Source: MEATINGPLACE, 9/30/11

Chicken production at Pilgrim’s Pride could soon be running at levels 5 percent lower than a year ago as the company reduces output to meet slower demand, an analyst has forecast.

BB&T Capital Markets analyst Heather Jones expects Pilgrim’s production in 2011 to exceed 2010’s level, but 2012 should fall below this year’s output. She sees Pilgrim’s turning profitable next year after a steep loss in fiscal 2011.

Pilgrim’s management in a recent meeting with analysts expressed regret about reopening the company’s Douglas, Ga,. facility, which is operating well below full capacity, Jones said. Managers also “strongly downplayed” any consideration of reopening any other idled plants, she said.

Pilgrim’s sold 12 percent more pounds of chicken in the first half of this year, compared with the same period the year before, Jones said. She estimated at least half of that increase was due to higher production.

“Pounds produced ramped significantly throughout 2010, while production is scaling down throughout 2011. Thus, we expect 2012 production to be below that of 2011, and think that output could decline at a 5 percent run-rate near-term,” Jones wrote in a note to clients.

The company’s export volume is much higher so far this year, which is reducing domestic availability, she noted.

The analyst lowered her forecast for Pilgrim’s fiscal 2011 earnings per share to a loss of $1.89 from a loss of $1.66 previously, citing weaker-than-expected pricing and higher feed costs in the third quarter. But she increased her fiscal 2012 earnings estimate to 44 cents from 40 cents.

“We believe that considerable earnings improvement opportunity exists, once industry oversupply issues abate and the operating environment becomes more normalized,” Jones said.
 

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