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Sanderson Farms has second record-setting year in 2004

Laurel — Sanderson Farms knows chicken. The processor that began with a single feed store more than 50 years ago had a record fiscal year that ended on October 1 with sales that exceeded $1 billion for the first time in its history.

“It was our second year in a row to report record earnings,” said Mike Cockrell, treasurer and chief financial officer. “Share prices performed well in 2004 and were up over 600%. That has reflected our expansion and growth in the industry.”

The company expects $1.5 billion in sales this year compared to $500 million ten years ago. Results reported for the first quarter of 2005 are up compared to the same period a year ago.

“Sanderson Farms’ financial and operating performance during the first quarter marked a solid start for fiscal 2005,” said Joe F. Sanderson Jr., chairman and CEO. “While our cost structure during the first half of the quarter reflected relatively high-priced grain bought before the start of the fiscal year, that cost structure improved steadily during the quarter, as did the market for chicken.”

Cockrell says the company has tripled in size over the last 10 years. Although no new facility openings are planned in Mississippi this year, a new poultry-processing plant will open in Moultrie, Ga. It will look very much like the company’s McComb plant and is expected to be up and running in August.

“We are excited about the opportunities ahead for Sanderson Farms in fiscal 2005,” added Sanderson. “Our expansion into Georgia is underway as planned. Considering the current market environment and projected lower feed costs, positive consumer demand trends and the renewed growth in exports, we expect favorable market conditions to prevail in fiscal 2005.”

Cockrell said there is some capacity and out-of-hatchery capacity at the Collins, plant and the company is constantly looking at options. “We’re always looking at opportunities for growth,” he added.

Sanderson Farms currently operates plants in Hazlehurst, Laurel, Collins, Jackson and McComb, along with Hammond, La., and Bryan, Texas. They employ 8,500 people and contract with 600 independent poultry growers.

“We have been operating in a pricing environment conducive to chicken and have had a good performance in relation to our peers,” Cockrell said. “It all comes together for a positive run.”

He adds, however, that the chicken processing business is cyclical and that investors have to understand that 40% of the cost is tied to feed ingredients that Sanderson Farms can’t control. The prices for these commodities are based on harvest.

“Chicken is also a commodity, but the market has been good,” he said. “Several factors have converged in the last year to make this happen.”

Cockrell lists the following factors that made the chicken market good in 2004:

• High red meat prices

• High pork prices

• New chicken items in the casual dining market that created more demand for the product

• Atkins diet

“I have no figures for the impact of the Atkins diet, but I know that played a part,” he said. “Chicken has always been heart-healthy, and I hope that message will continue for consumers. It’s the lowest cost form of protein and is very versatile.”

He notes the demand for buffalo wings that spikes up during the fall and wanes a little in the summer while other chicken parts are enjoying their highest demand. The Super Bowl weekend is also a notable glitch in the demand for wings.

“Although the country is more health conscious, domestic consumption has slowed since 1995 and has traced population growth,” Cockrell said. “The greatest growth as an industry since 1995 has been in export. The industry exports 15% to Russia and China, countries that eat parts of the chicken that we don’t eat — namely dark meat and the feet.”

With two really good years under its corporate belt, Sanderson Farms will focus on getting the new Georgia plant going and on continuing to grow in sales. “Fiscal 2005 started off real well and we’re going to keep moving forward,” the CFO said.

In recent personnel news, marketing director Bill Sanderson retired. He is the son of Joe Frank Sanderson and grandson of Uncle Bob Sanderson, two of the company’s founders.

The company was started with one feed and seed store by a father and two sons and has become the fifth- largest poultry producer in the country. Sanderson Farms is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. The facilities are highly modernized, utilizing the most advanced, proficient technology and techniques available.

Contact MBJ contributing Lynn Lofton at mbj@msbusiness.com.


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