Sanderson Farms Reports a Net Loss in Q1

US - US poultry company Sanderson Farms has reported that despite a 7.3 per cent increase in net sales, the company made a net loss of $6.7 million in the first quarter of the year.
calendar icon 27 February 2009
clock icon 4 minute read

Net sales for the first quarter of fiscal 2009 were $388.9 million compared with $362.6 million for the same period a year ago. For the quarter, the company had a net loss of $6.7 million, or $0.33 per share, compared with net income of $6.2 million, or $0.30 per share, for the first quarter of fiscal 2008.

"The results for the first quarter of fiscal 2009 reflect prevailing economic conditions and reduced consumer demand for protein consumed away from home," said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. "Demand for chicken products held steady in the retail grocery market, but the slowdown in restaurant traffic continues to adversely affect sales to our food service customers. While market prices improved during the quarter compared to where the markets stood at the end of fiscal 2008, it was not enough to offset our costs. Grain prices for the quarter were actually down sequentially compared to our fourth quarter of fiscal 2008, but were still higher than last year's first quarter."

According to Mr Sanderson, overall market prices for poultry products were mixed during the first quarter of fiscal 2009 compared with the same three months of fiscal 2008. A simple average of the Georgia dock price for whole chickens was approximately 13 per cent higher in the Company's first fiscal quarter compared with the same period in 2008, reflecting the relative strength of the market for chicken in the retail grocery market. Bulk leg quarter prices were down by almost 25 per cent during the quarter compared with last year's first quarter, as the difficult worldwide economic issues began to affect the Company's export customers' access to credit during the fourth quarter of calendar 2008. Boneless breast meat prices during the quarter were approximately 9 per cent lower than the prior-year period, reflecting the soft market for any protein consumed away from home. Conversely, jumbo wing prices hit historic highs at an average of $1.15 per pound compared with an average of $1.08 per pound a year ago, reflecting strong seasonal demand during the football season and the Super Bowl. At the same time, costs for corn and soybean meal, the Company's primary feed ingredients, increased 4.5 per cent and 9.2 per cent, respectively, compared with the first quarter a year ago.

"We do not expect demand to improve until the economy gains some traction and consumers resume spending and dining out again," Mr Sanderson continued. "We will continue to manage our operations as efficiently as possible through this cycle and we do not plan to return to full production until we see an improvement in market conditions. However, we do expect that our feed costs will be lower this year as grain prices are also being affected by the economy and reduced demand.

"We continue to believe market forces will balance supply and demand for our industry over the long-term. Until consumer demand returns, any market price improvement will have to come from supply side reductions," concluded Mr Sanderson.

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