Fabio Sandri: I think that’s absolutely right. We’re always looking for creating value for our team members and our shareholders. And we look for acquisitions that complement our portfolio. We are always looking for things that, we can add value and operate it better or complement our portfolio of brands or geographies. So, I think the market has been really strong on M&A activity, and we will do an acquisition when we believe that will create value for our company.
Operator: The next question comes from Adam Samuelson of Goldman Sachs. Please go ahead.
Adam Samuelson: Yes. Thank you. Good morning, everyone.
Fabio Sandri: Good morning, Adam.
Adam Samuelson: Good morning. So a lot of discussion on boneless market and you’ve alluded to the volatility in the market and you did see some pretty notable almost some unusual counter-seasonal strength through the third quarter. I would love to just get kind of your thoughts on kind of how, what was really driving kind of the market just as we think about incremental potential sources of volatility moving forward, kind of more recently was an interesting one that would be helpful just to frame, think about what could, how that could recover if at all?
Fabio Sandri: Yes, sure. Thanks for the question. Yes, we’ve been seeing that the volatile part of the cut out has been the breast meat. As I mentioned, leg quarters has steadily increased. Wings resumed their growth trajectory with being back to the menus and more featuring, but breast meat has been really volatile. We saw some big increases at the end of the quarter, and that was mainly restocking of the, both the foodservice distributors and the, what we call industrial. So, the further processors and the branded companies that sell on the retail, I think over the beginning of the year, what we saw was with high prices at retail, those industrial customers, as we mentioned, we’re actually buying less. And we saw that in every single earnings release from the big brand names that they were selling at a higher price, but a lower volume.
And I think that was combined with lower production with a reduction in their inventories as well. So I think we saw during the end of the quarter, a little bit of restocking of those. And we saw some pickup in the demand on the retail. I think we saw a lot of features. We always mentioned that the commodity segment was always augmented by the case-ready demand during the grilling season. And I think we saw that late after Labor Day this year. But we are seeing that as of now as well. Where the case-ready category or the retail category with increasing features is actually buying big bird breast meat from commodity players to augment their offerings on the retail. So I think that big increase was based on these two factors, more industrial for the rebounding or rebuilding of the stocks more retail based on the features.
And the foodservice continues to be strong. I think the distribution on the foodservice, as we see the number of servings and penetration on the menu, chicken has improved once again because of the availability and the higher price of the competing proteins.
Adam Samuelson: That’s helpful. And then if I just have a second question on the U.K. and Europe and the margin had a nice kind of sequential improvement again, just help us think about the visibility that you have on the margin on the profit side moving into the first half of next year. Is there any concern on volatility in hog markets? Or do you think that you’re now in a better balance between the network and the Fresh poultry, the Prepared Foods and the Pork business?
Fabio Sandri: Yes, that’s a great point, Adam. Yes, as we build this portfolio, we have a very well balanced between Chicken, between the Fresh pork and Prepared foods, both meat and meals. I think we have invested in innovation as well. I think that has been one of the great strides that we made on helping our key customers to succeed just like we do in the U.S. investing into innovation. As I mentioned, we have more than 100 new products launched, especially on the news scenario. On the fresh, I think what we are seeing is that Pork has helped with a more balanced supply and demand. I think now the live operation of pork is profitable in Europe and was negative for a significant amount of time, and we are the highest have the highest integration of all players in U.K. And on the fresh chicken, what we are seeing is a significant increase in demand because of the affordability of chicken.
As we are seeing inflation in Europe was really high. And it was over the wage inflation. But right now, that change, and we’re seeing that wages are actually outpacing inflation. So the consumer must have more available income. We are seeing the translation of that into the consumer confidence in the region, and we expect an overall increase in the demand of protein.
Adam Samuelson: Great. That’s helpful. I’ll pass it on. Thanks.
Fabio Sandri: Thank you, Adam.
Operator: The next question comes from Priya Ohri Gupta from Barclays. Please go ahead.
Priya Ohri Gupta: Hi. Thank you so much for taking our question. Matt, one for you, if I could start. Your free cash flow performance has been coming in better, largely driven by strength in working capital. Just given some of the commentary you guys have made around the grain market, how should we think about working capital for the full year as it relates to cash from operations? Could we end up being in a more neutral position on working capital? Or is there even scope for it to possibly be positive?
Matthew Galvanoni: Thanks for the question. I think it’s probably overall more net neutral. I do see, though, as you pointed out, grain moderating. We have already started to see some of that. That started to hit our P&L here we’ll call it sort of in the second half of the quarter of Q3. And we do see a little bit more moderation here on the grain side. So that should be beneficial to us, both from a P&L perspective, but also as you point out, a working capital perspective. So we do see a little bit of continued improvement from where we sit today, but I wouldn’t take that just too far at this stage.
Priya Ohri Gupta: Okay. That’s helpful. And then can I, I just wanted to follow up around the more constructive comments around the European consumer. You just talked about how wages are outpacing inflation and you’re starting to see increased more confidence is really sort of dovetailed with some of the more cautious commentary we’ve heard from others around the European consumer versus the U.S. consumer. So how, I guess, how sustainable do you think some of these stronger trends in terms of the U.S. consumer could be relative to sort of uplifting protein demand? Should we think about this as quarter-to-quarter, I think that we should track? Or is there something more sustainable that we could think about as we model out into ’24?
