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Bird flu blow sends Pilgrim's Pride stock to 17-month low

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Pilgrim's Pride shares plummeted to a three-and-a-half year low, as bird flu restrictions hit exports, leaving the poultry giant reporting below-forecast earnings .

Pilgrim's Pride, a unit of the Brazil-based meat giant JBS, operates poultry processing facilities in the US, Puerto Rico and Mexico.

"I think export markets definitely impacted pricing," Pilgrim's Pride chief executive Bill Lovette told investors on Thursday.

"The total exports are down about 20% and that's definitely had an impact, said Mr Lovette."

Influenza threat

But Mr Lovette was more upbeat on US demand, and suggested that higher consumer incomes was helping the company, as the US moves away a "from a situation where… price is the only part of the discussion.

When asked about the effect of bird flu Mr Lovette told investors "we're focused on our key customers".

"If we see some of our key customers needing more product we will do what's best for taking care of those customers and taking care of our business."

Import bans

An outbreak of bird flu in the US earlier this year led to import bans in a number of jurisdictions.

These bans have started to ease, after the last case in the US was reported in July.

Imports to Cuba resumed this month, after being stopped due to bird flu in August and September.

South Africa was due to remove a 100% tarrif on US chicken imports this month, but has so far failed to do so.

Hong Kong, Japan, and Singapore have also begun to lift restrictions.

Cost to the industry

A report released last month showed the US poultry and egg industry lost millions to the export ban.

The USA Poultry and Egg Export council calculated that exports were down 14% in the first half of the year, compared to the same time last year.

Exports were seen at $2.405bn, down $386.3m.

And the US is not out of the woods yet.

There are fears that autumn migrations by wild birds, the primary vector of the disease, will trigger fresh outbreaks.

'Continued challenges'

In quarterly reports released after the market closed on Wednesday, Pilgrim's Pride reported earnings of $137.1m in the three months to September 27, down 46% from the same time last year.

This left earnings per share at $0.53, compared with $0.99 a year before, and well below the $0.72 analysts had forecast.

Revenues were down 7% from last year, at $2.11bn, where analysts had forecast $2.21bn.

"The continued challenges in the export markets, the strong dollar and the lowest chicken cutout in the past five years during the third quarter have had an impact on the commodity segments of our business, and on our US export and Mexico sales," Mr Lovette said at the time.

Focus on high growth markets

Domestic sales were down 11%, although sales in Mexico rose 30%.

"Although we expect export markets to gradually reopen soon depending on the domestic situation," Mr Lovette said , referring to the bird flu situation, "we continue to seek alternative and creative ways to reduce our dependencies on commodity products to produce more consistent margins by sharpening our focus on high growth markets."

Pilgrim's Pride shares touched $17.39 in early deals in New York, a drop of 10.3%, before recovering some ground to stand at $18.48 in lunchtime deals, a decline of 4.6%.

By William Clarke

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