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Sanderson Farms swings to profit

Published on 25 August, 2009, Last updated at 02:13 GMT
 

Chicken producer Sanderson Farms Inc. reported Tuesday it swung to a quarterly profit compared to a year ago, helped by a combination of lower feed-grain costs, higher poultry prices, and supply cuts.

For the quarter ended July 31, Sanderson posted net income of $43 million, or $2.09 a share. It lost $3.6 million a year ago when U.S. chicken suppliers suffered from oversupply, record-high prices for corn and soybean meal, and weak demand from sit-down restaurants. Sales rose 8% to $504.8 million for the quarter.

The results beat Wall Street's estimate for Sanderson (SAFM 38.19, +0.10, +0.26%) to earn $1.51 a share on sales of $470 million, according to a FactSet analyst survey.

U.S. chicken producers are doing better after supply cuts and former pricing. The poultry unit at Tyson Foods /quotes/comstock/13*!tsn/quotes/nls/tsn (TSN 12.70, +0.32, +2.58%) reported its first operating profit in more than a year for the quarter ended June 27.

Sanderson said whole chicken prices rose 2.3% from a year ago, while boneless breast meat prices increased 3.4%. The company said its cash market prices for corn and soybean meal dropped 26.7%. Sanderson does not hedge its feed-grain costs through use of options or derivatives on the financial commodity exchanges.

Sanderson said its Waco, Tex. chicken plant is now operating at full capacity. This year, it had been running the two-year old plant at almost full throttle while cutting production by 14% at its Mississippi and Louisiana plants, a move to restore profit.

The company is more optimistic. Last month, Sanderson restarted plans to build a new chicken facility in Kinston, N.C. It had put those plans on hold when poultry demand faltered and the company looked to conserve cash.

 

 
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