Why did the chicken cross the road?
To get to the other side so he could sell his shares of Pilgrim's Pride before it was worth NOTHING. Shares of Pilgrim's Pride fell 52.6 cents, or 46 percent, to 62.4 cents before trading was halted on Monday December 1. The company's stock has nearly eroded from its 52-week high of $29.59. Nice job Pilgrim's Pride. Within the year, your stock was trading at $29.59 and was down to 62.4 cents before trading of it was suspended by the New York Stock Exchange.
According to an Associated Press article on Yahoo Finance, "Pilgrim's Pride Corp. filed for Chapter 11 bankruptcy protection on Monday December 1, hurt like other meat producers by volatile feed prices and slumping demand but also hobbled by an unmanageable debt load."
O.K., demand for chicken is down? Really? Is that what people do when the economy starts slipping? They stop ordering chicken on their Caesar Salad and just order a plain cheese pizza at C.P.K. instead of the BBQ Chicken pizza. Maybe so. But I think it's interesting that Pilgrim's Pride, the countries largest chicken producer which controlls some 23% of the chicken market, is bankrupt. What is up with all of our huge corporations? AIG, The Big Three Auto companies and now Pilgrim's Pride. They all get run into the ground because they're run on CREDIT. As a country, we need small businesses to flourish because that's what truly keeps the economy moving. The little companies, the ones that are usually run without much credit. When a small company makes a profit, they might pay some bonuses, expand or even give raises to it's employees. But what do the big companies do? Pilgrim's Pride did $2.17 billion in business in their 4th quarter. That's $8.5 billion per year. That's a pretty big business. But how much of that business is run on CREDIT? Money that Pilgrim's Pride doesn't have? They borrow and borrow and borrow so they can keep going. Sounds a lot like the american consumer, which has managed to increase personal debt 400% since 2000. Nice. Because of course, we all know that operating at a loss, with huge debt is the AMERICAN WAY. Just look at the Airline industry. They operate at a loss every quarter, yet they continue to stay in business. Why is it that the government is afraid to let these huge companies fail? If Pilgrim's Pride were to fail, do you think all the chicken in your grocery store would vanish? Doubtful. "See a need, fill a need" (Robots) some chicken producer like Tyson would step in and fill the void. And that would be a good thing, because then Tyson and other producers would have a increase in sales. Good for them. What's sad about filing for Chapter 11 is that all of the money owed to creditors before the filing is basically wiped out. So all of the little companies that Pilgrim's Pride owes money to, companies that really need that money to survive, will be left out in the Texas sun. Yet Pilgrim's Pride will get to continue to operate and only have to pay on the new debt. I wonder how many of those smaller companies will fail, yet we'll never read about them. And I also wonder if under their bankruptcy filing, Pilgrim's Pride CEO and president Clint Rivers gets to keep his job. Seems like he hasn't done a very good job this past year. Maybe it's time they sell off their assets and let the other companies, like Tyson, pick up the slack.
Subscribe to:
Post Comments (Atom)
1 comment:
their major debt problem comes from a billion dollar acquisition last year. when the economy started to drastically slow, the projected gross profits weren't there to service the financing. this is because, grain/feed prices had a sharp increase in '07 and remained high to the middle of '08. this crippled profits because the price of a fryer is closely related to the price of feed because it is slaughtered between 6-8 weeks. higher feed cost, higher chicken cost, lower profits. also, pilgrims couldn't just raise prices to $7 per pound. that would leave a huge inventory of processed chickens and chickens on feed, which would end up, ultimately, slowing down the cash flow more than just selling them at a lower profit. this is in addition to customers paying more for gas, cereal, etc. thus, having less money for everything. customers actually couldn't buy as much as they used to be able to while profits were razor thin. profitability was also hurt by the sharp rise of transportation costs. however, in the past few months, grain has plummeted in price as has petroleum. they probably think that if they can slow the outflow of cash, they can become profitable enough to start paying back the debt since 2 of its major problems, feed and transportation, have resolved themselves. it might be smart to follow their progress, they could soon become a stock to buy. you're right, people are still going to eat chicken. Pilgrims pride knows how to get it to them.
Post a Comment