. And I think we're trying to differentiate our portfolio, not only from market pricing, but with some differentiated products that can capture upsides even when exposed to commodity.

So we've done that change. We're also investing this year, as we mentioned in the prepared remarks, to convert one Big Bird plant to a Case Ready operation. Again, our customers are growing faster than category average. As a matter of fact, when you look into the retail, our numbers are 3x larger in terms of growth when compared to the market, which means that our differentiated offerings are supporting our key customers to grow and win in the marketplace. And because of that, we will need to convert a more commodity Big Bird plant to a Case Ready plant.

Our portfolio of pricing, as you mentioned, has changed, and I think we have less exposure to the pure commodity right now. On some of the key customers we have negotiated prices. It is a market price, but it's a negotiated price. So we don't follow UB. We don't follow the commodity markets. What we follow is to keep our key customers competitive given what's happening in the marketplace.

But that price don't change every month or every quarter. It's something that will change when change is needed. And it could be if the grain prices are falling more than we expected, we can give the reduction in prices or if our cost is going up, let's say, because of labor that it has not been an issue this year, but it was in prior years. So we can increase our prices given what we are seeing both in the marketplace and in our operations. So I think we are less impacted by the commodity prices, as you mentioned. But of course, we follow some of our contracts follow the market price.

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

One just follows up on that last point you were making. So as we think about some of the contract pricing that you have in place, can you just maybe walk us through what that P&L impact is if you are collectively investing in lower prices or increased promotions with your partners as opposed to adjusting that contract pricing? And then I have a follow-up for that.

Yes. I think when I talk about promotional activity is something that we have let's say, an investment and a return. So when you do a promotional activity and an example is some BOGOs or buy one, get one that we do with one of our key customers. What we see is an increase in the demand, so increasing volume. So that helps the operation of our plants.

So what we typically do is to bring commodity meat or Big Bird meat into a Case Ready facility and we put that meat in a tray to support the promotional activity. So that helps reduce our operating cost at the plant, and it helps the retailer with more demand, more foot traffic. So it's an investment. When we have a commodity pricing, let's say, with the food distributor or with a national distributor like Sysco, US Foods Garden, foodservices.

It's more a day-to-day pricing or weekly pricing, and it follows more the commodity market. There will be, of course, as any supply and demand curve, right, more demand if the price go down, but it's not something specific to us. It's some market pricing. So there is a difference. When there is a promotional activity, it is something that we deliberately do that activity to help both our key customers and us with more supply and more demand, right? When it's market pricing, it is to everyone.

Got it. That's super helpful. And then, Matt, it looks like you guys were back in the market doing some open market bond buybacks. Can you just walk us through sort of the approach there given how low your leverage is and sort of what's driving that continued activity?

Yes. No, Priya, we -- as we did, call it, the first half of the year, this was just, I'll say, winding down our program that it really ended up in the first 2 weeks of July. So the $24-or-so million that was repurchased in the quarter all happened in the first couple of weeks. I think our total for the year has been $116 million in that range, and that last $24 million was just a wind-down. So we really aren't in the market any longer. We haven't been in over 3 months.

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

Thank you, everyone, for attending today's call. In the third quarter of 2025, we experienced strong demand for our products despite some market volatility. More important, our team members maintain a leadership mindset and accelerated their efforts to identify and capture operational opportunities. Given their remarkable discipline and extraordinary determination, we achieved strong results for the quarter. As such, I would like to extend my deepest appreciation for their efforts.

Moving forward, we must continue our work with an unwavering focus on team member safety and well-being, support our key customers' growth and close our operational gaps. As a result, we can achieve our vision to be the best and most respected company in our industry, creating a better future for our team members and their families. I look forward to accelerating our efforts and our growth during the remainder of 2025 and beyond. Thank you all.

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