Sanderson Farms reports good profitability

SANDERSON Farms Inc., the third-largest chicken integrator in the U.S., has reported good profitability for its fiscal 2012 fourth quarter and full year after taking large losses in its previous year.

The company said it was instituting an additional 2% cutback in production.

The fourth quarter "marked the end of another challenging year" for the company and the chicken industry, according to chair and chief executive officer Joe F. Sanderson.

Although chicken pricing did improve over the year before, grain prices surged to record-high levels in August because of the drought in much of the Midwest, and these higher costs offset some of the effect of the higher prices, he said.

The company's increase in sales and return to profitability reflected the ramp-up of the Kinston, N.C., complex to near full capacity, he said. (Kinston was brought on line in January [Feedstuffs, Jan. 17].)

He noted that Sanderson Farms sold 2.952 billion lb. of chicken in fiscal 2012, 5.7% more than in fiscal 2011 and a record-large amount.

As measured on the Georgia dock, the company said whole-bird prices were higher than the year before in both the fourth quarter and year, by 7.7% and 7.3%, consistent with steady demand for its line of chill-pack products. Breast meat prices were 11.6% and 9.1% higher.

Relatively strong dark meat prices reflected chicken export sales, Sanderson Farms said.

However, corn and soybean meal prices, which increased throughout the year, were 11.6% and 39.7% higher in the fourth quarter than in the year-ago fourth quarter, the company said.

Sanderson said the company expects demand from the foodservice markets to remain soft until employment and consumer confidence improve, and in light of this, plus the continuing high prices for grain and uncertainty over the grain supply, the company is making an additional 2% cutback in production. It had already decreased production 4% at its plants other than Kinston.

Sanderson also said the company's profitability has allowed it to "significantly" reduce debt and strengthen its balance sheet. He said the company is well positioned to manage through current challenging conditions and resume its growth strategy once the market situation improves.

Financial results for Sanderson Farms, which is headquartered in Laurel, Miss., are shown in the Table.

Volume:84 Issue:53