Pilgrim's Pride attempted to dispel a cloud over the US
chicken market – rising meat production – by saying that demand was sufficient
to mop up the extra output, and flagging its focus on boosting exports.
On Thursday, the US chicken market received two cautions, the
first when Joe Sanderson, the chairman and chief executive officer of chicken
group Sanderson Farms, cautioned of "challenges ahead for our industry" – and not
just from elevated feed costs.
"We also do not expect to see a meaningful improvement in
demand from our food service customers until the national employment situation
improves and consumers begin to dine out again on a consistent basis," Mr
Sanderson told investors.
'Downward price pressure'
Separately, US Department of Agriculture analyst Rachel
Johnson, cautioned over the threat to prices from a return to domestic growth
in broiler meat production expected in 2013, of 264m pounds to 37.3bn pounds.
"Most of the increase in production is expected to come from
a larger number of birds slaughtered, but some added production come from
higher bird weights at slaughter, especially during the first half of the year,"
Ms Johnson said.
With output higher, and the volume of broiler meat in cold
storage ending 2013 up 11%, "broiler prices in general would be expected to be
facing some downward pressure," she said.
The USDA forecast prices falling from 98-100 cents per pound
in the current quarter to 89-97 cents a pound in the last three months of 2013,
a level which could potentially see values record a year on year fall.
However, Ms Johnson acknowledged that the pressure on prices
"may be countered by relatively high prices for competing meats, a growing
economy, and a continued strong market for broiler exports".
And Pilgrim's Pride chief executive William Lovette,
flagging "strong demand in the chicken market", said the group was "still confident"
over the market's ability to absorb extra output.
"We believe that supply and demand is well in balance now
and will continue to be in the future," he told investors.
Indeed, "we see retail demand very strong".
And while demand from the foodservice sector was "flat", Pilgrim's
Pride did "expect more future activity in food service, especially at the quick
service restaurant level and fast casual segments".
Back into the black
The comments came as Mr Lovette addressed investors
following the group's release of results showing a return to fourth quarter
profit, with earnings of $22.4m, compared with a loss of $85.1m in the same
period a year before.
Revenues rose 19.7% to $2.19bn, while the results also
benefited from a 6.3% fall to $45.6m in administrative expenses, and the
non-repeat of restructuring charges.
"We continue to focus on creating value for our key
customers, relentless pursuit of operational excellence and growing our value
added exports in order to maintain the trajectory of improvement in 2013 and
beyond," Mr Lovette said.
The earnings, equivalent to $0.09 a share, beat Wall Street
forecasts of a $0.06-a-share result.
Nonetheless, Pilgrim's Pride shares, which had enjoyed a
strong run-up to the results, boosted in part by firm chicken results from
rival Tyson earlier this month, failed to hang to a two-year high of $9.90
reached in opening deals.
The stock stood at $8.59 in afternoon trade in New York,
down 5.7% on the day.