GREELEY, Colo. – In a period of low cut-out values, export restrictions and low prices, Pilgrim’s Pride Corp. is looking beyond fresh chicken to diversify its product portfolio and improve operations. The company plans to focus most of its capital expenditures on growing its prepared foods business, said Pilgrim’s CEO Bill Lovette during a conference call with analysts. Pilgrim’s also sees the potential for export markets to reopen to US poultry exports.
Lovette said Pilgrim’s is on track to grow and support rising demand for prepared foods from key customers. “Our team is focusing their efforts on leading regional and national chain operators, school food service, and main broad-line distributors as the major customer segments,” he said.
|Bill Lovette, CEO, Pilgrim's Pride Corp.|
“To support this strategy, a significant portion of our CapEx over the next two years will be dedicated on investments that will enhance our prepared foods capacity and efficiency and improve our well-regarded Pierce brand,” he added. “We believe this approach, when paired with our enhanced agility to grow versus buy when financially optimal, will create an earnings profile that is much more resilient to volatility. This was definitely reflected in this quarter’s results.”
The company also is staying the course on its strategy of growing value-added exports despite export restriction imposed following an outbreak of highly pathogenic avian influenza in the United States. Lovette said value-added exports have helped the company become less dependent on bulk leg quarter market pricing.
“We remain on target to further reduce our reliance on commodity exports while continuing to make investments in increasing our non-commodity leg meat business and expect to have the capacity to debone over half of our jumbo leg quarters by the end of this year for both domestic and export consumption, and process the rest in the whole legs assuming the best cut-out,” Lovette said. He added the approach enables the company to increase its options for exports and generate higher margins in pure commodity products.
Looking ahead to the fourth quarter, Lovette said Pilgrim’s is planning upgrades at another of the company’s facilities. Improvements will include modernizing the lines and improving quality through process technology to improve alignment with key customers. He said the company is on target to achieve $200 million in operational efficiencies “despite non-routine start-up costs and a large newly retooled plant and an extended shutdown at our largest facility for structural maintenance last quarter.”