Weak export market dents Pilgrim’s profits

By Oscar Rousseau

- Last updated on GMT

Related tags: Net sales, Generally accepted accounting principles, Poultry

Pilgrim's CEO Bill Lovette has also confirmed a target for capital spending in 2016
Pilgrim's CEO Bill Lovette has also confirmed a target for capital spending in 2016
Strong headwinds in the poultry export market hit Pilgrim’s Pride’s annual profits, but a strategy to expand in the booming Mexican market validates its growth strategy, the company claims.  

It was a mixed bag of financial results for the US-based company Pilgrim’s Pride, which posted its fourth quarter and yearly results on Wednesday 10 February.

The company, which claims to be the biggest chicken producer in America and Puerto Rico, and the second-largest in Mexico, recorded falls in net sales and gross profit when compared to 2014. However, the dip in financial results was modest and Pilgrim’s Pride said its results demonstrated a “solid year-on-year performance, despite a much softer market environment.​”

Commendable performance

Our case-ready and small bird operations continued to deliver strong results in spite of challenges in the export markets, while the weakest chicken cutout in the past five years continued to impact the commodity segments of our business, as well as our Mexico operations,​” said Bill Lovette, CEO of Pilgrim’s.

Despite the headwinds, our team managed to deliver margins that are above periods when prices were at similar levels. Our performance is commendable and strongly validates the benefits of our strategy.​”

In June2015, GlobalMeatNews reported​ Pilgrim’s Pride had been cleared by the Mexican government to complete its acquisition of Tyson Food’s company Tyson de México.

Commenting on the takeover, Lovette said the investment helped to “improve our geographic diversification and competitiveness in one of the strongest emerging markets… signifying our commitment to maximising shareholder value creation while remaining financially disciplined​”.
 
Profits down

Pilgrim’s reported net sales of $8.18bn and pre-tax profit of $645.9m in its trading results for 2015, published late on Wednesday evening in the US. The trading figures mark decline in both areas with Pilgrim’s Pride posting net sales of $8.58bn and pre-tax profits of 711.6m in its 2014 results.

The NASDAQ-listed company also reported adjusted earnings per share of $2.60 in 2015.

The implementation and execution of our portfolio model over the past five years is critical in supporting our ability to deliver stronger profitability while giving more consistent financial results, as we minimise the impact of specific market conditions in any given segment or geography,"​ added Lovette.

For example, as part of this operating strategy, in fresh chicken we are able to leverage our well-balanced mix of bird sizes to support key customers’ needs, while in prepared foods we could utilise our well-regarded Pierce brand to lead our efforts in building and solidifying relationships at key accounts.​”

Pilgrim’s CEO Bill Lovette also confirmed he has approved a target for capital spending in 2016 to enhance growth and capitalise on its return on investment

Our team has identified $185m in operational improvements for 2016, to build on the over $1billion in cumulative improvements we have made to the business in the last five years. We are committed to reinvesting our strong cash flow generation back into the business with the goal of more closely aligning with this strategy and optimising our capital allocation, while remaining on track on the relentless pursuit of operational excellence,​” he added.

Related topics: Meat

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