Clouds Darken Over Pilgrim’s Pride

Brent Finnegan -- September 25th, 2008

STORY UPDATED 5:00pm: As pundits and politicians in DC debate how fast the sky is falling over Wall Street, Pilgrim’s Pride — which employs more than 900 workers in total at their plant and corporate office in Timberville — announce they will post a huge financial loss this quarter.

Pilgrim’s made a few cutbacks in March, but their troubles only worsened over the summer. A year ago, Pilgrim’s stock shares were worth around $34. Today, that stock is worth less than $7.

Over the past year, profits in the meat industry have been eroded by grain prices that were pushed up by increased global demand for livestock feed and grain-based biofuels. The poultry industry in particular has been squeezed, since corn and soybeans are its biggest cost items […]

Another problem for Pilgrim’s is its debt load. In 2006 the company bought rival Gold Kist for about $1 billion, saddling Pilgrim’s Pride with debt, and many analysts now believe Pilgrim’s paid the wrong price for the company at the wrong time. (from the WSJ)

In addition to employees in Timberville, Pilgrim’s Pride buys poultry from about 240 local growers.

7 Responses to “Clouds Darken Over Pilgrim’s Pride”

  1. republitarian says:

    Tysons is also in trouble….

  2. finnegan says:

    “Pilgrim’s Pride stock has now dropped 64% this week.” – MarketWatch

    Here’s the graph of [today’s?] stock activity.

  3. Jeremy Aldrich says:

    Thanks for posting about this. The stock is currently trading at less than $4. At their peak in late August-early September of last year, they were above $40. The volume of stock being traded shows that it’s kind of a fire sale.

    I was relieved by the comments of one analyst who said that even if they go into bankruptcy, it’s likely to be the kind that allows them to reorganize and continue operating rather than shutting down completely. Obviously, that would be devastating for our local economy.

  4. David Miller says:

    Jeremy, Bankruptcy is a form of protection that usually allows for profitable arms of corporations to continue to produce and profit. The trick here is that all stocks are currently “on sale” or like our economy “on fire”. Pilgrim’s Pride may have been mismanaged (taking on 1b in debt) or maybe not. Now would be the wrong time to assume that a company will go bankrupt by their stock price. The great thing here is that these companies have all of these problems because they were allowed to grow so ferociously, buying competitor after competitor, raising prices and then folding under their debt. Same thing going on everywhere. I just wish people would remember that de-regulation and monopoly buster busting -i.e. allowing them to regain their stranglehold led us to this. Guess whose fault it is? Or if you’d rather, what philosophy or mantra or group of persons in power led to this awful chain of events. Also maybe ask yourself if those persons have taken credit for their grievous errors in judgment of have the done otherwise?

  5. Jeremy Aldrich says:

    Uhh…I’m not assuming they’re going into bankruptcy based on their stock price. Their stock price is a reflection of the market’s concern they’ll go bankrupt, because they can’t even pay their bills this month, so of course their lenders don’t want to loan them MORE money. If they don’t have money to pay the debts which are due, they will be in default and be forced to declare bankruptcy, regardless of their stock price at the time.

    Their market capitalization (the total value of the company’s outstanding stock) is currently less than $300 million, and their total debt is around five times that.

  6. David Miller says:

    Jeremy, Thanks for the link. I hadn’t paid any attention to this in particular, just jumped to the conclusion that it was related to the rest of the market crap.

  7. Jeremy Aldrich says:

    Pilgrim’s stock ended yesterday at $1.26 a share, after extending an agreement to bide time with key lenders. The company’s credit was downgraded to “poor quality” by Moody’s Investor Service on Monday. The independent research firm CreditSights said yesterday that there is a “high probability” that the company will file for bankruptcy in December. Cost-cutting measures continue at the company, including from what I’ve heard closing the Timberville plant cafeteria.

    Now for some personal opinion – if the company does end up being restructured in a Chapter 11 bankruptcy, it will be in a much better position than now as the outlook for the poultry industry is looking brighter than it has in a while due to decreased feed and fuel prices as well as an industry-wide production cut that should make production more profitable. I hope whatever changes are on the horizon will be enough to keep the hundreds of area folks around here employed.

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