Sanderson Farms reports $55.7 million loss in Q3
Net sales for the first nine months of fiscal 2011 were $1,418.2 million compared with $1,396.3 million for the first nine months of fiscal 2010. The net loss for the first nine months of fiscal 2011 totaled $105.5 million, or $4.77 per share, compared with net income of $87.0 million, or $3.96 per share, for the first nine months of last year.
The net losses for the quarter and nine months ended July 31, 2011 include a charge, net of income tax, of $14.4 million, or $0.65 per share, to record the value of live inventories on hand at July 31, 2011, at market value.
“Sanderson Farms’ financial results for the third quarter of fiscal 2011 reflect difficult market conditions,” said Joe F. Sanderson, Jr., chairman and CEO of Sanderson Farms. “Market prices for poultry products were significantly lower than last year’s third quarter. While retail grocery store demand has remained steady, food service demand remains sluggish, and will likely remain that way until the employment market gains traction and consumers regain their confidence and return to restaurants. We also incurred significantly higher costs for corn and soybean meal, our primary feed ingredients, compared with the same period a year ago.”
According to Sanderson, overall market prices for poultry products were lower in the third quarter of fiscal 2011 compared with prices in the third quarter of fiscal 2010. As measured by a simple average of the Georgia dock price for whole chickens, prices were relatively flat, showing a 0.3 percent decline compared with the third quarter of fiscal 2010. Boneless breast meat prices weakened counter seasonally during the quarter, and averaged 22.0 percent lower than the prior-year period, and averaged 12.8 percent lower for the first nine months of the year compared with the prior year. Jumbo wing prices averaged $0.78 per pound for the third quarter of fiscal 2011, down 27.5 percent from the average of $1.07 per pound for the third quarter of fiscal 2010. The average quoted market price for bulk leg quarters increased approximately 24.3 percent for the quarter. Cash prices for corn and soybean meal delivered to the company increased 84.7 percent and 25.8 percent, respectively, compared with the third quarter a year ago. For the nine months ended July 31, 2011, the Company’s cash prices for corn increased 70.1 percent and soybean meal increased 19.1 percent when compared to the nine months ended July 31, 2010.
“While lower egg sets over the past several weeks point to fewer chickens on the market this fall, those chickens will meet lower seasonal demand after Labor Day,” added Sanderson. “We will also experience higher costs for grain during the balance of this calendar year compared to the same time last year. The price for grain will ultimately depend on this year’s crop performance but, based on current markets, cash paid for feed grains would be $340.8 million more during this fiscal year compared to last year if we were to price all of our remaining needs at current market prices. Given what we expect to be a high cost environment into calendar 2012 and sluggish demand from our food service customers, we will extend our previously scheduled November and December holiday production cuts into calendar 2012 to balance our supply with expected demand from our customers. We will leave that production cut in place until demand from our customers improves.
“Despite current market conditions, we remain confident in the long term success of the company,” added Sanderson. “We continue to operate well and are comfortable with our growth strategy. We are on schedule at our new Kinston, North Carolina, complex and look forward to the new opportunities this plant will provide for Sanderson Farms, our employees, customers and shareholders.”
Source: Sanderson Farms Inc.