With net sales reaching $8.1 billion, a net income of $174.2 million and a $327.8 million reduction in debt, Lovette was proud of the company’s performance in 2012. “The improvement in our 2012 results was driven largely by operational efficiency,” Lovette said, indicating the company surpassed its 2012 efficiency goals. “This helped us offset a $260 million feed cost increase over 2011.”
The goals are similar for this year, with an efficiency plan that if carried out would save the company $125 million, giving it a cumulative improvement of $635 million since 2010. “We intend to grow our business with margin in mind, not market share,” Lovette said during a February 15.
Citing the expenses involved with producing live poultry, Lovette told shareholders the company may make some grow-or-buy decisions during the upcoming year.
“We will do what is most agreeable to margins with respect to growing a live chicken, or purchasing meat in the open market,” he explained.
Lovette reported that the company has changed how it manages its boneless operations, and has been able to more efficiently reduce the amount of meat trimmed from each bird in the process. Another way to increase revenues for 2013 is through more value-added products. He is optimistic those products can earn more money from overseas markets because of global population growth and higher dietary protein inclusion rates for people in developing. The company’s goal is to grow sales of value-added exports by 30 percent.
Pilgrim’s plant operations in Mexico, which have been executing at a high level, are being looked to as another part of the growth strategy. Charles Vanderhyde was hired in January as head of Mexican business unit, Lovette added, saying he has the understanding of world markets to help them grow.
Addressing a pair of questions about 2012 outbreak of avian influenza in Mexico and how it may impact business there, Lovette said the company has been concerned about the disease since it broke into the table egg industry last year, and has stepped up the monitoring of its farms and increased biosecurity measures. As of now, there are no cases of avian flu among Pilgrims’ breeders.
If there continues to be avian influenza spread into the table egg industry, or if it reaches the broiler industry in Mexico, it would lead to a decrease in broiler supplies and a subsequent increase in poultry prices.