May 29, 2006
Sanderson trims expenses after suffering US$25 million loss in Q2
Poultry processor Sanderson Farms reported that net sales for the company's fiscal 2006 second quarter are at US$225.1 million, 13 percent lower than the US$259.2 million for 2005 second quarter.
Net loss for the first half of the year totaled US$25.3 million compared with net income of US$36.6 million for the first six months of last year.
The results reflected a difficult market environment for the chicken processing industry, said Joe Sanderson Jr, chairman and CEO of Sanderson Farms
Low demand for poultry products in the domestic market, coupled with the decline in exports have depressed market prices, Sanderson said.
According to a company news release, overall market prices for poultry products were significantly lower in the second quarter of 2006 compared with prices a year ago.
Prices fell 7.3 percent in the company's second fiscal quarter compared with the same period in 2005. Bulk leg quarter prices declined 43.1 percent during the quarter compared with last year's second quarter. Boneless breast meat prices during the quarter were approximately 30.1 percent lower than the year-before period.
At the same time, prices for corn -- the company's primary feed ingredient -- increased 6.5 percent compared with the second quarter one year ago.
While current market conditions are better than those experienced in the second quarter, they remain challenging, Sanderson said.
Smithfield is reducing its production levels at all its bird deboning plants and at its chill-pack plant in Mississippi.
Weekly production would be scaled down 4.3 percent to balance production with market demand.
Sanderson said it has also identified opportunities to reduce its expenses without compromising product quality, customer service, or long-term operations.
Additionally, it has postponed construction of its new poultry complex in Waco, Texas, for 90 days, which would defer US$29 million of capital expenditures to fiscal 2007.
