Pilgrim’s Pride cuts 1,100 jobs, closes seven facilities
US meat processor Pilgrim's Pride announced recently that it is closing one processing plant and six distribution centres, resulting in the loss of 1,100 jobs, citing the US government's policy on corn-based ethanol as the primary reason for the action.
March 12, 2008
Pilgrim's Pride Corp. announced that it will shutter one processing plant and six distribution centers, all resulting in the loss of some 1,100 jobs.
Citing continued financial pressure from what Pilgrim's CEO Clint Rivers called the government's "ill-advised policy" on corn-based ethanol, the nation's largest chicken processor will close its Siler City, N.C., plant, which is home to about 830 workers.
In addition, the Pittsburg, Texas-based processor will shutter distribution centers in Oskaloosa, Iowa; Plant City and Pompano Beach, Fla.; Jackson, Miss.; Nashville, Tenn.; and Cincinnati, Ohio.
The closings are expected to begin immediately and be completed by June.
Pilgrim's Pride also announced an ongoing review of the company's other production facilities for potential mix changes, closure and/or consolidation in response to what it called "current negative industry fundamentals."
"While the decision to close a facility is always very difficult, we believe [these] actions … are absolutely necessary to help bring supply and demand into better balance," Rivers said in a statement. "That portion of the demand for our products that exists solely at pricing levels below the cost of production is no longer a demand that this industry can continue to supply."
Pilgrim's Pride also said it expects to record asset impairment and other charges related to the facility closures of approximately $35 million, $21.7 million net of tax, or 33 cents per share. The company in January posted a $32.3 million loss for the quarter ended Dec. 29.
While no decision has been made about future use of the Siler City facility, the company said affected workers will have access to transition programs to help workers find new jobs.
JP Morgan analyst Pablo Zuanic said in a note to investors that Pilgrim's Pride's move was positive for the entire industry. "Although by how much the shutdown by Pilgrim's Pride of one of its 33 chicken production facilities in the United States will lead to actual production cutbacks, clearly this news is positive for the group," he wrote. "In the past Pilgrim's Pride had made the argument that egg set cuts created inefficiencies, but if the company is willing to adjust its infrastructure (slaughter, and other facilities like hatcheries and feed mills), then egg set cuts should follow."
Competitors' shares benefit
Shares of Laurel, Miss.-based competitor Sanderson Farms Inc. jumped more than 6 percent on the news. After the opening bell on the Nasdaq, Sanderson Farms shares were up $2.16, reaching $37.06.
Shares of Tyson Foods Inc. also increased on the news, climbing 22 cents to reach $16.28 in early morning trading on the New York Stock Exchange.
Shares of Pilgrim's Pride were $23.66, up 83 cents, in early morning trading.