Sanderson Farms swings to Q3 profit

by Erica Shaffer
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Sanderson
Higher prices for fresh chicken offset rising feed prices.
 
LAUREL, Miss. – A positive supply and demand balance for fresh chicken lifted earnings for the third quarter at Sanderson Farms Inc.

For the most recent quarter ended July 31, 2017, Sanderson Farms reported net income of $115.8 million, or $5.09 per share, compared with net income of $54.7 million, or $2.42 per share during the same period the previous year.

The company said the result reflects an accrual for probable liability for a contribution to the company’s employee stock ownership plan of $12.5 million before income tax, or 35.9 cents per share net of income tax, compared to $7.9 million before income tax, or 22.6 cents per share net of income tax, for the same period a year ago. Net income for the quarter also reflected an accrual of $14.4 million before income tax, or 41.4 cents per share net of income tax, for probable liability under the company’s bonus award program, compared to no accrual for this item during fiscal 2016.

Net sales for the third quarter were $931.9 million compared with $728.0 million for the same period a year ago.

“Sanderson Farms’ financial results for the third quarter of fiscal 2017 reflect a continued favorable balance of supply and demand for fresh chicken sold to retail grocery store customers,” said Joe F. Sanderson Jr., chairman and CEO. “That balance was reflected in relatively strong market prices for that product during the current third fiscal quarter.”

Sanderson added that market prices were higher for boneless breast meat, bulk leg quarters and jumbo wings compared to a year ago. Meanwhile, foodservice traffic and domestic demand for chicken stayed below pre-recession levels.

“…but demand from and the popularity of local chain concepts and restaurants that focus on wings are offsetting reduced traffic at casual dining restaurants,” Sanderson said. “This demand contributed to a good supply and demand balance during the quarter.”

Feed cost per-pound of poultry processed at Sanderson Farms eased 1.3 percent to 0.32 cents per pound in the comparable year-ago period.

Prices paid for the company’s main feed ingredients, corn and soybean meal, climbed 0.3 percent and 3.1 percent, respectively, compared with the third quarter of 2016.

The company noted that, if achieved, the US Dept. of Agriculture’s current yield and harvest estimates for the 2017 corn and soybean crops would leave both grains well supplied going into fiscal 2018. USDA said in its Aug. 11 crop report that supply estimates for both corn and soybeans were higher than analysts’ expectations.

Sanderson Farms reported net income for the first nine months ended July 31 of $206.9 million, or $9.10 per share, compared with net income of $113.0 million, or $5.01 per share, for the first nine months of 2016. Net sales for the first nine months of fiscal 2017 were $2,422.3 million compared with $2,025.2 million reported in the year-ago quarter.

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