Pilgrim's Pride (PPC) Tops Q3 EPS by 31c, Revenues Beat

Pilgrim's Pride (NASDAQ: PPC) reported Q3 EPS of $0.66, $0.31 better than the analyst estimate of $0.35. Revenue for the quarter came in at $3.08 billion versus the consensus estimate of $3.01 billion.

Third Quarter Highlights

• Net Sales of $3.08 billion.
• Net GAAP Income of $33.4 million. Adjusted Net Income of $161.7 million or adjusted EPS of $0.66 excluding $110.5 million DOJ agreement.
• Consolidated Operating Income margin of 3% with Adjusted Operating Income margins of 6.7% in U.S. excluding DOJ agreement, 18.4% in Mexico and 3.5% in Europe.
• Adjusted EBITDA of $305.0 million, or a 9.9% margin, 18% higher than a year ago.
• Faced with the global Covid-19 pandemic, we continue to be guided by our principles of an uncompromising commitment to the safety of our team members, our duty to provide quality food globally, and our responsibility to provide continued employment opportunities and benefits for our team. To support the local communities where we operate, we initiated the “Hometown Strong” initiative, and are committed to invest $20 million in 2020.
• Strong focus in execution and dedication by our team members, supported by portfolio strategy of differentiated products, strong Key Customer relationships, and diversified global presence have helped us to counter challenging market conditions due to Covid-19 and improve the resiliency in our results.
• Demand in U.S. recovering, with our Retail and QSR business stronger than a year ago, though volatility and challenging conditions in commodity segments still remaining. Relative performance versus the industry continuing to improve, supported by our agility in adapting mix and Key Customer approach.
• Mexico experienced a significant rebound to record one of the strongest Q3 in its history despite unfavorable mix impact and added operating costs. Strong execution, higher economic activities, better supply/demand balance, a stronger Peso, and our increased share of non-commodity products contributed to the strength.
• The legacy European chicken business continued to improve its results despite Covid-19 impact, with better operational efficiencies and a commitment to innovation. Momentum of newly acquired European pork assets in generating positive EBITDA continuing, while margins also increasing on a consistent basis.
• Our liquidity position remains strong, supported by the relentless emphasis on cash flow generation, focus on working capital management, and disciplined investments in high-return projects, preserving the opportunity to maintain strategic growth priorities while strengthening our differentiated global platforms.

“Once again we are grateful to our team for their continued commitment, dedication and hard work, in supporting our ability to keep our team members safe and healthy, and allowing us the capability to maintain production and supply to our customers during this unprecedented crisis. Although conditions have been improving, the markets have remained volatile and challenging in Q3 as a result of Covid-19. However, our diversified strategy has continued to mitigate the tough environment and produce the expected results in relative performance to industry competition, and deliver more resilient performance regardless of changes in specific market conditions. For Q3, the U.S. and Mexico rebounded from a difficult first half, with Mexico recording one of the strongest Q3 in its history, while Europe also continuing to improve despite the increase in operating costs related to Covid-19. We remain agile and are continuing to adapt our operations to changes in market conditions,” stated Fabio Sandri, Chief Executive Officer of Pilgrim's.

“During the third quarter, in the U.S. we are continuing to see demand recovering at our fresh operations, including from some sectors within foodservice, with more states gradually loosening travel and movement restrictions. Our Retail and QSR businesses have been especially strong, and demand from our customers has been outperforming the industry. Commodity large bird deboning was once again the most challenged this quarter. Operationally however, we continue to improve our relative performance versus the industry across all our business units, including commodity segments. We also continue to adapt quickly to changes in channel demand by adjusting the mix of our production capabilities, supported by our close partnerships with Key Customers, strong focus in execution by our team members, the geographical diversity of our footprint, and our presence across all bird size categories.”

“After a very difficult first half in 2020, our Mexican operations delivered great results in Q3, and we generated one of the strongest Q3 in the company's history in Mexico despite the unfavorable mix impact and added operating costs relative to the same period last year. A normalization in economic activities, an improved supply/demand balance in the market, a stronger Peso, and a very good operational performance, all contributed to the strength. We are continuing to invest in our Del Dia and premium Pilgrim’s brands (both prepared and fresh), as well as seeking more market share in the modern channel, which will bring more stable margins to our operations.”

“Our legacy European chicken operations are continuing to improve, driven by exposure to retail as well as a recovery in foodservice demand, particularly from QSR, despite the significant impact of Covid-19 on the operations. In addition, our strong internal operating performance and commitment to innovation have helped in mitigating the difficult environment. The positive momentum in improvement from the newly acquired European pork assets has been maintained, with positive EBITDA and margins continuing to increase. The performance was driven by strong demand at retail partially offset by a reduction in foodservice, continuing strength in pork exports especially to China, as well as the implementations of operational improvements and synergy capture.”

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