August 29, 2012

Buoyed by increased prices for chicken wings and other products, Sanderson Farms Inc. posted a higher-than-expected quarterly profit and would further reduce production to protect earnings from rising feed costs.

Shares of Sanderson Farms were up almost 9% after executives said it had cut overall production by 2% earlier this month. The reductions will be in addition to a previously announced 4% cut, executives said on a conference call with analysts on Tuesday (Aug 28).

The worst US drought in more than half a century has driven up the cost of corn and other animal feed, prompting analysts to lower expectations for meat producers such as Sanderson Farms, Tyson Foods Inc. and Smithfield Foods Inc.

Sanderson reported a profit of US$28.7 million, or US$1.25 per share, for the third quarter ended on July 31, compared with a year-earlier loss of US$55.7 million, or US$2.51 per share. Sales rose 22% to US$624.9 million.

Analysts on average expected earnings of US$1.20 per share on revenue of US$620.0 million, according to Thomson Reuters I/B/E/S.

Shares of Laurel, Mississippi-based Sanderson jumped 8.8% to US$44.15 in morning Nasdaq trading.

On the New York Stock Exchange, Tyson shares were up 4.3%, while Smithfield gained 1.3%.