September 26, 2008

Pilgrim's Pride stocks fell 38 percent on Wednesday (September 24, 2008) amid tightening credit environment and volatile grain market.

The company's stock stopped trade at US$6.36 per share, after falling to a 52-week intraday low of US$6.06, compared with its 52-week intraday high of US$35.98.

Pilgrim's Pride has received harsh blows from high feed costs and tightened credit, which is all the more serious as the company is saddled with debts and its operations are concentrated on poultry. The company posted a quarterly loss of US$52.8 million in June, compared to a profit of US$62.6 million a year ago. In contrast, Tyson posted a profit in its most recent quarter as its beef and pork businesses diversify its risks.

In the past year, profits in the meat industry have been eroded by high feed grain prices due to increased global demand. The poultry industry suffered a severe impact, as corn and soymeal are its main cost items.

In June, the Pittsburg, Texas, company posted a quarterly net loss of $52.8 million, compared with profit of $62.6 million a year earlier.

In 2006, Pilgrim's Pride bought rival Gold Kist for about US$1 billion, a purchase that landed the company in debt. Many analysts now believe that Pilgrim's Pride paid the wrong price for Gold Kist at the wrong time.

In May, the company sold 7.5 million shares for about US$177 million to tide over this low-margin period, and in the past several months has shut down several facilities to cut costs.

In July, Moody's Investors Service downgraded Pilgrim's Pride credit rating and early this month, has placed the company's ratings under review for another possible downgrade.

Pilgrim's Pride expects its feed grain costs this year to increase more than US$900 million from 2008, up US$100 from its previous forecast.