Pilgrim's Pride stock plummets 22% in wake of Q1 loss
Shares of Pilgrim's Pride Corp. took a nose dive Thursday (May 6), falling 22% as investors reacted to a first-quarter loss and fears of a potential oversupply of chicken.
Pilgrim's Pride, which is in its final days as a Pittsburg, Texas-based company, reported a net loss of US$45.5 million, or 21 cents a share, on sales of US$1.6 billion in the three months that ended March 28.
Results were weighed down by restructuring charges and reorganisation expenses of US$56.5 million (pre-tax), or 16 cents a share. In December, Pilgrim's emerged from bankruptcy and has announced plans to move its corporate headquarters to Colorado.
A year ago, as it was beginning the bankruptcy process, the company reported a net loss of $58.8 million, or 79 cents a share, on sales of nearly US$1.7 billion.
Wall Street's response to the report, which included company plans to boost supply, was swift and unequivocal. The stock fell early and closed at US$8.66, down US$2.50.
Pilgrim's stock has tumbled 34% in the last 10 days as investors worried producers may be planning to send too many birds to market - potentially repeating the oversupply of two years ago that created bargains for consumers but hobbled balance sheets.
Pilgrim's plans to reopen a processing plant in Douglas, Georgia, that was closed during its bankruptcy. That plant is expected to open by January 2011. The company also plans to reopen two other idled facilities, one by mid-2011 and the other by spring 2012. The moves will boost production by 10%, or about 3.5 million birds a week.
Meanwhile, competitor Sanderson Farms also has announced plans to boost production.
With the economy strengthening, demand will increase, chief executive Don Jackson told analysts. But he acknowledged that first quarter sales the company planned on did not materialise.
Beyond restructuring costs, Pilgrim's blamed the red ink on a loss of about US$11 million related to grain hedges and lower-than-anticipated market prices for dark meat.
