Reporting its results for the fourth quarter, Gold Kist revealed that its profits took a nosedive, dropping from US$25m, or $0.49 per share last year, to $3.2m, or £0.06 per share, this year due to increasingly hostile market conditions.
The company posted adjusted net income of $7.8m, or $0.15 per diluted share for the fourth fiscal quarter. Adjusted net income is a non-GAAP measure that excludes a share-based compensation expense and costs associated with the unsolicited acquisition proposal from Pilgrim’s Pride and exploration of strategic alternatives incurred during the quarter.
Fourth quarter net sales were $544.3m, compared with $582.7m for the quarter ended October 1, 2005.
For the full year, Gold Kist reported net sales of $2.13bn, a 7.7% decline year-on-year, and a net operating loss of $27.5m, compared with a net operating income of $205.6m for fiscal 2005. This year’s net losses totalled $17.7m, or $0.35 per share, compared with net income of $112.2m, or $2.22 per share, for fiscal 2005.
“Conditions in the poultry industry changed significantly in fiscal 2006 following the two best years in the company’s history,” said John Bekkers, president and chief executive officer. “In fiscal 2006, an oversupply of broilers and competing meats led to a decline in broiler prices. The decrease in net sales was due to a decline of 8.3% in average broiler prices for fiscal 2006. We believe concern about avian influenza in export markets was the primary cause for reduced consumption in those markets, which further contributed to greater domestic supply and lower sales prices for the year.”
Declining demand and dropping poultry prices combined with increased costs that the company was unable to off-set, Bekkers explained. “Processing costs continued to increase for the fiscal year due to higher utilities, freight and packaging costs,” he said.
Looking to the future, the company said that it hopes to sidestep the impact of a volatile commodities market by increasing its focus on value-added products.
“We continue to believe that our strategy of increasing value-added and private-label products, along with improving productivity, will help offset some of the impact of the latest industry downturn.
“With the opening in November 2006 of a $70m, 180,000-square-foot expansion at our poultry processing facility in Live Oak, Florida, and the September 2006 opening of our $30m, 80,000-square-foot expansion in Guntersville, Alabama, we mark the completion of two important steps in the execution of our strategic capital expenditure plan. Both of these plants add substantial capacity for producing value-added products and products that will be sold at retail markets under private labels,” Bekkers said.