GREELEY, COLO. — In an effort to maintain what the company calls a “more consistent earnings profile,” poultry processor Pilgrim’s Pride Corp. is focusing on building its prepared foods business in an effort to reduce its exposure to shifts in the commodity markets.
“… We are pleased with the progress we are making with our prepared food sales and operations,” said Bill Lovette, president and chief executive officer, on April 30 during a conference call with financial analysts to discuss first-quarter results. “Having reduced our sales footprint by eliminating s.k.u.s (stock-keeping units), shuttering inefficient lines and simplifying our approach, we now have a sustainable base of business from which to grow and further support increasing demand from our key customers. School food service, key broad line distributors, key regional and national chain operators are among the key customer segments to which we are focusing resources.”
Mr. Lovette added that to support the prepared foods strategy a “significant portion” of the company’s capital expenditures budget will be dedicated to equipment that will enhance prepared foods capacity and plant efficiencies. Another area of focus is the supermarket deli, where Pilgrim’s Pride plans to capitalize on its Pierce chicken brand and offer a complete line of ready-to-heat chicken, rotisserie birds and case-ready chicken products.
Like its competitors Tyson Foods and Perdue Farms, Pilgrim’s Pride also is working to increase its production of antibiotic-free (A.B.F.) chicken, but noted the endeavor will come at additional costs.
“We are also responding to increased demand for reducing antibiotic usage in poultry,” Mr. Lovette said. “In fact, we are already the largest A.B.F. producer for some key customers in the U.S. and are aggressively migrating our production to have at least 25% of our chicken A.B.F. certified by the end of 2018. We are currently only using antibiotics strictly for therapeutic purposes and working hard to eliminate antibiotics used in human medicine from our hatcheries over the next 18 months.
“As we convert more of our production to A.B.F., we will be able to sell an increasing amount of whole bird equivalents, which includes the back half, for a premium in domestic markets.”
But he added that the production of A.B.F. chickens requires more investment in larger housing facilities on farms.
“… As the industry grows in its percentage of A.B.F. chicken, those chickens require more space per head and so overall it requires more square footage, so that’s yet another sort of barrier to overall growth …,” Mr. Lovette said.
For the first quarter of fiscal 2015, Pilgrim’s Pride recorded net income of $204,215,000, equal to 79c per share on the common stock, and an increase compared with the same period of the previous year when the company earned $98,117,000, equal to 38c per share.Sales for the period were relatively flat at $2,052,919,000 when compared with $2,018,065,000 during the previous year.