Favorable poultry demand and lower feed costs boost Sanderson's profits.
SANDERSON Farms Inc. announced results for its fiscal 2014 second quarter and six months ended April 30, which benefited from lower feed costs and good retail demand for chicken.
Net sales for the second quarter were $660.7 million, compared with $621.2 million for the same period a year ago, while net income was $51.0 million, compared with $24.4 million for the 2013 second quarter. The company attributed the gain to lower feed costs in flocks processed, which decreased 19.1% from the 2013 second quarter.
Prices paid for corn decreased 34.0% compared with the second quarter of 2013, while prices paid for soybean meal, the company's second primary feed ingredient, increased 8.8%.
However, Sanderson Farms expects grain prices to remain volatile at least until the size and quality of the corn and soybean crops are known.
"The results for our second quarter of fiscal 2014 reflect lower grain costs and continued favorable demand for poultry products," said Joe F. Sanderson Jr., chairman and chief executive officer of Sanderson Farms. "Our net sales were 6.4% higher compared with the second quarter of fiscal 2013, reflecting increased volume, offset by slightly lower market prices.
"Demand for chicken remains strong from our retail grocery store customers, and it appears that the relatively high prices of competing protein have shifted some consumer demand to chicken," he continued. "In addition, while customer traffic through foodservice establishments remains challenged by macroeconomic factors, relatively high-priced beef contributed to improving demand and market prices during the quarter for products produced at our foodservice plants."
According to Sanderson, market prices for poultry products were mixed during the second quarter compared to the year before, with the simple average of the Georgia dock price for whole chickens increasing approximately 4.3% year over year and moving to record-high levels in April.
Meanwhile, bulk leg quarter market prices were lower than during last year's second quarter and reflected lower export demand.
Average boneless breast meat prices were flat with the prior-year period but moved significantly higher in April.
Prices for jumbo wings were down 27.9% for the 2014 versus 2013 second quarters.
For the first six months of fiscal 2014, net sales were $1.246 billion, compared with $1.217 billion for the same period of fiscal 2013, while net income totaled $79.9 million, compared with $17.4 million for the first six months of last year.
"We continue to make progress on our new facilities in Palestine, Texas," Sanderson said. "Construction is well under way at the feed mill, hatchery and processing plant sites, and we have sufficient interest from independent contract producers to provide housing for our flocks. Indeed, we will place our first pullet flock associated with the Palestine, Texas, facility next month."
The company said it is "reasonably optimistic" about the upcoming summer months and what is typically the high-demand period for chicken.
Also, while grain costs have increased somewhat, they remain below last year's prices, and demand for chicken products is expected to remain strong.
Weekly broiler egg sets continued to run slightly above last year's numbers, but breeder placements were constrained. Sanderson Farms noted that the reduced size of the breeder flock likely will constrain production over the short term despite higher industry returns.
"While macroeconomic conditions continue to affect consumer behavior, market prices for boneless breast meat sold to our foodservice customers improved through April and May, and market prices for retail grocery store products have also moved higher. Regardless of market conditions, however, we will maintain our focus on maximizing our operating performance and sales execution," Sanderson concluded.