Weak export market affects Sanderson Farms Q3 results
Sanderson Farms Inc. reported results for the third fiscal quarter and nine months ended July 31, 2015. Net sales for the third quarter of fiscal 2015 were $739.9 million compared with $768.4 million for the same period a year ago. For the quarter, the company reported net income of $50.9 million, or $2.27 per share, compared with net income of $76.1 million, or $3.30 per share, for the third quarter of fiscal 2014.
Net sales for the first nine months of fiscal 2015 were $2,123.9 million compared with $2,014.0 million for the first nine months of fiscal 2014. Net income for the first nine months of fiscal 2015 totaled $188.6 million, or $8.28 per share, compared with net income of $155.9 million, or $6.76 per share, for the first nine months of last year.
“Sanderson Farms’ financial results for the third quarter of fiscal 2015 reflect continued good demand for fresh chicken at retail grocery stores, which demand was reflected in a Georgia dock whole bird price that remained near record levels during the quarter,” said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. “However, market prices for most products produced at our big bird deboning plants were significantly lower during the quarter when compared to last year’s third fiscal quarter. Bulk leg quarter prices remain under pressure as a result of weak export demand affected by export bans related to the discovery of avian influenza in the United States, a relatively strong United States dollar and lower oil revenue in countries with oil- based economies. While food service traffic and demand in the United States continue to improve, that demand was not enough to keep pace with additional industry production combined with higher domestic supplies resulting from lower exports. As a result, market prices for boneless breast meat remained under pressure during the quarter.”
According to Sanderson, compared with the third fiscal quarter of 2014, the average Georgia dock price for whole chickens was approximately 4.5 percent higher, boneless breast meat prices were lower by approximately 25.4 percent, the average market price for bulk leg quarters decreased approximately 47.8 percent, and jumbo wing prices were higher by 29.5 percent. The Company’s average feed cost per pound of poultry products processed decreased 8.9 cents per pound, or 24.7 percent, compared with the third quarter of fiscal 2014, and prices paid for corn and soybean meal, the Company’s primary feed ingredients, decreased 13.2 percent and 34.5 percent, respectively, compared with the third quarter of fiscal 2014.
“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,” continued Sanderson. “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 $19.5 million during the quarter for the program, which compares to $15.5 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 is the same amount accrued in last year’s third quarter. Together, these accruals amounted to $20.2 million net of income tax, or $0.90 per share.
“We are pleased with progress at our new Palestine, Texas, facilities,” said Sanderson. “The plant is now moving to fifty percent capacity, and we are on schedule to increase production at the plant again in January 2016. We expect to reach full production during the second fiscal quarter of 2016. We also broke ground on our new St. Pauls, North Carolina, facilities in July, and we look forward to the opportunities the new facilities will provide to our shareholders, our customers and our employees.”
Source: Sanderson Farms Inc.