Sanderson Farms net income rebounds first quarter 2014
Company reveals income of $28.9 million for first quarter, extends stock repurchase program
Sanderson Farms recorded a net income of $28.9 million for the first quarter of fiscal year 2014, rebounding from a loss of $6.9 million for the first quarter of fiscal year 2013. The first quarter for Sanderson Farms ended January 31, with the results being announced on February 25.
Net sales for the first quarter of fiscal 2014 were $584.9 million compared with $595.8 million for the same period a year ago.
The company also on February 25 announced that its board of directors has extended to February 24, 2017, its stock repurchase program approved February 16, 2012, to repurchase up to 1.0 million shares from time to time at prevailing prices in open market transactions or in negotiated purchases, subject to market conditions, share price and other considerations.
"Our results for the first quarter of fiscal 2014 marked a solid start to the fiscal year," said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. "While poultry market prices were mixed compared to the same period a year ago, our grain costs were lower. Retail grocery store demand for chicken has remained steady. However, we continue to see weak food service demand, which remains under pressure as a result of macroeconomic conditions and was also affected by weather during our first fiscal quarter. Weather also affected our first quarter results as we were forced to close several of our plants during the last week of January due to ice and snow. While we expect lower grain prices for the fiscal year and we experienced lower feed costs during the first quarter, grain prices have moved higher during February as a result of USDA's lower than expected corn carryout estimate reported earlier this month."
According to Sanderson, market prices for poultry products were mixed during the first quarter of fiscal 2014 compared with the same period of fiscal 2013. A simple average of the Georgia dock price for whole chickens was approximately 6.5 percent higher in the company's first fiscal quarter compared with the same period in 2013, and currently stands near a record $1.0450 per pound. Boneless breast meat prices during the quarter were approximately 4.3 percent lower than the prior-year period. The average market price for bulk leg quarters decreased approximately 15.6 percent for the quarter compared with the same period last year. Jumbo wing prices were lower by 40.7 percent compared with last year's first fiscal quarter, down from the record high $1.92 per pound the week before the Super Bowl in 2013. The company's average feed cost per pound of poultry products processed decreased 25.1 percent compared with the first quarter of fiscal 2013, and prices paid for corn and soybean meal, the company's primary feed ingredients, decreased 38.8 percent and 12.8 percent, respectively, compared with the first quarter of fiscal 2013.
"We expect market conditions in the retail grocery store market to remain strong as chicken will compete once again during 2014 with high priced beef and pork," Sanderson added. "While we benefited during the summer of 2013 from menu shifts toward chicken items, and away from relatively high priced beef at food service establishments, whether or not we get a similar benefit during 2014 is yet to be seen."
"The record corn crop harvested in the United States last fall has taken pressure off the United States and world corn stocks to use ratio for 2014, but a lower than expected carryout of corn at the end of the 2014 crop year estimated by the USDA in February has caused market prices for both corn and soybean meal to move higher. Despite this increase in the grain market, had we priced all of our grain needs at current prices yesterday, our grain costs would be lower by $153 million during fiscal 2014 compared to fiscal 2013.
"While broiler egg sets have been higher than the previous year's levels most every week since last August, the industry remains constrained by limited breeder stock supplies. As a result, we don't expect a significant increase in domestic chicken production until the second half of calendar 2014 at the earliest. Healthy, fully employed and confident American consumers could easily absorb the additional chicken production indicated by higher broiler egg sets if we see further improvement in macroeconomic conditions."
Sanderson noted that construction continues on the Sanderson Farms big bird deboning complex in Palestine, Texas, and the company is looking forward to the opportunities the new facility will create. While weather has delayed construction to some extent, Sanderson Farms remains on schedule to begin operations at the new facility during the first calendar quarter of 2015.
Commenting on the stock repurchase program, Sanderson said, "As in the past, we plan to use our stock repurchase program in part to offset shares issued through our equity compensation plans. We believe this program represents a good use of corporate funds while minimizing potential dilution related to our equity compensation programs."