S&P: Protein sector challenged

Standard & Poor's said that Tyson Foods Inc. (BBB/negative/A-3) and Pilgrim's Pride Corp. (BB/stable) have reported net losses for the second quarter of fiscal 2006.

In addition, the agency said Smithfield Foods Inc. (BB+/stable) issued an earnings warning on April 28 for its fourth-quarter results because of a glut of hogs and other proteins.

Gold Kist Inc. (B+/stable) will soon announce earnings and S&P said it expects the company will follow the other industry participants.

S&P noted that the sector has been challenged over the past two and a half years on a number of fronts, including Mad cow disease as well as the drop in global demand for poultry products due to avian influenza concerns.

Throughout all this, however, credit protection measures for most of the rated protein companies have not weakened materially, the agency noted, adding that, still, the coming weeks could potentially determine whether the industry has hit its trough and will begin a cyclical upswing, or whether the bottom will last longer than currently expected.

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