Production increases, prices boost Sanderson Farms

by Keith Nunes
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LAUREL, MISS. — Increased production from Sanderson Farms, Inc.’s facility in Kinston, N.C., combined with higher poultry prices led to a profitable second quarter for the company. For the quarter ended April 30, the chicken processor recorded net income of $23,865,000, equal to $1.04 per share on the common stock. The results compared favorably to the same period during the previous year when Sanderson Farms recorded a loss of $16,276.000.

Sales for the quarter increased significantly to $595,046,000, up 24% from $479,342,000 the previous year.

“The results for our second quarter of fiscal 2012 reflect improved market conditions driven primarily by a decrease in the supply of poultry products,” said Joe F. Sanderson Jr., chairman and chief executive officer of Sanderson Farms. “Our net sales were 24.1% higher than during the second quarter of fiscal 2011, reflecting increased production and higher average sales prices of chicken. We sold approximately 10.8% more pounds of poultry products during the quarter as a result of increased production at our Kinston, N.C., facility. This increase was partially offset by our previously announced 4% production cut at our other facilities.

“Demand for chicken remains steady from retail grocery store and export customers. However, demand from our casual dining customers remains soft, and we expect this trend will continue with macroeconomic concerns and continued high unemployment affecting consumers’ spending decisions.”

Mr. Sanderson said market prices for poultry products were higher during the second quarter of fiscal 2012 compared with the same quarter a year ago. As measured by a simple average of the Georgia Department of Agriculture’s Georgia “dock” price for whole chickens, prices increased approximately 7.5% in the company's second fiscal quarter compared with the same period in 2011. Bulk leg quarter market prices were 22.4% higher compared with last year’s second quarter, and reflected continued strong export and demand.

Boneless breast meat prices during the second quarter were 2.3% higher than the prior year period. Jumbo wing prices were up 121.5% for the second quarter of 2012 compared with the same period last year. Prices paid for corn and soybean meal, the company’s primary feed ingredients, decreased 6.44% and 15.19%, respectively, compared with the second quarter of fiscal 2011.

“Looking ahead, we will continue to closely monitor the chicken markets and production levels as we head into the summer months and what is typically a period of better demand for chicken” Mr. Sanderson said. “Weekly broiler egg sets continue to run below last year’s numbers, and breeder placements are lower. With economic conditions continuing to affect consumer behavior, we expect to see continued soft casual dining demand. However, market prices for boneless breast meat sold to our food service customers improved seasonally the first two weeks of May, and market prices for retail grocery store product have also moved higher. We believe these market improvements are supply driven and, while market conditions remain fluid, we will maintain our focus on our operating performance and sales execution.”

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