Sanderson Farms achieved a net income of $53.4 million, or $2.41 per share, during the third quarter of fiscal year 2019, a big jump when compared with its net income of $11.5 million, or $0.50 per share, for the third quarter of fiscal 2018.
The company reported its financial results on August 29 for the period that ended July 31.
While net income was up for the quarter, so were net sales. Net sales for the third quarter of fiscal 2019 were $945.2 million, compared with $852.4 million for the same period a year ago.
Net income for the third quarter of fiscal 2019 reflects an accrual for probable liability for a contribution to the company’s employee stock ownership plan of $2.7 million before income tax, or $0.10 per share net of income tax, compared to $2.4 million before income tax, or $0.08 per share net of income tax, for the same period a year ago.
Net sales for the first nine months of fiscal 2019 were $2,533.8 million compared with $2,437.9 million for the first nine months of fiscal 2018. Net income for the first nine months of fiscal 2019 totaled $76.2 million, or $3.44 per share, compared with net income of $104.6 million, or $4.58 per share, for the first nine months of fiscal 2018. Net income for the first nine months of fiscal 2018 reflects a one-time non-cash benefit of $37.5 million, or $1.64per share, as a result of an adjustment to the Company’s deferred income tax liability to reflect a lower tax rate resulting from the federal tax reform legislation passed during the first fiscal quarter of 2018.
“Similar to last year’s third fiscal quarter, Sanderson Farms’ financial results for the third quarter of fiscal 2019 reflect significant counter-seasonal weakness in market prices for boneless breast meat produced at our plants that process a larger bird for food service customers,” said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms. “Fortunately, market prices for other products produced at those plants were higher than last year, and reflected good demand during the quarter. Average market prices for dark meat, jumbo wings and chicken tenders were all higher than the same period a year ago. Average realized prices for poultry products produced for retail grocery store customers were slightly higher than last year’s third fiscal quarter and continue to reflect a more balanced supply and demand environment.”
According to Sanderson, compared with the third fiscal quarter of fiscal 2018, jumbo boneless breast meat market prices were lower by approximately 3.2 percent, the average market price for bulk leg quarters increased approximately 17.1 percent, and market prices for jumbo wings were higher by 37.6 percent. The company’s average feed cost per pound of poultry products processed decreased 1.1 cents per pound, or 4.1 percent, compared with the third quarter of fiscal 2018.
Prices paid for corn and soybean meal, the company’s primary feed ingredients, decreased 1.4 percent and 18.0 percent, respectively, compared with the third quarter of fiscal 2018. In its report published August 12, 2019, the USDA increased its supply estimate for corn for the 2019/20 crop year. While the USDA lowered its estimate for harvested acres as a result of the late planting season, it increased its yield estimate. The published USDA report estimates for corn acres and yields were higher than the market expected. While the USDA lowered its estimate of soybean harvested acres, it held its yield estimate steady and lowered its demand estimate. Market prices for both corn and soybean meal fell following the release of the report. If realized, the USDA’s current yield and harvest estimates for the United States’ 2019 corn and soybean crops would leave both grains adequately supplied going into fiscal 2020.
“The USDA expects chicken production growth of 1.7 percent during calendar 2019 compared to 2018, which alone shouldn’t be a burdensome supply number. However, market prices for boneless breast meat produced at our plants that process a larger chicken for food service customers remain under pressure. As always, we will manage our business consistently regardless of market cycles,” added Sanderson.
Progress with new complex in Texas
“We continue to make progress at our new Tyler, Texas, facilities,” Sanderson said of its newest facility. “The start-up has gone well, and the plant is now processing at 50 percent capacity. We expect to reach full capacity during the second fiscal quarter of 2020.”