(Bloomberg) -- Pilgrim’s Pride Corp., the second-biggest U.S. chicken producer, was on track for the biggest drop in more than a month after second-quarter revenue missed analyst estimates.
Pilgrim’s was unable to process its chickens as it usually would, leading to suboptimal “mix” of chicken-product sales, the company said. Thousands of workers at American meat plants caught the virus and prompted shutdowns at major beef- and pork-processing plants. That disrupted production even if the labor crunch in the chicken sector was more limited
The company posted a loss of 2 cents a share, not adjusted, a statement Wednesday showed. Analysts were expecting a profit of 1 cent per share. The period was the first to show the full impact of the coronavirus pandemic on results.
Shares slumped Thursday by as much as 8.3%, before trimming losses to trade 6.7% lower at $15.13 as of 11:56 a.m. in New York.
In the U.S., the market was significantly challenged in the first half of the quarter before a gradual loosening of travel and movement restrictions drove an improvement in demand, especially from food service, the company said.
“After a very challenging beginning of the quarter, markets have adapted. During the month of June, results were quite encouraging and showing a noticeable improvement globally,” Fabio Sandri, interim chief executive officer for Pilgrim’s, said in the statement.
“Compared to June of last year, the U.S. was roughly the same, Europe slightly better and Mexico in-line, even when considering all the disruptions, less than optimal product mix, and added operating costs because of Covid-19,” he said.
Strong sales at quick-service restaurants should help the company in the third quarter even as it faces more protein competition from recovered beef and pork plants and still-volatile conditions in food service, Sandri said.
Key Insights
In the U.S., large bird deboning was once again the most volatile this quarter, with quick moves between the lows and the highs, and remained challenging compared to 2019.Deboning on dark-meat cuts such as leg quarters declined as food-service sales slowed. That resulted in more leg quarters shifting to export markets, which pressured prices.The company didn’t address an antitrust investigation by the U.S. Justice Department into price-fixing allegations.Jayson Penn, the company’s CEO currently on a leave of absence, was charged by U.S. prosecutors with conspiring to fix prices.The paid leave started last month, and Chief Financial Officer Fabio Sandri is acting as interim CEO.Europe operations performed in-line with last year, driven by strong retail demand.Operations in Mexico continue to struggle amid an unfavorable macroeconomic environment, while local currency moves also put additional pressure on results.
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Click here for the earnings statement
(Updates with share prices, details from analyst call starting in fourth paragraph)
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