Sanderson Farms provides details on Q1 results

by Keith Nunes
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Sanderson Farms whole roasting chicken and chicken leg quarters
The avian influenza that affected U.S. poultry negatively impacted Sanderson Farms' first quarter earnings.

LAUREL, Miss. – An export market marred by closures to US poultry products due to highly pathogenic avian influenza and a domestic foodservice sector in the midst of a slowdown both had an impact on poultry processor Sanderson Farms’ first quarter earnings.

“Foodservice and export demand are the wild cards for 2016,” said Joe Sanderson Jr., chairman and CEO, Feb. 25 in a conference call with financial analysts. “Lower gasoline prices help consumers. But recent stock market volatility and uncertainty about the global economy are hampering food service demand.

“The restaurant association's Restaurant Performance Index fell sharply in December and stood below 100 for the first time since February 2013, which signifies contraction in key industry indicators. The contraction continued in January, as at least one survey shows traffic decline year over year by 1.8 percent at casual dining and by almost 1 percent in QSRs. At least a portion of that decline, however, was probably due to severe weather in many parts of the country in January.”

With regard to export bans in place due to the incidence of AI in the US last year, executives also see light at the end of that tunnel. Sanderson said South Africa has opened its market again and both China and South Korea are considering reopening their markets to US poultry products.

“ … We've been thinking it was going to be 2017 before China opened back up, and I think that's a conservative way to look at that,” Sanderson said. “There is a possibility if it could open before that, but I think the conservative thing is to think 2017.”

Sanderson Farms processing plant in Palestine, Texas
Sanderson plans to focus on growth as it ramps up operations at its new processing plant in Palestine, Texas.

Prepared foods also remain a focus for Sanderson Farms. In 2015, prepared foods sales were about 7 percent of total sales, and Mr. Sanderson said the company has a goal of achieving 10 percent of total sales.

“With Palestine and St. Pauls coming on, it's going to fall further behind,” Sanderson said. “So we need to increase our volume of prepared foods.”

When a financial analyst asked if increasing that volume may involve an acquisition, Sanderson was succinct in his answer.

“Yes,” he said.

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