Source:  MEATINGPLACE.COM, 7/30/10

Pilgrim's Pride Corp. on Friday posted lower second-quarter net earnings, hurt by hefty restructuring charges, but gave an optimistic outlook for the chicken industry in the second half of the year. The company also said it is moving forward with plans to reopen three idle production plants by 2012.

The Greeley, Colo.-based poultry processor forecast overall industry production to rise 2.7 percent in 2010.
"That is still well below the pre-cutback levels of 2008 and supplies at this point remain fairly tight,” said Chief Executive Don Jackson. “Based on the current supply across all three meat proteins, I believe the industry will remain relatively strong.”

Jackson predicted industry production would rise another 2 percent in 2011, with Pilgrim’s contributing half of that total, but emphasized that production would not increase beyond where it was in 2008. Pilgrim’s is increasing its own production about 5 percent annually over the next two years, he told analysts on a conference call.

The company plans to reopen its Douglas, Ga., plant in January, 2011, but in November of this year will begin deboning chicken breasts at the facility, Jackson said. Those breasts are currently being sent to outside processors for deboning. Production at Douglas is expected to reach full capacity of 1.3 million birds per week by late spring.

Pilgrim’s will reopen a second idled facility by mid-2011 and potentially another by spring 2012, Jackson said. Candidates include El Dorado, Ark.; Athens, Ala.; and Athens, Ga. However, the company may expand an existing plant rather than reopen a third plant if that approach is more cost-effective, he said.

Food service demand up

Jackson said customer demand improved during the second quarter, particularly from the food service sector, but some categories have been slower to recover than others. He predicted pricing would stay relatively strong through year-end.

“In general, our customers appear to be optimistic, and I believe we will see more price support for chicken as supplies remain below pre-cutback levels," Jackson said.

Pilgrim’s reported second-quarter net earnings of $32.9 million, or 15 cents a share, compared with net earnings of $53.2 million, or 72 cents a share, in the same period a year ago. One-time charges for the write-down of two office buildings contributed to the decline. Net sales declined to $1.7 billion from nearly $1.8 billion in the year-ago quarter, due to production cuts, the company said.

Adjusted earnings before interest, tax, depreciation and amortization and excluding charges were $127.6 million, compared with adjusted EBITDA of $166.0 million for the same period a year ago.

Jackson said the company made progress in new business, cost controls and operating efficiencies during the quarter.

"We are succeeding in bringing in new, higher-margin business in both retail and food service in the third quarter,” he said. “We intend to grow our share and volume in every channel.”

Pilgrim’s, which has resumed packing products for Russia, has sold out its entire production volume from its Russian-approved plants. It is now booking orders for September at prices above August, Jackson said.
Regarding exports to China, Jackson said he hopes an agreement will soon be in place between the two countries.

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