Pilgrim’s Pride to close three chicken plants, lay off 3,000

Pilgrim’s Pride to close three chicken plants, lay off 3,000
By Meatingplace Editors on 2/27/2009
Pride, which is reorganizing under bankruptcy protection, on Friday
said it would idle three U.S. chicken processing plants and lay off
3,000 workers, reducing its production by as much as 10 percent as the
recession takes its toll on consumer demand.

Shuttering the three plants, which are slated to close by mid-May,
is expected to generate savings of $110 million a year as the company
works to slash costs in an effort to emerge from bankruptcy, Pilgrim’s
Pride said. The plants are in Douglas, Ga., El Dorado, Ark., and
Farmerville, La.

“The idling of these three plants is a painful reflection of the
unprecedented challenges facing our company and our industry from an
excess supply of chicken and weakening consumer demand resulting from a
crippled economy,” Pilgrim’s Pride Chief Executive Don Jackson said in
a news release.

Each of the three plants produces bulk fresh chicken sold on the
spot commodity market. Their closing will reduce total pounds of
chicken produced by the company by 9 percent to 10 percent, Pilgrim’s
Pride said.

“The actions announced today will reduce our production of
low-value, commodity meat that is a financial drain on the company
without affecting any of our core business lines or customers,” Jackson

Pittsburg, Texas-based Pilgrim’s Pride filed for Chapter 11
bankruptcy protection in December 2008 after struggling with high feed
grain costs, low meat prices and a large debt.

The company operates 32 plants, and the three closings will affect roughly 7 percent of its total U.S. workforce.

The company’s 900 workers in Douglas, 800 in El Dorado and 1,300 in
Farmerville will be permanently laid off, Pilgrim’s Pride spokesman Ray
Atkinson told Meatingplace.

However, the plants are being idled, not permanently shuttered, and
could re-open down the road if the production capacity is needed again,
Atkinson said.

About 430 independent contract growers who supply birds to the three

plants also will be affected, the company said. But it noted there
will be no disruption in supply to its retail, food service and
industrial customers.

The company also will move production of its chicken and tuna salad prepared products from Franconia, Pa., to its facility in

Moorefield, W. Va., affecting an additional 100 employees, Atkinson
said. The Franconia operation will be closed permanently as those
operations are consolidated, he said.

J.P. Morgan analyst Ken Goldman said the moves by Pilgrim’s Pride
are welcome news for the U.S. poultry industry, removing about 2
percent of overall production.

As a result, egg sets should begin to decline by about 8 percent to
9 percent in a couple of months, assuming that no competitors ramp up
production, Goldman said in a research note.

“This should help boosts prices and producer margins,” he said.

Pilgrim’s Pride expects to incur one-time, pre-tax restructuring
charges of about $35 million, before any potential asset impairment
charges, primarily in the second quarter of fiscal 2009.