Chicken producer Pilgrim's Pride Corp. reported a narrower first-quarter loss on Thursday, but shares tumbled as investors worried that the company's plans to boost production will further pressure meat prices.
Pilgrim's Pride and other major poultry producers cut production in recent years so they could raise prices to offset higher ingredient costs. Slumping demand brought on by shoppers eating out less frequently limited their ability to raise prices without trimming production. So the company's new plan to bring three plants back into operation by the spring of 2012, which will raise production by 10 percent over two years, has analysts wondering how prices will be affected.
In the three months ended March 28, the company lost $45.5 million, or 21 cents a share, including restructuring charges and losses on grain hedges of 16 cents per share. In the year-ago period, the company lost $58.8 million, or 79 cents a share.
Revenue fell 3 percent to $1.64 billion from $1.7 billion as lower-than-expected market prices for dark meat and a delay in processed volume meant the company had to sell some meat products at lower prices.
A combination of depressed profits and high debt prompted Pilgrim's Pride to file for bankruptcy protection in late 2008. It idled plants and cut production as it restructured. The company has since emerged from bankruptcy protection. Under a reorganization plan, Pilgrim's Pride sold a 64 percent stake in the company, worth $800 million, to Brazilian beef giant JBS, the world's biggest meat producer.
CEO Don Jackson said the company's performance in the quarter was below expectations but he is optimistic about the industry heading into the summer, a major chicken consumption period. Feed costs for chicken have stabilized and he said the economy is improving, which will help demand.
The company plans to reopen its plant in Douglas, Ga. by January. It will open two other facilities, one by the middle of next year and one by the spring of 2012.
Shares fell $2.53, or 23 percent, to $8.63 in midday trading Thursday.
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