Sanderson Farms returns to profitability

by Staff
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LAUREL, MISS. — Efficient company management, lower feed costs and industry-wide production cuts, which resulted in a reduced supply of chicken in the market, helped Sanderson Farms Inc. "return to profitability" during its second quarter of fiscal 2009, said Joe F. Sanderson Jr., chairman and chief executive officer. Net income for the second quarter ended April 30 was $26,216,000, equal to $1.29 per share on the common stock, up sharply from $6,217,000, or 31c per share, in the same period a year ago.

Net sales for the second quarter were $426,759,000, down 2% from $433,876,000.

For the first six months of fiscal 2009, net income totaled $19,467,000, or 96c per share, up from income of $12,439,000, or 61c per share, for the first six months of fiscal 2008. Net sales for the first six months of fiscal 2009 were $815,643,000, which compared with $796,442,000 for the first half of fiscal 2008.

Demand for chicken at grocery stores remains strong and the export market improved compared to the company’s first quarter, Mr. Sanderson said.

"However, as in the previous two quarters, demand from some food service customers has been adversely affected by the economic downturn, as demand for protein consumed away from home remains soft," he added. "We also benefited from lower feed costs during the quarter compared with a year ago."

Mr. Sanderson said market prices for poultry products were higher during the second quarter of fiscal 2009 compared with the first quarter of the year. But prices were mixed compared to prices one year ago.

Prices, as measured by a simple average of the Georgia dock price for whole chickens, increased approximately 6.1% in the company’s second fiscal quarter compared with the same period in 2008. Bulk leg-quarter prices were lower by 18% compared with last year's second quarter. Boneless breast-meat prices during the quarter were approximately 5% lower than the prior year period. Jumbo-wing prices remained strong and averaged $1.39 per lb. during the second quarter of fiscal 2009, compared with the average of 97c per lb during the second quarter of fiscal 2008, representing an increase of 43%.

The company’s costs for primary feed ingredients — corn and soybean meal — dropped 23% and 14%, respectively, compared with the second quarter one year ago.

Mr. Sanderson said he is "cautiously optimistic" heading into the summer, which is typically a period of better demand for chicken.

Since broiler egg sets have continued to be lower, this indicates continued lower supply levels, he added.

"While our industry has never gone through the summer demand season with 5% to 6% less chicken, we have also never gone through the summer months with the economy and the American consumers as uncertain and cautious as they are today," Mr. Sanderson concluded.

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