High supplies hit Pilgrim’s Pride results for Q2

03-05-2006 | |

Excess poultry supplies stemming from avian-flu fears led Pilgrim’s Pride Corp. to post a fiscal second-quarter loss, as the company said it will start cutting production in the hope of regaining pricing power.

The Pittsburg, Texas, chicken and turkey producer swung to a loss of $32 million from a year-ago profit of $56.4 million. Sales for the three months ended April 1 fell to $1.27 billion from $1.38 billion a year ago.

O.B. Goolsby Jr., president and chief executive of Pilgrim’s Pride, addressed the oversupply issue during the company’s earnings conference call Tuesday: “We are taking steps to control production to reduce excess summer inventories.”

Pilgrim’s Pride said it will reduce its weekly slaughter rate of about 3%, starting in July, which is about 830,000 head per week. Executives said they didn’t know if competitors would follow suit or offer alternative suggestions to reduce poultry inventories.

In addition to reducing its slaughter rate, Pilgrim’s Pride said in a statement it will cut capital investment for fiscal 2006 by between $25 million to $40 million, meaning it will spend between $140 million to $175 million during the year on capital investment.

“We believe that by taking these actions at a time of the year when chicken consumption normally increases, we will better balance our production with demand for the remainder of the year and strengthen our competitive position,” Goolsby said in a statement. “Reducing overall supply to better match demand is an important component in helping return the industry to profitability.”