August 31, 2006

 

Gains in Sanderson Farms's third quarter likely to stem losses for the year

 

 

Sanderson Farms reported a US$4 million increase in third-quarter sales, reviving hopes that the year-to-date decline chalked up so far would be limited when the year closes.

 

Sanderson Farms Inc. reported net sales for its 2006 fiscal year third quarter at US$281.0 million. For the quarter, the company reported net income of US$3.3 million, down sharply from the US$24.0 million for the third quarter of fiscal 2005.

 

Even as the company's sales for the first nine months of the year fell by US$34.4 million (from US$790.7 million last year to US$756.6 million this year), it incurred a net loss of US$22 million compared to the net income of US$60.6 million last year. 

 

Sanderson's performance during the third quarter of fiscal 2006 reflects improved market conditions during June and July, Joe Sanderson, Jr., chairman and CEO of Sanderson Farms said.

 

While market prices for all poultry products were lower during the quarter than the same time last year, they have improved compared with the first two quarters of fiscal 2006.

 

Production cuts announced in May have been implemented and the company would continue to look for ways to lower costs, Sanderson said.

 

Prices for whole chickens fell by 6.8 percent in the company's third fiscal quarter compared with the same period in 2005, and were lower by 6.1 percent for the first nine months of the fiscal year compared with the year-earlier period.

 

Prices for boneless breast, wings and bulk leg quarters fell compared with prices a year earlier.

 

Meanwhile, prices for feed ingredients corn increased 6.3 percent while soymeal remained flat compared with the third quarter one year ago.

 

All production assets, with production scaled down during the recent period of low demand, are in place to reach full production. However, the company expects other cuts in production announced in May to remain in place at least through the end of the calendar year.

 

Although Sanderson has the assets for an additional 150,000 head per week capacity at its Collins, Mississippi plant and its feedmill, the company intends to delay these additions until other production cuts have been restored.

 

The company is however restarting the construction of a Texas facility it delayed for 3 months and expects that facility to come on line for the fourth fiscal quarter of 2007.