The plants to be closed within 60 to 75 days are located in Douglas, Georgia, El Dorado, Arkansas, and Farmerville, Louisiana. They employ some 3,000 people, or roughly 7 percent of the company's total U.S. workforce. Some 430 independent contract growers who supply birds to these three plants also will be affected, the company said.
No disruption in supply to foodservice customers is anticipated, as the closings will only eliminate production of excess commodity chicken, according to the company’s statement. Pilgrim’s Pride plans to keep the plants idle until it believes that additional production capacity is needed.
The company expects to generate annualized net savings of approximately $110 million from idling these three plants and to incur one-time, pre-tax restructuring charges of approximately $35 million, before any potential asset impairment charges, primarily in the second quarter of fiscal 2009. This includes approximately $8 million of estimated non-cash restructuring costs.
"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."
When completed, the idling of the three plants will result in a reduction of approximately 10 percent 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.