Sanderson Farms Inc. reported results for the fourth quarter and fiscal year ended October 31, 2017. Net sales for the fourth quarter of fiscal 2017 were $919.9 million compared with $790.8 million for the same period a year ago. For the quarter, the company reported net income of $72.9 million, or $3.20 per share, compared with net income of $76.0 million, or $3.36 per share, for the fourth quarter of fiscal 2016.
Net sales for fiscal 2017 were $3.342 billion compared with $2.816 billion for fiscal 2016. Net income for the fiscal year totaled $279.7 million, or $12.30 per share, compared with net income of $189.0 million, or $8.37 per share, for last fiscal year.
“The fourth quarter marked the end of another record year for Sanderson Farms,” said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms Inc. “Market conditions weakened during our fourth fiscal quarter of 2017, as market prices declined seasonally after Labor Day. The seasonal decrease in demand was exacerbated by hurricane disruptions and higher than expected chicken production caused by higher than expected live weights. Despite this weakness, we performed well during the quarter.
“For the fiscal year, we reported record annual sales, with improved overall poultry market prices compared with fiscal 2016, and higher volume of poultry products sold by 13.2 percent. Grain prices were slightly higher during fiscal 2017 compared with prices paid in fiscal 2016; however, feed costs in processed flocks were lower per pound on improved live bird performance. For fiscal 2017, we sold 4.22 billion pounds of dressed poultry, another record, compared with 3.73 billion pounds in fiscal 2016.”
According to Sanderson, overall market prices for poultry products were generally higher in fiscal 2017 compared with prices a year ago, but were mixed for the fourth fiscal quarter of 2017. Boneless breast meat prices averaged 6.3 percent lower in the fourth quarter than the prior-year period. For the full fiscal year, however, boneless breast meat prices were 5.8 percent higher compared with fiscal 2016. Jumbo wing prices averaged $2.09 per pound during the fourth quarter of fiscal 2017, up 28.4 percent from the average of $1.62 per pound during the prior-year period. Jumbo wing prices averaged $1.92 per pound during the fiscal year, up 21.4 percent from the average of $1.58 per pound for fiscal 2016. The average market price for bulk leg quarters increased approximately 22.7 percent for the fourth fiscal quarter of 2017 compared with the fourth fiscal quarter of 2016, and increased 21.2 percent for fiscal 2017 compared to fiscal 2016. Improved dark meat prices during the fiscal year reflect the increase in industry export volumes during calendar 2017. Cash prices for corn during the fourth fiscal quarter increased by 6.0 percent, while soybean meal cash prices were down 2.0 percent.
“We are pleased that our profitability during fiscal 2017 allowed us to fund from cash on hand the completion of our new facilities in St. Pauls, North Carolina, start construction at our new complex in Tyler, Texas, strengthen our balance sheet, and reward our shareholders with a special dividend,” Sanderson continued. “We are well positioned to continue our growth strategy as we move St. Pauls to full production during fiscal 2018 and continue construction of our new complex in Tyler.
“As of October 31, 2017, our balance sheet reflected $1.733 billion in assets, stockholders’ equity of $1.433 billion and net working capital of $650.8 million. We had no debt at fiscal year-end. We believe our balance sheet provides us with the financial strength not only to support our growth strategy, but also to consistently manage our operations through the cycles that characterize our industry. We deeply appreciate the hard work and dedication to excellence of our employees, growers and everyone associated with our company,” Sanderson concluded.
In a follow-up conference after the release of the fiscal information, Sanderson referred to a slump in chicken wing sales. While sales for 2017 were strong overall, spot prices for wings have dropped in each of the last three months and are now 14 percent lower than a year earlier, reports the Denver Post.
“The only thing puzzling me right now is wings,” Sanderson said. “We’ve been talking to our wing customers and they’re the ones that are telling us that they’re seeing less traffic in their stores. They attribute that to the NFL.”
Sanderson added to those comments in a later interview with Bloomberg News, saying, “It’s just been reported to us that some of our customers think that their traffic is down because of the demonstrations by some of the NFL players.”
The NFL has been involved with controversy since last season, when some players began kneeling during the National Anthem to protest racial injustice. Some people, most notably President Trump on Twitter, have called for the league to end such protests. Earlier this year, Papa John’s CEO John Schnatter was direct with his criticism of the NFL, stating that NFL leadership had hurt Papa John’s shareholders. Executives from chicken wing restaurants Wingstop and Buffalo Wild Wings have not reported any impact on sales from protests.