UPDATE 2-Sanderson Farms posts loss; feed costs hurt

Thu Feb 24, 2011 9:05am EST

* Loss of $1.52/share vs yr-ago profit 75 cts/share

* Minus charge, EPS loss/share 87 cts vs view loss 33 cts

* Rev $427.7 mln vs year-ago $420.1 mln

* Too much chicken, high feed costs hurt

* Shares down 5.9 percent (Rewrites first paragraph; adds company and analyst comments, stock activity, byline)

By Bob Burgdorfer

CHICAGO, Feb 24 (Reuters) - Sanderson Farms Inc (SAFM.O), often regarded as the most efficient of U.S. poultry companies, reported a larger-than-expected quarterly loss on Thursday due to an excess of chicken and high feed costs, sending its shares down nearly 6 percent.

Slow restaurant sales have plagued Sanderson and other companies, resulting in excess inventories.

"We expect this trend will remain until the national unemployment rate improves," Chief Executive Officer Joe Sanderson said in a statement. "Consumers are simply not dining out as frequently, and restaurant traffic has remained under pressure."

Prices for breast meat, commonly sold to restaurants, were down about 3.1 percent in the first quarter ended Jan. 31, and wing prices were down nearly 37 percent, Sanderson said.

Corn, an important feed, topped $6.50 a bushel during the quarter, up nearly 80 percent from a year earlier, as more of the grain is being exported or used to make ethanol.

Sanderson said it would delay construction of a second North Carolina processing plant due to concerns about corn's cost and availability.

"This is not a surprise but certainly a positive for those asking the chicken industry to start showing signs of rationality," JPMorgan analyst Ken Goldman said in a note.

The company's recently completed Kinston, North Carolina, plant started operating in January, with full production expected in calendar year 2012.

Laurel, Mississippi-based Sanderson reported a first-quarter loss of $33.6 million, or $1.52 per share, compared with a year-earlier profit of $15.8 million, or 75 cents a share.

Excluding a charge for inventory adjustment, the loss was 87 cents per share. On that basis, Wall Street expected a loss of 33 cents, according to Thomson Reuters I/B/E/S.

Revenue rose to $427.7 million from $420.1 million.

Shares of Sanderson were down 5.9 percent at $41.29 in trading before the market opened.

At Wednesday's close, the stock had risen 12 percent in calendar 2011, but were down from a 52-week high of $59.43 on April 16. (Reporting by Bob Burgdorfer; Editing by Lisa Von Ahn)

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