December 9, 2009

Sanderson Farms reverses Q4 loss as chicken market improves

Sanderson Farms Inc. reversed a year-earlier loss in its fiscal fourth-quarter caused by last year's slumping prices and feed costs that were higher than historical norms, and the results exceeded Wall Street expectations.

Sanderson chairman and chief executive Joe F. Sanderson Jr. says the overall chicken market improved from a year earlier, though market conditions were less favourable than the fiscal third quarter.

According to Sanderson, the company continued to benefit from lower grain prices while retail trends remain favourable heading into next year, the market reflects continuing weakness in consumer spending and slow restaurant traffic.

The improving market is in contrast with last year, when producers cut output and clamped down on capital spending to help curb losses.

Sanderson says construction at its North Carolina chicken complex is back on track, and the company expects to place its first live pullets in the state in April, with operations set to start in early 2011.

For the quarter ended October 31, the company reported a profit of US$19.8 million, or 96 cents a share, compared with a prior-year loss of US$51.9 million, or US$2.56 a share, which included US$1.46 a share of inventory write-downs. Revenue increased 1.9% to US$469 million.

Its gross margin turned positive to 10.3%, amid increased sales and as corn costs fell 35%.

Prices were up for boneless breast meat - a key profit maker for producers - though prices tumbled for bulk leg quarters amid lower overall export demand.