Sanderson Farms profits from improved prices, volume

by Keith Nunes
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LAUREL, MISS. — Improved prices for Sanderson Farms’ finished poultry products combined with increased production volume due to the start-up of the company’s processing complex in Waco, Texas, this past August combined to help the poultry processor improve its earnings for the first quarter of fiscal 2008. For the quarter ended Jan. 31, the company had net income of $6,222,000, equal to 31c per share on the common stock, which compared with a loss of $2,849,000 for the same period last year.

Sales for the quarter were $362,566,000, up 24% from $292,711,000 in the same period a year ago.

"The results for the first quarter of fiscal 2008 reflect improvement in poultry prices over the same period last year, although we still faced, and will continue to face, much higher grain costs," said Joe F. Sanderson Jr., chairman and chief executive officer. "We continue to see higher and more volatile prices for corn and soybean meal, our primary feed ingredients, and the significantly higher costs affected our profitability during the quarter."

The Waco facility is still in the start-up phase of production, but Mr. Sanderson said it remains on schedule to achieve full production during the fourth quarter of fiscal 2008. With the additional capacity, Sanderson Farms will be able to process 18% more pounds of chicken during fiscal 2008 compared to fiscal 2007.

"While chicken prices were higher during our first quarter compared with the same period last year, we expect our feed costs will continue to rise," Mr. Sanderson said. "The demand for corn from ethanol producers is affecting market prices for corn and soybeans. While we remain confident that the chicken and grain markets will strike a favorable balance over time, we recognize there will be periods when that is not the case."

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