* Quarterly earnings $1.25 a share vs Wall Street view $1.20
* Higher feed costs to pressure results in coming months
* Will run plants below capacity until market conditions
* Shares up 9 percent
By Lisa Baertlein
Aug 28 Sanderson Farms Inc posted a
better-than-expected quarterly profit on Tuesday, buoyed by
higher prices for chicken wings and other products, and said it
would further reduce production to protect earnings from rising
The worst U.S. drought in more than half a century has sent
the cost of corn and other animal feed soaring, and the news
from Sanderson illustrates how that will translate into costlier
food for consumers.
Shares in the poultry company jumped 9 percent on the strong
results and word that it began trimming production by 2 percent
earlier this month. The production cut follows a 4 percent
reduction put in place in January, executives said on a
conference call with analysts.
Lowering production helps support retail prices by limiting
"With considerable uncertainty and a high degree of fear now
priced into the market for corn and soybean meal," Sanderson is
not locking in long-term prices for grain, Chairman and Chief
Executive Joe Sanderson said on the call.
Based on Monday's closing prices, Sanderson's feed grain
costs would be $61.1 million higher this fiscal year -- an
increase of about 10 percent.
"Our view this morning may be very different from our view a
few days from now," Chief Financial Officer Mike Cockrell said,
citing volatile external factors such as feed grain costs,
market prices for poultry and the overall health of the economy.
Jumbo wing prices averaged $1.59 per pound during the fiscal
third quarter ended July 31, more than doubling from a year
earlier. Boneless breast prices also rose, but at a
significantly lower rate due to sluggish food service demand.
Higher poultry prices helped the company swing to a
third-quarter profit of $28.7 million, or $1.25 per share, from
a year-earlier loss of $55.7 million, or $2.51 per share.
Sales jumped 22 percent to $624.9 million.
Analysts on average expected earnings of $1.20 per share on
revenue of $620.0 million, according to Thomson Reuters I/B/E/S.
Shares of Laurel, Mississippi-based Sanderson Farms leaped 9
percent to $44.25 in afternoon Nasdaq trading.
On the New York Stock Exchange, shares of poultry producer
Tyson Foods Inc rose 4.4 percent, while pork processor
Smithfield Foods Inc inched up 0.6 percent.