Sanderson Farms Inc. reported this week that net sales for the first quarter of fiscal 2018 were $771.9 million, compared with $688.3 million for the same period a year ago. Net income for the quarter was $51.2 million, or $2.24 per share, compared with net income of $24.0 million, or $1.06 per share, for the first quarter of fiscal 2017.
As a result of the company’s adoption of "Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting," during the third quarter of fiscal 2017, the income tax expense on the statement of operations for the three months ended Jan. 31, 2017, was $852,000 less than the amount originally reported in the company’s financial statements for the first quarter of fiscal 2017. In turn, adoption increased Sanderson Farms' net income by $852,000, or 4 cents per share, from what was originally reported.
Net income for the quarter reflects a one-time, non-cash tax benefit of $37.5 million as a result of an adjustment to the company’s deferred income tax liability to reflect a lower tax rate resulting from the recent federal tax reform legislation.
“Our results for the first quarter reflect higher market prices for dark meat products sold from our big bird deboning plants compared with last year’s first quarter, offset by lower white meat prices,” said Joe Sanderson Jr., chairman and chief executive officer of Sanderson Farms. “Poultry market prices for tray pack products sold to retail grocery store customers were higher when compared with the same period a year ago and continued to reflect a healthy supply-and-demand balance in that customer market.”
However, Sanderson said the overall foodservice market remains weak. “Traffic numbers through legacy foodservice chains continue to trend lower, and market prices for boneless breast meat reflect that weakness. Demand and prices for jumbo wings weakened counter-seasonally during the quarter, and market prices were lower by 9% when compared to last year’s first quarter.”
Additionally, he said overall market prices for poultry products were lower year over year during the first quarter. Compared with the first quarter of 2017, average prices of the company’s retail tray pack products were approximately 2.1% higher, boneless breast meat prices were approximately 2.8% lower, bulk leg quarters increased by approximately 15.9% and jumbo wing prices were 9.0% lower.
Sanderson Farms' average feed cost per pound of poultry products processed decreased approximately 0.5 cent/lb., or 1.9%, compared with the first quarter of 2017, and prices paid during the quarter for corn and soybean meal -- the company’s primary feed ingredients -- increased 1.0% and decreased 3.5%, respectively, compared with the first quarter of 2017.
“Record corn and soybean crops harvested in the United States last fall contributed to healthy soybean and corn balance tables heading into the 2018 planting season,” Sanderson said. “Strong export demand and weather challenges for the Argentine crops, however, have supported higher prices for both corn and soybeans despite ample supplies of both grains.”
Sanderson provided an update on the construction of the company’s new Tyler, Texas, complex, which began in the fall of 2017. He said it remains on schedule to open in the first quarter of calendar 2019. “We reached near-full production at the company’s St. Pauls, N.C., plant in January and will move to full production in April,” Sanderson added.