UPDATE 3-Pilgrim's Pride profit down 38 pct, shares fall

* Q2 profit 15 cents/share, down 38 pct from year ago

* Rev $1.71 billion vs yr-ago $1.78 billion

* To increase production 10 pct over two years

* Packing chicken for export to Russia

* Shares down 2 pct after dropping as much as 16 pct (Revises first sentence, adds analyst comments, industry details, updates stock price)

By Bob Burgdorfer

CHICAGO, July 30 (Reuters) - U.S. chicken producer Pilgrim's Pride Corp (PPC.N) reported sharply lower second-quarter profit on Friday, hurt by production cuts made last year, lower prices for some export items and restructuring costs.

Shares fell as much as 16 percent, even though the company said it had controlled costs and improved operating efficiencies.

Pilgrim's Pride, the No. 2 U.S. chicken producer, was in bankruptcy last year, when it closed plants and cut production. It has recovered much of the business lost during the reorganization and is preparing to reopen three plants in the next two years which will increase production by 10 percent.

As part of the reorganization the Colorado-based Pilgrim's Pride is now controlled by Brazilian meat producer JBS SA (JBSS3.SA), which owns 64 percent of the stock.

Retail and food service sales and volume improved from the first quarter, and it is adding new higher-margin products in the current period, the company said.

"We are seeing improved demand across all of our segments," Chief Executive Don Jackson told analysts on a conference call. "Retail demand remains solid, volume was up 2.7 percent in the quarter and food service increased 3.1 percent in the quarter versus Q1."

'IT WAS A POSITIVE NUMBER'

The company earned $32.92 million, or 15 cents per share, in the quarter ended June 27, down 38 percent from $53.24 million, or 72 cents a share, a year earlier, when Pilgrim's Pride had fewer shares outstanding.

Wall Street expected 18 cents per share, according Thomson Reuters I/B/E/S.

"They are still in the process of recovering, but it was a positive number and that is important," Paul Aho, economist with the consulting firm Poultry Perspective, said of the results. "It certainly sounds plausible that they are headed down the right track."

Revenue fell to $1.71 billion from $1.78 billion.

Earnings included a charge of nearly $17 million, or 5 cents a share, mostly from the closing of office buildings in Texas and Atlanta related to the company's previously announced headquarters relocation to Greeley, Colorado.

Jackson said the chicken industry should be strong, with industry-wide production estimated to be up 2.7 percent in 2010.

CHICKEN GOING TO RUSSIA

U.S. chicken exports to Russia and China were largely halted much of this year as Russia banned the meat because of a chlorine rinse and China applied tariffs claiming U.S. producers were selling the meat there at below cost.

Those two actions drove down prices for dark-meat leg quarters and wings, said Aho.

Russia lifted its ban in June when U.S. chicken companies agreed to use other treatments. But it was only in the past week that U.S. plants were cleared to ship there.

On Friday, Jackson said the company is now packing chicken for Russia and the August production for that country is sold out. It also is "booking orders for September at prices above August."

Pilgrim's Pride entered bankruptcy in late 2008, hurt by high feed and fuel costs, slowing meat sales and large debt.

The company and its competitors cut production in 2008 and 2009 to cope with higher costs and slow sales. Pilgrim's Pride closed and sold plants then, but earlier this year said it will reopen three of them.

Shares of the company were down 1.9 percent at $6.83 on the New York Stock Exchange on Friday afternoon, off an earlier low at $5.85. (Reporting by Bob Burgdorfer; Editing by Lisa Von Ahn, Steve Orlofsky and Matthew Lewis)