April 30, 2012

As the poultry processor's margins improved amid lower input costs, Pilgrim's Pride Corp.'s (PPC) swung to a first-quarter profit, its first in more than a year.

The latest results mark a departure from the company's four-quarter streak of losses. The chicken industry experienced a challenging year in 2011, which included surging feed costs and weak prices for chicken meat due to a historically large glut of supplies. The industry's downturn is the latest in a perpetual boom-and-bust cycle that has over many years forced chicken processors to consolidate or shut down. Many chicken companies have been willing to sell products at a loss in order to hang onto their business and put pressure on competitors.

"We are encouraged to see the benefits of our strategy and the improvement in our operations over the past year reflected in the best results we have had in the first calendar quarter since 2005," said Chief Executive Bill Lovette.

Lovette added that the company and industry needs to continue towards valuing the whole bird and not relying on high breast meat prices to carry the margin, noting volatility in the commodity markets must be considered as a standard part of production planning to maintain long-term profitability.

Pilgrim's Pride, the world's second-largest poultry processor, reported a profit of US$39.2 million, of US$0.18 a share, compared with a year-earlier loss of US$120.8 million, or US$0.56 a share. Sales slipped 0.2% to US$1.89 billion.

Analysts polled by Thomson Reuters had most recently forecast a profit of US$0.08 a share on revenue of US$1.96 billion. Gross margin improved to 5.8% from negative 2.8% as cost of sales slipped 8.5%.

Shares closed at US$7.00 Thursday (Apr 26) and were mostly inactive in premarket trading. The stock is up 22% since the start of the year.