Oversupply Won?t Beat Simmons Foods, CEO Says

Lindy “Buddy” Pilgrim, CEO of Simmons Foods Inc. of Siloam Springs, says all meat-producing companies are experiencing ups and downs. But Simmons, he says, is in no danger of being buried by the current downward trend.

The meat glut being experienced through the industry has taken its toll on a number of companies in 2000. But Pilgrim said his company was too strong to be beaten by the latest problem.

“There will be some companies that will not weather this cycle,” Pilgrim said. “We will. The markets are weak right now. But we’ve got a good management team here. I’m pleased to be here because we’ve got a good future.”

Pilgrim joined Simmons in February after serving as chief operating officer for Pilgrim’s Pride Corp. in Texas.

He insisted that Simmons is financially strong and added that the company had weathered many ups and downs in its 51-year history.

“When times are tough, you batten down the hatches and weather the storm,” Pilgrim said. “The chicken industry is a cyclical business.”

Simmons Foods had $420 million in gross sales for 1999, up 5 percent from $400 million in 1998.

John Bierbusse, an analyst with AG Edwards & Sons in St. Louis, said small poultry companies could handle the problem by doing the same thing the big ones were doing about it.

“Suffer,” Bierbusse said. “Or act rationally. Take your choice.”

But when asked what route he believed most of the poultry companies had chosen, Bierbusse said, “Suffering.”

The trouble started in the industry in 1999 when companies took their returns on profits from 1998 and put them into expansion.

“It’s difficult to absorb such a big increase in expansion,” Pilgrim said. “The industry’s expansion increase was 6 percent in 1999 and will be about 5 percent in 2000. We really need to be growing about 2.5 or 3 percent in order to sustain profitability.

“We’ve already had a reduction in pullets as a whole. We can look out six months at any given time when the chickens are coming of age. And the spring of 1999 levels will be back by about April of 2001. There’s going to be four or five more months of soft markets, then we should retain normal profit accessibility.”