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Pilgrim's Pride? $40ml Loss in 1st Quarter

by 5m Editor
4 May 2007, at 10:41am

TEXAS - Pilgrim's Pride Corporation (NYSE: PPC), the world's largest chicken company, today reported a net loss of $40.1 million, or $0.60 per share, on total sales of $1.99 billion for the second quarter ended March 31, 2007. The results mirror the trials the entire poultry industry have undergone this year. Though after Tyson's shock profit, they're left feeling like headless chickens.

These results include, for the first time, the acquisition of Gold Kist Inc., which was completed Dec. 27, 2006. The results also include charges of $14.5 million, $9.1 million, net of tax or $0.14 per share, related to the early extinguishment of debt incurred by the Company in connection with the financing for the acquisition. For the second quarter of fiscal 2006, the Company reported a net loss of $32.0 million, or $0.48 per share, on total sales of $1.27 billion.

"Our financial performance in the second quarter of fiscal 2007 reflects some of the significant operating challenges faced by U.S. chicken processors during that period," said O.B. Goolsby, Jr., Pilgrim's Pride president and chief executive officer. "Feed-ingredient prices remain at very high levels amid rapidly growing demand for corn-based ethanol. While we have succeeded in passing along some of these higher costs to our customers this year, most of the benefit from those price increases was not fully realized in the second quarter. Additionally, we are continuing to address pricing opportunities in a number of below-market customer contracts we acquired through the Gold Kist transaction."

Mr. Goolsby noted, however, that the Company's U.S. operations returned to profitability late in the second quarter -- and the Company is currently profitable in the third quarter -- as production cutbacks in the United States helped strike a better balance between production and demand. In addition, U.S. market prices for chicken products have strengthened heading into the summer as well. Mr. Goolsby also said the Company's Mexico operations have returned to profitability in the third quarter to date. He said current U.S. production at Pilgrim's Pride is "in line" with the Company's previously announced 5.0% reduction target when compared to year-ago levels. The cuts will stay in place throughout the third quarter of fiscal 2007 before leveling off in the fourth quarter, when the Company cycles through the first anniversary of its production cutback from last summer.

"We are cautiously optimistic about the second half of the fiscal year. We believe that the combination of lower industry production levels year-over-year, should they remain in place, and stronger pricing heading into the summer months will lead to continuing improvement in our financial results for the remainder of the year," Mr. Goolsby said. "On the Gold Kist integration front, our employees are investing a lot of time and effort in the integration, and I'm excited by the tremendous opportunities they have uncovered for improving our combined businesses. They are clearly focused on our common goal of delivering the best possible service and value to our customers every day and are making good progress toward achieving our previously announced estimate of $100 million in synergy savings."

For the six months ended March 31, 2007, the Company reported a net loss of $48.8 million, or $0.73 per share, on total sales of $3.33 billion. Included in these results were charges of $14.5 million, $9.1 million, net of tax or $0.14 per share, related to the early extinguishment of debt incurred by the Company in connection with the financing for the Gold Kist acquisition. For the first six months of fiscal 2006, Pilgrim's Pride reported a net loss of $6.3 million, or $0.09 per share, on sales of $2.61 billion.

5m Editor