Pilgrim's earnings plunge, closing Dallas plant
July 29, 2011
by Keith Nunes
GREELEY, COLO. — High feed costs, weak consumer demand and an oversupply of chicken took a significant toll on Pilgrim’s Pride Corp. during the second quarter of fiscal 2011, ended June 26. As a result, the company recorded a loss of $128,141,000. During the same period of the previous year, Pilgrim’s Pride’s net income was $32,918,000, equal to 15c per share on the common stock.
Sales for the quarter were $1,922,690,000, an increase compared with the previous year when sales were $1,707,568,000.
“Pilgrim’s total feed-ingredient purchases through the first six months of 2011 were more than $400 million higher than a year ago,” said Bill Lovette, president and chief executive officer. “At this time of year we are usually benefitting from stronger market pricing and increased demand from both food service and retail, but to date neither that demand nor pricing has materialized.”
Mr. Lovette said Pilgrim’s Pride is making structural changes in its book of business in order to share the cost burden from higher grain prices. The company is in discussion with customers to move toward a more viable business model that ties pricing for chicken products closer to the market, such as through a combination of market- and cost-based pricing.
The company also announced it is closing its Dallas processing facility. The facility is scheduled to be shuttered on Sept. 30, 2011, and production will be consolidated into other company facilities, including its Mount Pleasant, Texas, processing plant.
“By closing the Dallas facility, we can consolidate that production volume at three other plants and help those sites run closer to full capacity,” Mr. Lovette said. “In addition, we will eliminate the cost associated with transporting live birds from northeast Texas to the Dallas processing plant and shipping offal from Dallas back to our protein conversion plant in Mount Pleasant. This will significantly reduce our costs and allow us to operate more efficiently. In addition, we believe it will go a long way toward helping position Pilgrim’s to emerge from the current industry down-cycle as a leaner, more competitive company.”
During the second quarter, Pilgrim's sales and volume in food service and retail rose slightly, according to the company. Export demand remained strong during the quarter, with sales, volume and pricing hitting all-time highs for the period. Year-to-date export sales are up 65% and volumes have climbed 50%.
“Our partnership with JBS USA is helping us enter new markets and increase our penetration in many existing markets,” Mr. Lovette said, adding that Pilgrim’s share of the U.S. export market for chicken has climbed to 24% from 17%.
For the first six months of fiscal 2011, Pilgrim’s Pride recorded a loss of $248,901,000, which was significantly higher than the loss of $12,629,000 the company suffered during the same period of fiscal 2010.
Sales for the period were $3,815,166,000, an increase compared with 2010 when they were $3,350,486,000.