Sanderson Farms' 3Q profit up 12%
|Sanderson Farms processed fewer chickens in the third quarter due, in part, to lower-than-expected hatch rates.
LAUREL, Miss. – Sanderson Farms Inc. reported a 12 percent gain in profits for the third quarter as favorable market conditions offset lower poultry processing volumes and employee benefit accruals.
Net income for the quarter was $76.1 million, or $3.30 per share compared to $67.9 million, or $2.95 per share a year ago. Net sales for the quarter were $768.4 million compared to $739.0 million a year ago.
“Sanderson Farms’ financial results for the third quarter of fiscal 2014 reflect continued favorable market conditions,” said Joe Sanderson Jr., chairman and CEO. “Market prices for poultry products were higher than the third quarter of fiscal 2013, as the Georgia Dock whole bird price remained historically high during the quarter. The higher Georgia Dock price reflects good retail grocery store demand. While boneless breast meat prices peaked below last year’s high, they remained above $2.00 per lb. through June and into July.”
Georgia dock prices for whole chickens gained 5.3 percent for the quarter, the company noted. Expenses for grain were mixed as cash prices for corn delivered to Sanderson dropped 28.7 percent while soybean meal prices increased 17.6 percent.
“While market conditions were favorable during the quarter, financial results were affected by accruals booked for the company’s bonus award program and a contribution to the company’s employee stock ownership plan,” Sanderson said. “Because management now deems it probable the company will achieve at least a portion of the targets under its bonus award program, the company accrued $15.5 million during the quarter for the program, which compares to $6.5 million accrued in last year’s third quarter. In addition, $11.0 million was accrued for a contribution to the company’s employee stock ownership program, which compares to $5.5 million accrued in last year’s third quarter. Together, these accruals amounted to $17.5 million net of income tax, or $0.76 per share.”
Sanderson added that lower processing volumes dragged on earnings for the quarter. The company processed 770.4 million lbs. of fresh poultry during the quarter, which is 44.7 million lbs. less than the company projected in May.
“Several factors contributed to the reduced volume, including fewer head processed as a result of lower-than-target hatch rates at our hatcheries and lower-than-target live weights of chickens processed,” Sanderson said.
In other company news, progress continues on the Sanderson's poultry processing facility in Palestine, Texas. Sanderson said the plant is on target to begin processing chickens at the new facility during the first calendar quarter of 2015.