I know a lot of you don't care anything about the poultry business, but this could end up being a serious blow for a lot of contract growers throughout East Texas, SE Oklahoma and other areas - not just in Arkansas. The Pilgrims growers I know are already hurting - this can only make things worse.
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Pilgrim's Pride sees stocks slip into nose-dive
BY STACEY ROBERTS
Posted on Friday, September 26, 2008
Stock values for Pilgrim's Pride Corp. were in a free-fall Thursday after the company said it expects a significant loss in the fourth quarter, so much so that it will not be able to meet debt obligation agreements.
Pilgrim's Pride told its lenders it does not expect to meet its fixed-charge coverage ratio covenant under its principal credit facilities at the end of its fourth quarter, which ends Saturday. A fixed charge coverage ratio is a ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases, according to Forbes' Investopedia Web site.
Trading on the Pittsburg, Texas-based poultry processor's stock was halted Wednesday after it plunged 38 percent to $ 6. 36 a share on the New York Stock Exchange. It closed at $ 3. 84 on Thursday, down another 39. 62 percent.
While Pilgrim's Pride stock was losing value on the markets, rivals Springdale-based Tyson Foods Inc., Sanderson Farms Inc. of Laurel, Miss., and pork producer Smithfield Foods Inc. of Smithfield, Va., saw some stock increases.
Tyson Foods closed at $ 13. 10, up 96 cents or 7. 91 percent. Smithfield closed at $ 17. 64, up 72 cents or 4. 26 percent. Both companies trade on the New York Stock Exchange.
Sanderson Farms closed at $ 38. 29, up $ 2. 22 or 6. 15 percent, on the strength of an announced dividend of 14 cents per share. It trades on the Nasdaq.
Pilgrim's Pride is asking lenders to waive the fixed-charge ratio and to continue to provide company liquidity through Oct. 28, the company said in a Thursday news release. A company spokesman did not respond to a telephone request for comment Thursday.
Ann Gilpin, an equity analyst with Morningstar, said the company troubles can be traced to its 2006 purchase of rival Gold Kist for about $ 1 billion.
"Absolutely it can be narrowed down to that," Gilpin said Thursday. "They very much overpaid. We valued [Gold Kist ] at $ 13 per share, and they paid $ 21. And they acquired a bad business." Gilpin said the bulk of Gold Kist's business was in food service, an industry heavy in longterm contracts.
Almost immediately after Pilgrim's Pride bought Gold Kist, the price of grain began to increase but chicken prices remained flat, Gilpin said.
"They've tried to renegotiate the contracts, and they've tried to shorten the terms, but they have been unsuccessful," she said.
Poultry processors like Pilgrim's Pride have incurred heavy losses this year because of rising corn prices, which add to the expense of feeding chickens. Tyson Foods has joined with Pilgrim's Pride in exhorting the government to reverse its subsidized corn-based ethanol fuel program, which they blame for the rise in commodity grain prices.
When asked if the poor condition of Pilgrim's Pride stock made the company a target for sale or takeover, Gilpin said the potential buyers, Tyson or Smithfield Foods, are not in a sound business position to purchase another company.
Plus, an acquisition of the largest chicken processor in the United States might trigger potential action by the federal government to prevent a monopoly of the industry, Gilpin said.
Stephens Inc. analyst Farha Aslam said in a Thursday industry note that the company could raise cash by selling Pilgrim's Pride's Mexican chicken operations and the Texas egg products business.
Aslam said that at the end of the third quarter, the company had liquidity of $ 408 million. She estimated that it was using $ 50 million to $ 100 million in cash per quarter.
The worst-case scenario would include the company going into a bankruptcy restructuring, Gilpin said. Pilgrim's Pride would continue to operate while in bankruptcy, and after a few years some private equity firm could buy the company.
"They have been trying to do the right things to pull themselves out of these problems," Gilpin said.
"They are just so laden with debt. If the banks could be a little lenient with them, it would help. But the Oct. 28 deadline is too soon for any real improvement." Company spokesman Ray Atkinson had said recently that the company lost $ 142 million this year, largely because of the increase in corn prices. In March, Pilgrim's Pride closed a poultry-processing complex in Siler City, N. C., shedding 830 workers and closing contracts with chicken farmers. It also closed distribution centers in five states.
The company said in April that it intended to reduce production by 5 percent because of rising costs.
It had eliminated about 1, 100 positions this year before cutting another 700 jobs at El Dorado this month. One hundred of those job cuts were announced Tuesday.
On Aug. 11, the company said it would cease production and cut 360 jobs at the Clinton processing plant and the feed mill in Atkins.
Former Pilgrim's Pride poultry farmers in Conway, Van Buren, Pope and Perry counties filed suit earlier this month claiming that the company committed fraud when it closed the Clinton processing plant and discontinued contracts.
Tyson announced earlier this year that it would close its Wilkesboro, N. C., plant, eliminating 400 jobs.
Tyson Foods reported in July that third-quarter earnings were down more than 90 percent from a year ago. It had net income of $ 9 million for the quarter that ended June 28, down from $ 111 million for the same period a year ago. In August, Petit Jean Poultry Inc. of Danville said it would close its Buffalo, Mo., chickenprocessing plant with 465 jobs after that company lost its contract with Tyson. In Arkansas, Pilgrim's Pride operates chicken-processing plants in De Queen and Batesville, and other facilities in Nashville and Hope. The company directly employs about 3, 000 in the state and contracts with hundreds of poultry farmers.
http://www.nwanews.com/adg/Business/238446/
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Pilgrim's Pride sees stocks slip into nose-dive
BY STACEY ROBERTS
Posted on Friday, September 26, 2008
Stock values for Pilgrim's Pride Corp. were in a free-fall Thursday after the company said it expects a significant loss in the fourth quarter, so much so that it will not be able to meet debt obligation agreements.
Pilgrim's Pride told its lenders it does not expect to meet its fixed-charge coverage ratio covenant under its principal credit facilities at the end of its fourth quarter, which ends Saturday. A fixed charge coverage ratio is a ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases, according to Forbes' Investopedia Web site.
Trading on the Pittsburg, Texas-based poultry processor's stock was halted Wednesday after it plunged 38 percent to $ 6. 36 a share on the New York Stock Exchange. It closed at $ 3. 84 on Thursday, down another 39. 62 percent.
While Pilgrim's Pride stock was losing value on the markets, rivals Springdale-based Tyson Foods Inc., Sanderson Farms Inc. of Laurel, Miss., and pork producer Smithfield Foods Inc. of Smithfield, Va., saw some stock increases.
Tyson Foods closed at $ 13. 10, up 96 cents or 7. 91 percent. Smithfield closed at $ 17. 64, up 72 cents or 4. 26 percent. Both companies trade on the New York Stock Exchange.
Sanderson Farms closed at $ 38. 29, up $ 2. 22 or 6. 15 percent, on the strength of an announced dividend of 14 cents per share. It trades on the Nasdaq.
Pilgrim's Pride is asking lenders to waive the fixed-charge ratio and to continue to provide company liquidity through Oct. 28, the company said in a Thursday news release. A company spokesman did not respond to a telephone request for comment Thursday.
Ann Gilpin, an equity analyst with Morningstar, said the company troubles can be traced to its 2006 purchase of rival Gold Kist for about $ 1 billion.
"Absolutely it can be narrowed down to that," Gilpin said Thursday. "They very much overpaid. We valued [Gold Kist ] at $ 13 per share, and they paid $ 21. And they acquired a bad business." Gilpin said the bulk of Gold Kist's business was in food service, an industry heavy in longterm contracts.
Almost immediately after Pilgrim's Pride bought Gold Kist, the price of grain began to increase but chicken prices remained flat, Gilpin said.
"They've tried to renegotiate the contracts, and they've tried to shorten the terms, but they have been unsuccessful," she said.
Poultry processors like Pilgrim's Pride have incurred heavy losses this year because of rising corn prices, which add to the expense of feeding chickens. Tyson Foods has joined with Pilgrim's Pride in exhorting the government to reverse its subsidized corn-based ethanol fuel program, which they blame for the rise in commodity grain prices.
When asked if the poor condition of Pilgrim's Pride stock made the company a target for sale or takeover, Gilpin said the potential buyers, Tyson or Smithfield Foods, are not in a sound business position to purchase another company.
Plus, an acquisition of the largest chicken processor in the United States might trigger potential action by the federal government to prevent a monopoly of the industry, Gilpin said.
Stephens Inc. analyst Farha Aslam said in a Thursday industry note that the company could raise cash by selling Pilgrim's Pride's Mexican chicken operations and the Texas egg products business.
Aslam said that at the end of the third quarter, the company had liquidity of $ 408 million. She estimated that it was using $ 50 million to $ 100 million in cash per quarter.
The worst-case scenario would include the company going into a bankruptcy restructuring, Gilpin said. Pilgrim's Pride would continue to operate while in bankruptcy, and after a few years some private equity firm could buy the company.
"They have been trying to do the right things to pull themselves out of these problems," Gilpin said.
"They are just so laden with debt. If the banks could be a little lenient with them, it would help. But the Oct. 28 deadline is too soon for any real improvement." Company spokesman Ray Atkinson had said recently that the company lost $ 142 million this year, largely because of the increase in corn prices. In March, Pilgrim's Pride closed a poultry-processing complex in Siler City, N. C., shedding 830 workers and closing contracts with chicken farmers. It also closed distribution centers in five states.
The company said in April that it intended to reduce production by 5 percent because of rising costs.
It had eliminated about 1, 100 positions this year before cutting another 700 jobs at El Dorado this month. One hundred of those job cuts were announced Tuesday.
On Aug. 11, the company said it would cease production and cut 360 jobs at the Clinton processing plant and the feed mill in Atkins.
Former Pilgrim's Pride poultry farmers in Conway, Van Buren, Pope and Perry counties filed suit earlier this month claiming that the company committed fraud when it closed the Clinton processing plant and discontinued contracts.
Tyson announced earlier this year that it would close its Wilkesboro, N. C., plant, eliminating 400 jobs.
Tyson Foods reported in July that third-quarter earnings were down more than 90 percent from a year ago. It had net income of $ 9 million for the quarter that ended June 28, down from $ 111 million for the same period a year ago. In August, Petit Jean Poultry Inc. of Danville said it would close its Buffalo, Mo., chickenprocessing plant with 465 jobs after that company lost its contract with Tyson. In Arkansas, Pilgrim's Pride operates chicken-processing plants in De Queen and Batesville, and other facilities in Nashville and Hope. The company directly employs about 3, 000 in the state and contracts with hundreds of poultry farmers.
http://www.nwanews.com/adg/Business/238446/
