Sanderson Farms Inc. reported an increase in net income for the third quarter to $76.1 million, or $3.30 per share, compared with net income of $67.9 million, or $2.95 per share, for 2014.
The poultry producer's net sales were $768.4 million for the third fiscal quarter and nine months ended July 21, compared to $739 million for the third quarter of fiscal 2013.
Net sales for the first nine months of fiscal 2014 were $2.014 billion compared with $1.956 billion for the first nine months of fiscal 2013. Net income for the first nine months of fiscal 2014 totaled $155.9 million, or $6.76 per share, compared with net income of $85.3 million, or $3.71 per share, for the first nine months of 2013.
"Sanderson Farms' financial results for the third quarter of fiscal 2014 reflect continued favorable market conditions," said Joe F. Sanderson, Jr., chairman and CEO of Sanderson Farms. "Market prices for poultry products were higher than the third quarter of fiscal 2013, as the Georgia Dock whole bird price remained historically high during the quarter. The higher Georgia Dock price reflects good retail grocery store demand. While boneless breast meat prices peaked below last year's high, they remained above $2.00 per pound through June and into July."
As measured by a simple average of the Georgia dock price for whole chickens, prices increased 5.3 percent compared with the third quarter of fiscal 2013, according to Sanderson Farms. Boneless breast prices improved when compared to 2013's third fiscal quarter, averaging 2 percent higher than the prior-year period. Jumbo wing prices averaged $1.14 per pound for the third quarter of fiscal 2014, down 10.9 percent from the average of $1.28 per pound for the third quarter of fiscal 2013. The average quoted market price for bulk leg quarters was lower, averaging $0.49 per pound during the third fiscal quarter of 2014 compared to $0.51 during the third fiscal quarter of 2013. Cash prices for corn delivered to the company decreased 28.7 percent compared with the third quarter a year ago, while the price for soybean meal delivered to the company increased 17.6 percent.
"While market conditions were favorable during the quarter, 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 $15.5 million during the quarter for the program, which compares to $6.5 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 compares to $5.5 million accrued in last year's third quarter. Together, these accruals amounted to $17.5 million net of income tax, or $0.76 per share.
"In addition to the employee benefit accruals, the quarter was negatively affected by lower than anticipated volume processed at the company's poultry plants. We processed 770.4 million pounds of fresh poultry during the quarter, which is 44.7 million pounds fewer than we projected in May. Several factors contributed to the reduced volume, including fewer head processed as a result of lower than target hatch rates at our hatcheries and lower than target live weights of chickens processed.
"We are pleased with construction progress at our new Palestine, Texas, facilities," said Sanderson. "We remain on target to begin processing chickens at the new facilities during the first calendar quarter of 2015, and look forward to the opportunities the new facilities will provide to our shareholders, our customers and our employees."
