Sanderson Farms net income jumps in second quarter

Sanderson Farms has reported a rise in net income and net sales for both the second quarter and first six months of fiscal year 2017.

Both periods for the third largest broiler company in the United States ended April 30. The company reported its financial results on May 25.

Net sales for the second quarter of fiscal 2017 were $802.0 million compared with $692.1 million for the same period a year ago. For the quarter, net income was $66.9 million, or $2.94 per share, compared with net income of $47.6 million, or $2.11 per share, for the second quarter of fiscal 2016.

Net sales for the first six months of fiscal 2017 were $1,490.4 million compared with $1,297.3 million for the same period of fiscal 2016. Net income for the first half of the year totaled $90.1 million, or $3.96 per share, compared with net income of $58.3 million, or $2.58 per share, for the first six months of last year.

"The results for our second quarter of fiscal 2017 reflect benign feed costs, continued favorable demand for poultry products from retail grocery store customers, higher volume, and an improving export environment," said

Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. "Our sales price per pound increased during the first half of this fiscal year compared with last year as market prices improved steadily through the second fiscal quarter. Poultry export market fundamentals improved, market demand for wings improved counter seasonally, and market prices for boneless breast meat improved significantly during the second half of April and have continued to move higher into May.

"In addition to higher sales prices, our net sales for the quarter also reflect more pounds sold. Our new Palestine, Texas, facility is running at full capacity and our St. Pauls, North Carolina, plant will reach 50 percent capacity next month. Poultry pounds sold increased 11.5 percent during the quarter compared to last year's second quarter."

Market conditions

According to Sanderson, overall market prices for poultry products were higher during the second quarter compared with the same period last year. Market prices for chicken products sold to retail grocery store customers remained relatively strong during the quarter and continue to reflect good demand. Compared with the second fiscal quarter of 2016, boneless breast meat market prices were approximately 9.1 percent higher, the average market price for bulk leg quarters increased approximately 17.2 percent, and jumbo wing market prices were higher by 5.1 percent. The company's average feed costs per pound of poultry products processed were essentially flat when compared with the second quarter of fiscal 2016, while prices paid for corn and soybean meal, the company's primary feed ingredients, decreased 0.4 percent and increased 15.0 percent, respectively, compared with the second quarter of fiscal 2016. The company's feed costs per pound processed were affected by changes in feed formulation and improved broiler performance.

"Looking ahead to the second half of the fiscal year, we continue to expect grain prices to remain relatively benign," added Sanderson. "There are ample supplies of both corn and soybeans worldwide, and the planting progress of the 2017 corn and soybean crops remains close to average, despite a wet spring in the United States grain belt.

"With respect to production numbers, while 2017 breeder placements have been relatively flat with 2016 placements, hatch rates and live weights are trending below last year. The current USDA forecast for United States broiler production during calendar 2017 to increase approximately 2.0 percent over calendar 2016 seems reasonable, but may prove to be high should these trends continue. In addition, per capita domestic availability of chicken is up less than one half of one percent as a result of improved export demand. We expect our production during our third and fourth fiscal quarters of 2017 to be up 13.6 percent and 11.7 percent, respectively, compared to the same quarters of fiscal 2016. The increase reflects new production at our new St. Pauls, North Carolina, and Palestine, Texas, complexes as well as the additional pounds we expect to process as a result of our previously announced agreement with House of Raeford Farms," added Sanderson.