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Pilgrim's Pride Has Something To Smile About

by 5m Editor
1 August 2007, at 11:08am

PITTSBURG - Both Tyson and Pilgrim's Pride have reported good third quarter fiscal results. Does this signify a new leaf in the poultry industry, or is it merely an optimistic blip.

Pilgrim's Pride Corporation, the world's largest chicken company, today reported net income of $62.6 million, or $0.94 per share, on record sales of $2.12 billion for the third fiscal quarter ended June 30, 2007. For the third quarter of fiscal 2006, the Company reported a net loss of $20.5 million, or $0.31 per share, on total sales of $1.29 billion.

"We are pleased with our improved financial performance in the third quarter, particularly in light of continued high costs for feed ingredients," said O.B. Goolsby Jr., Pilgrim's Pride president and chief executive officer. "Our return to profitability is a direct result of improved pricing driven by industry-wide production cuts implemented earlier this year, coupled with strong demand for our products, particularly in the consumer retail segment. As a result of these higher selling prices for our products, we were able to offset the impact of higher corn and soybean meal costs."

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"Our return to profitability is a direct result of improved pricing driven by industry-wide production cuts implemented earlier this year."

O.B. Goolsby Jr., Pilgrim's Pride president

Mr. Goolsby also said the Company's Mexico operations returned to profitability in the third quarter.

He also said the Company continues to make good progress with the Gold Kist integration. Through the end of the third fiscal quarter, the Company had realized approximately $48 million in annualized cost savings -- well ahead of its previously forecasted schedule of $25 million by the end of September.

"Our employees are making good progress in identifying opportunities to improve our combined businesses. Together they are working on a wide variety of projects that will help us operate more efficiently and deliver improved service to our customers. In some cases, we've been able to capture synergy savings ahead of schedule, while in other cases the project timelines have been adjusted to meet the demands of our business. In total, however, I'm now confident that we'll be able to exceed our previously announced synergy savings target of $100 million and believe that our annual run rate is likely to be closer to $150 million by January 2008," Mr. Goolsby said.

Looking ahead, he believes that feed-ingredient costs will continue to pose one of the biggest operating challenges for the U.S. chicken industry.

"There is no question that high feed costs are with us for the long-term, thanks to what many believe is the nation's misguided public policy that subsidizes production of corn-based ethanol. It's important to note that next year the agriculture industry once again will have to find millions of additional acres for corn -- on top of this year's record plantings -- just to meet increased production demand for ethanol. While American consumers may one day realize some marginal benefit from cheaper prices at the fuel pump, they undoubtedly will continue to pay more for food items at their neighborhood grocery store or favorite restaurant," Mr. Goolsby said.

For the nine months ended June 30, 2007, the Company reported net income of $13.8 million, or $0.21 per share, on record sales of $5.45 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 nine months of fiscal 2006, Pilgrim's Pride reported a net loss of $26.7 million, or $0.40 per share, on sales of $3.90 billion.

5m Editor