Sanderson reports sharp drop in Q1 profit
Feb. 25, 2016
by Erica Shaffer
Sanderson Farms posted a weak market price to start 2016.
LAUREL, Miss. – Weak market prices for poultry and other factors weighed on Sanderson Farms Inc.’s results for the first quarter of fiscal 2016. The company reported net income of $10.7 million, or 47 cents per share, compared to $66.5 million, or $2.87 per share in the first quarter of 2015.
Joe F. Sanderson, chairman and CEO, said overall market prices for poultry were lower during the quarter compared to a year ago. The average Georgia dock price for whole chickens was about 0.8 percent lower, while boneless breast meat prices were about 21.6 percent lower. The average market price for bulk leg quarters dropped 48.4 percent and jumbo wing prices retreated 2.7 percent.
|Joe F. Sanderson, chairman and CEO of Sanderson Farms
“Poultry market prices for our tray pack products sold to retail grocery store customers were only slightly lower when compared with the same period a year ago, and we also experienced lower grain costs,” Sanderson explained in an earnings release. “As a result, margins on tray pack products remained strong.
“On the other hand, the foodservice market is over supplied, primarily as a result of continued weak export demand. Poultry products that would normally be directed for sale in the export markets are instead being sold in the domestic foodservice market.”
For the quarter ended Jan. 31, net sales were $605.2 million compared to $667.4 million a year ago. Sanderson said that while conditions improved in January, the company faces significant headwinds in the export market even though most avian influenza-related poultry bans have been lifted. Currency issues, political issues and weak oil prices also challenge the company.
Tailwinds for the company include lower costs for feed. Sanderson’s average feed cost per pound of poultry products processed declined 2.9 cents per lb., or 10 percent in the first quarter, compared to a year ago.
“Near record corn and soybean crops harvested in the United States last fall contributed to healthy soybean and corn balance tables headed into the 2016 planting season,” Sanderson noted. “Lower grain prices provided a significant tailwind during fiscal 2015, and had we priced all of our fiscal 2016 grain needs at yesterday’s prices, our grain costs would be lower by $61.4 million during fiscal 2016 compared with fiscal 2015.”
In other company news, Sanderson said construction of the company’s new St. Pauls, NC, complex is on schedule for the plant to open in the first quarter of 2017. Meanwhile, the Palestine, Texas poultry processing plant is moving toward full production capacity.
“We will begin the second shift in Palestine starting in April, and we expect the plant to reach full production in the company’s fourth fiscal quarter,” Sanderson said. “We look forward to the opportunities the new facilities will create.”