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Multi-million dollar expansion into Georgia begins next phase of growth

Sanderson Farms hatches big plan for Peach State

LAUREL — South Georgians are praising poultry processor Sanderson Farms (Nasdaq: SAFM). After deciding to expand its chicken production operation into the Peach State, the Laurel-based company announced a $96-million expansion last month, which will create an estimated 1,700 jobs.

“Tire dealers will sell more tires, car dealers will sell more cars, grocery stores will sell more groceries, and I expect land values will go up as a result of all the money that will be circulating Colquitt County,” said Jimmy Jeter, chairman of the Moultrie-Colquitt County Economic Development Authority.

Sanderson Farms’ banner news comes on the heels of another record year. Ranked among the top seven poultry producers in the nation, Sanderson Farms reported more than $870 million in sales in 2003. With current weekly broiler production of 5.5 million birds, the company ranks among the nation’s top six broiler companies.

Strong demand boosts prices

As strong demand boosted chicken prices, the company’s earnings more than doubled last quarter. Net income for the second fiscal quarter ending April 30 jumped from $12.8 million last year to $33.4 million. Sanderson Farms’ stock price 52-week low was $16 on June 9, 2003; its 52-week high was $48.05 on June 2. (On Jan. 29, the company’s board of directors approved a three-for-two stock split.)

“Sanderson Farms had another strong financial and operating performance in the second quarter of fiscal 2004,” said Joe F. Sanderson Jr., president and CEO of Sanderson Farms Inc. “Our results reflect solid execution throughout our operations and a favorable market environment. We have continued to benefit from stronger consumer demand and improved market prices for poultry products compared with the same time period last year.”

In 1947, D.R. Sanderson Sr., and his two sons, D.R. Sanderson Jr., and Joe Frank Sanderson, began a farm supply business, which sold feed, seed, fertilizer and other farm supplies. In 1951, the family formed a partnership, Sanderson Brothers. Eventually, poultry production was added. When Sanderson Farms was incorporated in 1955, the company began its steady climb to becoming one of the top-quality chicken producers in the nation. The company has been publicly held since 1987.

Today, Sanderson Farms employs more than 8,500 people and contracts with more than 600 independent growers. Its USDA Grade A Chill Pack Chicken, marketed under the Sanderson Farms Miss Goldy brand, is shipped to nearly every state in the nation. Also under the Sanderson Farms label, the company ships chicken in the form of fast food, deli, boneless products and parts, along with a broad range of prepared chicken and other food products, and more than 100 frozen entrees and specialty foods.

More than 1.4 billion pounds of product are sold each year, generated by seven production facilities in Mississippi, Louisiana and Texas. (The company opened facilities in Brazos, Texas, in 1997, also as a result of a growing customer base in the southwest; Sanderson Farms now has 50% of the market share in the Lone Star State.) Its food division has the capacity to produce 555,000 pounds of entrees and 850,000 pounds of processed chicken.

In Mississippi, Sanderson Farms employs 6,300 employees at its prepared foods plant in Jackson; processing plant, hatchery and feed mill in Hazlehurst; processing plant and feed mill in McComb; processing plant and hatchery in Collins; and processing plant, feed mill and hatchery in Laurel. The company has 470 contract growers in the state. About 1,500 people are employed at facilities in Texas, where the balance of its contract growers are located. About 700 people are employed at facilities in Louisiana.

Deciding to sell

“We have been in the process of developing the Georgia expansion plan for a year,” said Sanderson Farms CFO Mike Cockrell. “Last year, the poultry industry was under pressure as a result of lower market prices and the previous year’s Russian embargo of U.S. chicken meat. Because many in the industry experienced deep losses during the year, there were more assets and processing plants on the market for sale than ever before in the industry. We looked at many assets for sale, but for one reason or another were unable to close a deal.”

After deciding to build a plant, Sanderson Farms executives looked in Alabama, Georgia, South Carolina and Florida for suitable sites. They settled on sites in Colquitt and Cook counties for the construction of the new poultry-processing complex.

Sites near Adel in Cook County were announced for the construction of a new feed mill and hatchery, and a site near Moultrie in Colquitt County was chosen for the construction of a new poultry processing plant and wastewater treatment facility.

The $8.5-million feed mill complex will have the capacity to produce 7,000 tons of finished poultry feed per week and will create 45 jobs with an estimated annual payroll of $1.5 million.

The $8.2-million, 65,000-square-foot hatchery will house approximately 50 hatchers and incubators capable of processing, incubating and hatching approximately 1.5 million eggs and 1.3 million chicks per week. About 115 jobs will be created, with an estimated $2.7 million annual payroll.

The $31.5-million, 210,000-square-foot processing plant, which will be built on 500 acres, will be capable of processing 1.2 million chickens per week. About 1,500 jobs will be created, with an estimated annual payroll of $31.5 million.

Doug Creel, from the company’s McComb division, has been named manager of the new Georgia division, and Mississippi employees staff the office that was recently opened in Moultrie.

In addition to Sanderson Farms’ investment, 130 contract poultry producers will invest approximately $85 million to build 424 broiler houses, 48 breeder houses and 24 pullet houses. The signup process for growers “has gone very well; it’s extremely pleasing,” said Cockrell. Construction will begin this summer, and initial operations are slated to begin next year at the new complex. Full capacity should be reached by the spring of 2006.

“We received an extraordinary amount of cooperation from the economic development and government officials in the cities of Adel and Moultrie, as well as Cook and Colquitt counties, the Georgia Department of Industry, Trade and Tourism, the University of Georgia Poultry Science Department, the Georgia Poultry Federation and the Governor of Georgia,” said Sanderson.

The decision to build facilities in Georgia was purely market-driven, and the incentives offered by economic developers were similar to Mississippi’s, said Cockrell.

“We have a very significant market share in Mississippi, Louisiana and Texas, which we’ve considered our core market, but many of our new customers are located east of our current operations — in Florida, Georgia, Virginia, the Carolinas and parts of Tennessee and Alabama — and it made sense for us to locate this new facility closer to those customers, and cut a day off transportation to allow us to more efficiently serve them,” he said.

From 1992 to 2002, the company tripled in size, and Sanderson Farms’ customers now include distributors, food service operators, club stores and retailers primarily in the Southeast, Southwest, Midwest and West.

“We believe our expansion into Georgia offers a unique opportunity to begin the next phase of growth,” said Sanderson.

Contact MBJ contributing writer Lynne W. Jeter at mbj@thewritingdesk.com.

About Lynne W. Jeter

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