Sanderson Reports Improved Results for Q1 of 2012

US - Sanderson Farms has reported net sales for the first quarter of fiscal 2012 at $517.8 million compared with $427.7 million for the same period a year ago.
calendar icon 29 February 2012
clock icon 4 minute read

For the quarter, the company had a net loss of $8.0 million, or $0.36 per share, compared with a net loss of $33.6 million, or $1.52 per share, for the first quarter of fiscal 2011.

"Our results for the first quarter of fiscal 2012 reflect improved, but still challenging, conditions for our industry," said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc.

"We experienced higher poultry market prices than the same period a year ago. While retail demand for chicken has remained steady, we continue to see weak food service demand, and we believe food service demand will remain under pressure until the national employment environment improves.

"Weak food service demand and ample supplies continue to weigh on market prices for boneless breast meat produced at our food service plants.

"While grain prices have retreated from the highs they set last fall, we also experienced higher feed costs during the first quarter, and this continues to affect our profitability."

According to Mr Sanderson, market prices for poultry products were higher during the first quarter of fiscal 2012 compared with the same period of fiscal 2011. A simple average of the Georgia dock price for whole chickens was approximately 5.3 per cent higher in the Company's first fiscal quarter compared with the same period in 2011.

Boneless breast meat prices during the quarter were approximately 7.9 per cent higher than the prior-year period. The average market price for bulk leg quarters increased approximately 41.4 per cent for the quarter compared with the same period last year. Jumbo wing prices, which averaged $1.43 per pound, were higher by 44 per cent compared with last year's first fiscal quarter.

The Company's average feed cost per pound of poultry products sold increased 16.7 per cent compared to the first fiscal quarter of fiscal 2011, and prices paid for corn and soybean meal, the Company's primary feed ingredients, increased 11.6 per cent and decreased 1.2 per cent, respectively, compared with the first quarter of fiscal 2011.

"Market conditions steadily improved during our first fiscal quarter compared with last year's first quarter and compared with our fourth quarter of fiscal 2011, and the Company was profitable in January," Mr Sanderson added.

"However, we continue to experience high grain prices, especially for corn. Corn supplies are at their tightest level in 15 years, which will likely keep upward pressure on grain costs at least until the market gets some visibility into the quantity and quality of the 2012 crops.

"Egg sets and pullet placement data indicate lower chicken production numbers over the short term, and the USDA currently estimates the industry will produce 2.9 per cent fewer pounds during calendar 2012 when compared to calendar 2011.

"The effect this expected supply will have on chicken market prices will depend on demand, although we are encouraged by the lower production numbers.

"While we expect a seasonal increase in demand as we move into the spring and summer months, which are typically a period of higher demand for our products, we do not believe food service demand will pick up significantly until we begin to see meaningful improvement in the employment outlook for under and unemployed Americans.

"Our balance sheet at 31 January 2012, reflects refundable income taxes at 31 January 2012, of approximately $102.1 million, $82.7 million of which relates to a federal income tax refund due as a result of the Company's fiscal 2011 net loss. The Company received that refund on 27 February 2012, and will use the proceeds of the refund to reduce outstanding borrowings under its revolving credit agreement," Mr Sanderson concluded.

Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. Its shares trade on the NASDAQ Global Select Market under the symbol SAFM.

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