Sanderson Farms saw its net income more than double and its net sales increase substantially during the third quarter of fiscal year 2017, the company reported on August 24.

The quarter ended on July 31.

Net income

For the quarter, Sanderson Farms saw its net income reach $115.8 million, compared to a net income of $54.7 million during the same quarter of fiscal year 2016. For the first three quarters of the fiscal year, the net income is just shy of twice its net income for the first nine months of the 2016 fiscal year, going from $113 million to $206.9 million.

Net income for the third fiscal quarter reflects an accrual for probable liability for a contribution to the company's employee stock ownership plan of $12.5 million before income tax, or 35.9 cents per share net of income tax, compared to $7.9 million before income tax, or 22.6 cents per share net of income tax, for the same period a year ago. Net income for the quarter also reflects an accrual of $14.4 million before income tax, or 41.4 cents per share net of income tax, for probable liability under the company's bonus award program, compared to no accrual for this item during fiscal 2016.

Net sales

Net sales for the third quarter of fiscal 2017 were $931.9 million compared with $728.0 million for the same period a year ago. Net sales for the first nine months of fiscal 2017 were $2.422 billion compared with $2.025 billion for the first nine months of fiscal 2016.

Impact of market conditions

"Sanderson Farms' financial results for the third quarter of fiscal 2017 reflect a continued favorable balance of supply and demand for fresh chicken sold to retail grocery store customers," said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms. "That balance was reflected in relatively strong market prices for that product during the current third fiscal quarter. Market prices for boneless breast meat, bulk leg quarters and jumbo wings produced at our plants that process a larger bird were all higher this year when compared to last year's third fiscal quarter. Food service traffic and demand in the United States remain below pre-recession levels, but demand from and the popularity of local chain concepts and restaurants that focus on wings are offsetting reduced traffic at casual dining restaurants. This demand contributed to a good supply and demand balance during the quarter."

According to Sanderson, compared with the third fiscal quarter of 2016, market prices for chickens sold to retail grocery store customers remained relatively flat at levels that reflect a good supply and demand balance. Compared with the third fiscal quarter of 2016, jumbo boneless breast meat prices were higher by approximately 24.8 percent, the average market price for bulk leg quarters increased approximately 15.9 percent, and jumbo wing prices were higher by 40.2 percent. The company's average feed cost per pound of poultry products processed decreased 0.32 cents per pound, or 1.3 percent, compared with the third quarter of fiscal 2016.

Prices paid for corn and soybean meal, the company's primary feed ingredients, increased 0.3 percent and 3.1 percent, respectively, compared with the third quarter of fiscal 2016. In its report published August 11, 2017, the USDA's supply estimates for both corn and soybeans were higher than analysts' expectations. If achieved, the USDA's current yield and harvest estimates for the United States' 2017 corn and soybean crops would leave both grains well supplied going into fiscal 2018.

Expansion efforts

Sanderson reported that the company continues to make progress with its new poultry complex in St. Pauls, North Carolina. The poultry processing plant is now operating at 75 percent of its capacity, and remains on schedule to reach full production in January 2018.

Construction will commence on Sanderson Farms’ new Tyler, Texas, facilities in September, he added.

“We look forward to the opportunities the new facilities will provide to our shareholders, our customers and our employees when we begin processing at the new processing plant during the first calendar quarter of 2019," Sanderson said.