February 5, 2010

Pilgrim's Pride to outpace industry growth

The head of Pilgrim's Pride Corp (PPC) said on Thursday (Feb 4) that the poultry producer plans to outpace industry growth this year in a move that will focus attention on capacity discipline in the sector.

The US group also said it is regaining market share after emerging in December from a year of bankruptcy protection, triggered in part by a supply glut.

Don Jackson, chief executive of PPC, said the company may re-open a plant shuttered as part of its restructuring, and would boost production above the 1% expected this year for the US poultry industry.

While rivals such as Tyson Foods Inc. (TSN) have also seen improvements in their poultry business, helped by exports and reduced competition from pork, the industry's record on supply discipline has been poor.

Jackson, who was speaking during the company's post-earnings; conference call, said demand was outstripping supply and draining inventory, and retail and food service demand is firming, he said though the latter continues to lag.

Pilgrim is being helped by a less-than-expected deterioration in customer relations following its bankruptcy filing.

The company suffered a liquidity crisis amid oversupply, weak pricing and wrong-way hedges on the cost of feeds such as corn and soy. Brazil's JBS S/A paid US$800 million for a 64% stake in exchange for US$800 million.

"We have not found we had to buy back business," said Jackson. Contracts that had been shortened amid the industry crisis are now pushing back out towards 12 months.

Jackson estimated Pilgrim's market share at around 20%, compared to a peak of 24%, and said it is winning business "across-the-board".