July 30, 2008


Pilgrim's Pride Q3 in red ink amid high feed costs

Pilgrim's Pride reported a net loss of US$52.8 million in its third-quarter compared to a net income of US$62.6 million in the same quarter last year, due to soaring feed costs.

Net sales for the third quarter ended June 28 rose to US$2.21 billion, up from US$2.1 billion a year ago. Gross margin had plunged to 2.4 percent from 11.2 percent.


In the third quarter, feed ingredient costs went up by 41 percent and based on year-to-date costs and projections for the current quarter, feed expenses are expected to increase US$900 million from a year ago, according to Pilgrim's Pride.


Other than feed costs, higher fuel and energy prices are pressurising Pilgrim's Pride bottom line. Chief executive Clint Rivers is also critical of the US government's ethanol policy, which pulls corn supplies from the livestock industry to the ethanol industry.


Chicken prices have also not managed to increase fast enough to cover the production costs, leading Pilgrim's Pride to take several actions this year to limit losses. In the past few months, the company had announced its decision to sell 7.5 million of its shares, to cut production by 5 percent, and closing six distribution centres and one processing facility. The company also plans to consolidate a tray-pack chicken processing operation and close a distribution facility to cut costs.


Rivers said the company's production cutbacks indicate a longer recovery period, therefore a fourth-quarter loss is expected.


Pilgrim's Pride shares went up 19.5 percent to US$14.54 recently.

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