Sanderson Farms posts lower Q2 results

Overall market prices for poultry products lower during quarter.

May 25, 2018

3 Min Read
Sanderson Farms posts lower Q2 results

Sanderson Farms Inc. reported results for its second fiscal quarter and six months ended April 30, 2018. Net sales for the fiscal 2018 second quarter were $813.5 million, compared with $802.0 million for the same period a year ago. For the quarter, net income was $41.9 million, or $1.84 per share, compared with net income of $67.0 million, or $2.95 per share, for the second quarter of fiscal 2017.

Net sales for the first six months of fiscal 2018 were $1.6 billion, compared with $1.5 billion for the same period of fiscal 2017. Net income for the first half of 2018 totaled $93.2 million, or $4.08 per share, compared with net income of $91.0 million, or $4.00 per share, for the first six months of last year.

“The results of our second quarter of fiscal 2018 reflect slightly lower feed costs per pound, continued favorable demand for poultry products from retail grocery store customers, higher volume and a stable export environment," said Joe Sanderson Jr., chairman and chief executive officer of Sanderson Farms. “These positive factors were offset by weak foodservice demand for boneless breast meat and jumbo wings produced at our plants that target foodservice customers. Because of this weakness, our average sales price per pound decreased during the first half of this fiscal year compared with last year but improved sequentially during the second fiscal quarter of 2018. Market prices for boneless breast meat improved significantly during March but then weakened counter-seasonally in April as the cold, wet spring weather kept consumers indoors.”

Sanderson added that lower average sales prices were offset during the quarter by more pounds sold, as the company’s new St. Pauls, N.C., facility is running at full capacity. “Poultry pounds sold increased 3.1% during the quarter compared to last year’s second quarter,” he said.

According to Sanderson, overall market prices for poultry products were lower during the second quarter compared with the same period last year. However, he said 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 fiscal 2017 second quarter, Sanderson said boneless breast meat market prices were approximately 5.3% lower, the average market price for bulk leg quarters increased approximately 6.2% and market prices for jumbo wings were 23.6% lower. Market prices for chicken breast tenders averaged 4.7% lower than a year ago.

The company’s average feed costs per pound of poultry products processed decreased by 3.3% compared with the second quarter of fiscal 2017, while prices paid for corn and soybean meal -- the company’s primary feed ingredients -- decreased 1.3% and increased 3.6%, respectively, compared with the second quarter of 2017. Sanderson Farms’ 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 expect grain prices to be somewhat higher as we move through the crop growing season,” Sanderson noted. “While there are ample supplies of both corn and soybeans worldwide, a slow start to the United States' planting season for 2018 corn and soybean crops as a result of the cold, wet spring in the United States Grain Belt put upward pressure on market prices. Farmers quickly made up that early deficit, and planting progress is now on pace with historical averages. Grain market participants will now turn their attention to trade issues and weather during the growing season.”

With respect to chicken production numbers, Sanderson noted that while the U.S. Department of Agriculture reported that the U.S. broiler breeder flock is 4% larger than a year ago, the agency also reported that egg production, hatch rates and livability are trending below last year.

“The current USDA forecast for U.S. broiler production during calendar 2018 to increase approximately 1.6% over calendar 2017 seems reasonable, but even this lowered estimate could prove to be high should these production trends continue. We expect our production during our third and fourth fiscal quarters of 2018 to be up 2.8% and down 4.7%, respectively, compared to the same quarters of fiscal 2017,” Sanderson concluded.

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