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Pilgrim's Pride's (PPC) CEO Bill Lovette on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 28, 2016 09:00 AM ET

Executives

Dunham Winoto - Director of IR

Bill Lovette - President and CEO

Fabio Sandri - CFO

Analysts

Farha Aslam - Stephens

Patrick Chen - BMO Capital Markets

Omar Mejias - BB&T Capital Markets

Adam Samuelson - Goldman Sachs

Bryan Hunt - Wells Fargo

Michael Piken - Cleveland Research

Operator

Good morning and welcome to the First Quarter 2016 Pilgrim's Pride Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [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 Investor Relations 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 Dunham Winoto, Director of Investor Relations for Pilgrim's Pride. Please go ahead, sir.

Dunham Winoto

Good morning and thank you for joining us today as we review our operating and financial results for the first quarter ended March 27, 2016. 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 in the Investor Relations section of our website along with the slides we'll reference during this call. These items have also been filed as 8-Ks and are available online at www.sec.gov. Presenting to you today are Bill Lovette, President and Chief Executive Officer; and Fabio Sandri, Chief Financial Officer.

Before we begin our prepared remarks, I'd 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 those factors have been provided in today's press release, our 10-K, and our regular filings with the SEC.

I'd now like to turn the call over to Bill Lovette.

Bill Lovette

Thank you, Dunham and good morning, everyone. Thank you for joining us today. For the first quarter of 2016, net revenues were $1.96 billion versus $2.05 billion from a year ago, resulting in an adjusted EBITDA of $234 million or 11.9% margin versus $364 million a year ago or 17.8% margin. Our net income was $118 million compared to $204 million in the same period in 2015, while adjusted earnings were $0.46 per share compared to $0.82 per share in the year before.

In line with our expectations, Q1 results have improved meaningfully from a challenging Q4. Both US and Mexican operations contributed to the solid results, driven by gradually improving market environment, which puts us in a strong position for Q2. Pricing in the spot market rose as demand picked up with the reopening of most export markets, coupling to clear some of the cold storage inventories from last fall. With export demand becoming stronger, we expect further improvement in the commoditized part of the market in combination with seasonally stronger demand during the upcoming summer drilling season.

It’s worth reminding everyone that once again our portfolio strategy is designed for the mid to long run rather than the short term. More specifically, it’s structured to avoid the full peaks and troughs of the commodity markets. The diversity of our product and customer mix will allow us to capture the strength of up markets and at the same time, be cushioned from the weakness of down markets, which we believe will translate to lower volatility and more consistent earnings and higher margins.