Pilgrim’s Pride Corp. plans to idle three of its 32 US chicken processing plants by mid-May as part of the reorganisation of the ailing US poultry group.
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The idling of what the company has called “these three underperforming plants” is intended to reduce production and to significantly reduce costs in the midst of an industry-wide oversupply of chicken and weak consumer demand.
Pilgrim’s Pride expects to generate annualised net savings of approximately US$110m from idling these three plants and to incur one-time, pre-tax restructuring charges of approximately $35m, before any potential asset impairment charges, primarily in the second quarter of fiscal 2009. This includes approximately $8m of estimated non-cash restructuring costs.
The plants that the company plans to idle within 60 to 75 days are located in Douglas, Georgia; El Dorado, Arkansas; and Farmerville, Louisiana. The plants employ a total of approximately 3,000 people – or roughly 7% of the company’s total US workforce.
Pilgrim’s Pride said it will provide transition programmes to employees whose positions are eliminated.
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By GlobalDataApproximately 430 independent contract growers who supply birds to these three plants also will be affected.
The company said there will not be any disruption in the supply of product to retail, foodservice and industrial customers as a result of the idling of these plants, since these changes will only eliminate production of excess commodity chicken. The company plans to keep the plants idle until it believes that additional production capacity is needed.
“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,” said Don Jackson, president and chief executive officer. “Simply put, we are producing too much commodity chicken in what is a very weak market. 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.”
The idling of these three plants, when completed, will result in a reduction of 9% to 10% in total pounds of chicken produced by the company.
In addition, the company announced it will be consolidating its protein salad production from Franconia, Pennsylvania. to its further-processing facility in Moorefield, West Virginia.
“We recognise the pain and uncertainty that the idling of these plants will have on our employees and growers at these locations, as well as on the surrounding communities. It is a devastating situation, and we sincerely wish that such actions were not necessary,” Jackson said.
“But the reality is that our country is arguably facing the most significant financial crisis since the Great Depression, with consumer spending on food dropping at its steepest rate in more than 60 years. We are taking decisive steps now to protect the greatest number of jobs and growers in order to restructure our business and ultimately emerge from Chapter 11 as a stronger, more efficient competitor.”
As previously reported, the company filed voluntary Chapter 11 petitions in December.
