Pilgrim's Pride Blames Higher Feed Costs For 2nd-Quarter Loss

DALLAS - Pilgrim's Pride Corp., the nation's largest chicken producer, said Monday its second-quarter loss widened from a year ago as it paid more for feed and took a restructuring charge.

Pilgrim's Pride also said its U.S. business would probably lose money in the current quarter, and it might be summer 2009 before the company returns to normal operating profit margins.

Poultry companies are trying to raise prices to offset higher feed costs, but without much success. The company said the average price it received last quarter for boneless skinless breast meat was 4 percent lower than a year ago, although it has recently begun to rise.

The company has said it will cut production by 5 percent this year, and several other producers plan cutbacks, which are designed to force chicken prices higher.

Chief Executive Officer Clint Rivers placed blame for the industry's trouble on the federal government's "deeply flawed" policy of paying subsidies for using corn to produce ethanol for fuel, which he said will drive food prices higher.

"American consumers are only just beginning to feel the impact of sharply higher food prices," as food producers pass along more of their higher costs, Rivers said.

He said the company hasn't been able to raise prices fast enough to cover higher feed costs. He called the current situation facing poultry producers "among the most difficult I have seen during my 27 years in the business."

The Pittsburg, Texas-based company lost $111.5 million, or $1.67 per share, in the three months ended March 29 compared with a loss of $40.1 million, or 60 cents per share, a year earlier.

The results included impairment and restructuring charges of $17.7 million, or 17 cents per share, to close a processing plant and six distribution centers. Excluding those, the company lost $1.50 per share.

Thomson Financial said analysts expected a loss of 81 cents per share. The estimates typically exclude one-time items.

Revenue rose to $2.10 billion, a tick above the $2.09 billion forecast by analysts and the $1.99 billion from a year ago.

The company said its costs for corn and soybean meal in the quarter rose $200 million from a year ago, which it blamed on the use of corn to make ethanol for fuel, causing feed grain prices to spike.

Chief Financial Officer Richard Cogdill said feed costs would probably push the company to another loss in the April-to-June quarter - analysts expect a loss of 8 cents per share - although a "modest" profit is "possible" in the quarter after that.

Cogdill told analysts the company doesn't expect to return to normal operating profit margins until the June quarter of 2009.

A week ago, Tyson Foods Inc., the world's largest meat producer, also blamed higher feed and fuel costs for causing its chicken-processing unit to lose $61 million in the latest quarter. Chicken accounts for a third of Tyson's sales.

Pilgrim's Pride recently announced it would close a processing plant and six distribution centers and Rivers said Monday that the company was still considering the sale, closure or consolidation of others.

Through the first six months of its fiscal year, the company lost $143.8 million, or $2.16 per share, compared with a loss of $48.8 million, or 73 cents per share, a year earlier. Sales have increased to $4.15 billion from $3.28 billion.

Pilgrim's Price shares fell 21 cents, or 1.3 percent, to $15.43 Monday.