Sanderson Farms income gains on higher prices
LAUREL, Miss. – Income at Sanderson Farms Inc. climbed 2 percent on higher prices for chicken breast meat. For the quarter ended April 20, the company reported income of $24.4 million, or $1.06 per share, compared to $23.9 million, or $1.04 per share for the second quarter of fiscal 2012.
Net sales for the quarter advanced to $621.2 million compared to $595 million for the same period a year ago, according to the company.
Sanderson said overall market prices for poultry increased during the quarter. Boneless breast meat prices advanced 14.2 percent and have continued to increase, according to the company. Bulk leg quarters were flat, but drew strong export demand. Jumbo wing prices declined 4.4 percent. The overall strong performance of the poultry market helped ease some pressure from Sanderson's feed costs, but continued to have an impact. Prices paid for corn and soybean meal increased 15.9 percent and 37.2 percent respectively.
“The results for our second quarter of fiscal 2013 reflect improved market conditions driven primarily by an overall increase in demand for poultry products," said Joe F. Sanderson, Jr., chairman and CEO of Sanderson Farms, Inc. “Our net sales were 4.4 percent higher compared with the second quarter of fiscal 2012, reflecting higher average sales prices of chicken. While our volumes reflect the production cuts we put in place last fall, demand for chicken remains strong from our retail grocery store and export customers. In addition, while customer traffic through food service establishments remains challenged by macroeconomic factors, several new chicken items on quick serve menus and chicken promotions in casual dining restaurants, coupled with relatively high priced beef, contributed to better market prices during the quarter for products produced at our food service plants.
“Our profitability for the second quarter continued to be adversely affected by relatively high feed costs,” added Sanderson. “Feed costs in flocks processed increased 14.3 percent compared with last year’s second fiscal quarter, and remain high relative to historical costs. Because of the tight supply of both corn and soybeans, we expect grain prices to remain high and volatile at least until markets get some visibility on the quantity and quality of this year’s corn and soybean crops. The late planting season caused by cold and wet weather across much of the Corn Belt is contributing to price volatility. That said, we have priced most all of our grain needs through July at levels that will allow us to slightly reduce our feed costs per pound each successive month through July.”
Net sales for the first six months of fiscal 2013 climbed to $1,217 million compared with $1,112.9 million for the same period a year ago. Net income for the first half of the year totaled $17.4 million, or $0.76 per share, compared to net income of $15.9 million, or $0.69 per share, for the first six months of 2012, according to the company.
“Looking ahead, we are reasonably optimistic as we head into the summer months and what is typically a period of better demand for chicken,” Sanderson said. “While grain costs remain above historical levels, demand for chicken products is strong. Weekly broiler egg sets continue to run slightly above last year’s numbers, but breeder placements remain lower and it appears the reduced size of the breeder flock will constrain production over the short term despite higher industry returns.
“While macroeconomic conditions have continued to affect consumer behavior, market prices for boneless breast meat sold to our food service customers improved through April and May, and market prices for retail grocery store products have also moved higher. Regardless of market conditions, however, we will maintain our focus on our operating performance and sales execution,” Sanderson concluded.