TSN
#Thank you.
Yes.
So with the drop in the cut-out and a little bit more stabilization, if you can call it that, in cattle futures, it feels like that the retailers have been much more willing to feature beef coming up for Memorial Day forward.
50s have been pretty cheap.
So ground beef is a good value.
If you look at the latest 13 weeks, ground beef is up about 6% or so on a 15% decrease in price.
And actually, it accelerates just a tad to about 6.5% in the four-week view on about the same kind of a price decline.
So this cheaper cut-out is going to mean better beef volume, I think.
Plus we've got supply around us.
There's still a bit of heifer retention.
You're seeing heifers about 44% or so of the slaughter.
So we're still growing the herd a bit.
It looks like to us that for the year ---+ now it will be obviously bigger in the back half ---+ for the year, we ought to see about 2% increase in the fed cattle supply this year, and we think that's the number for the next two years.
Again, as we know, we're very well positioned where the big feed lots are, where the big high capacity feed lots are.
So yes, it feels good to have the worst behind us in Beef and good supply coming to us, and that will help certainly our margins.
I don't think deal flow is as robust as it's been over the last four, five years.
But we have a very consistent view that we look, first of all, for strategic fit.
And then we look at, in absence of that ---+ and I think one of the great things about our business, <UNK>, is that we've got a very good organic growth story.
And so as we look at the landscape, no need for us to push into a deal that doesn't fit us strategically or that kind of thing.
So although the landscape is a little thinner than it has been, we continue to look.
We want to grow.
And we want to grow organically and we want to grow inorganically.
And <UNK> has got us a great balance sheet and a lot of capacity to be able to do that.
In the meantime, I think buying back our stock is a great way to return cash to shareholders; and we'll stay on that and stay pretty consistent with our uses of capital, like we have been for the last three or four years.
Hard to say on that last part.
I wouldn't dare to ---+ I wouldn't venture to take a guess there.
We are seeing higher pork prices in China, which typically lead to higher chicken prices.
But chicken demand has remained a bit soft and we've not seen the price of chicken respond like it normally does in proportion to pork.
I will tell you this, though, that our sell-in, our international team are focused on driving value in fresh branded chicken, and I think they're making good headway.
They're seeing good momentum.
Any of the market factors, like a lower chicken supply that would ultimately lead to higher wholesale markets, would only benefit our business.
But in the meantime, we're certainly not standing back on our laurels.
We're working hard to grow our business and to grow a great branded fresh offering.
Yes.
Oh, I'm sorry, yes.
Great questions.
I'll peel this apart.
First off, we did expect the net debt to go up seasonally, as you may recall.
We have cattle and hog deferrals that flip from the end of December into March that we have to pay off.
Typically, $300 million to $400 million a year, so that's not unusual.
We did have a lot of extra cash going into this quarter on purpose, because we intended to pay off the 2016 notes, which were $638 million.
So that answers that part of the question.
As far as net debt for the rest of the year, I would say that it will be generally in the area of where we are now, maybe up or down $50 million or $100 million.
And to answer the question about borrowing to buy back stock, we would rather not.
We think it's a better use of our resources to invest in growth first and foremost, and then use the rest to buy back stock and continue to build our debt capacity.
<UNK>, certainly international would also, or is also, an M&A focus.
Our strategy is to grow value-added poultry and Prepared Foods in international.
And think value-added poultry and prepared foods when you think international.
So those are the type of businesses that we would be looking at and focusing on, because that's, as Sally often reminds us, about 96% of the population is outside of the US and food consumption is going to grow around the world.
So we want to be positioned to be able to grow for the long term and that means international, as well.
So you're absolutely thinking right to think that international acquisitions would be targets, as well.
It's hard to say, <UNK>.
That's a no call there.
We really don't see any changes.
We've evolved our pricing mechanisms over the last three or four years.
And I'm assuming that we'll continue to evolve them over time to make sure that we can ensure supply and work with our customers on pricing mechanisms that work for both of us.
I think a big key for our business, and I know our teams are focused on this, is to make sure that we've got the very best quality out there and we have outstanding service.
And our team's doing a super job at that right now.
So we'll continue to work on those things as we move forward.
Thanks.
Good morning.
<UNK>, our business is built for growth.
And frankly, I would much rather have a 9%, 10%, 11% Chicken business that's growing and outgrowing the categories that we're in, than to push the margin structure and end up having to sacrifice growth to do that.
So that's how we look at it.
We're actively working on getting ---+ we've got a lot of fully cooked capacity available right now.
We're actively working on putting a lot of par fry capacity around us.
I think the team has done a super job changing the mix.
We are seeing some shift from frozen into fresh at retail.
And our folks are all over that.
That's actually good for our business.
So I think as we've looked out and run our models for the next five years, what we tried to do is get some large portion on standard deviation of the mean and that kind of thing built into the model to be able to reflect a business that can grow and maintain stable higher margins.
You got it.
And I think too, with adequate supply of pork, and we portend an adequate supply of pork, that means you should have favorable raw materials again next year in our Prepared Foods business, which should allow us to be able to grow that business and have a favorable margin structure.
So we feel great about the way 2017's shaping up.
It's early, but we feel good about it.
Well, let's end by re-emphasizing, I think, an important point.
As we continue growing our volume and our earnings, everything else will fall in line.
Growth is and will be our primary focus.
Thanks, everybody, for joining us today and I hope you have a great week.
