Sanderson Farms Turns Loss to Profit

US - Poultry processor, Sanderson Farms, has reported net sales for the fourth quarter of the 2012 financial year of $648.4 million compared with $559.8 million for the same period a year ago.
calendar icon 19 December 2012
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For the quarter, the Company reported net income of $9.3 million compared with a net loss of $21.6 million for the fourth quarter of fiscal 2011.

Net sales for fiscal 2012 were $2.386 billion compared with $1.978 billion for fiscal 2011. Net income for the year totaled $53.9 million, compared with a net loss of $127.1 million for last year.

"The fourth quarter of fiscal 2012 marked the end of another challenging year for Sanderson Farms and the poultry industry," said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc.

"We reported record annual sales of $2.386 billion, a 20.6 percent increase over fiscal 2011. However, while poultry markets improved compared to fiscal 2011, grain prices surged to record levels during August as a result of drought conditions across much of the corn belt. As a result, the improvement in poultry market prices was offset in part by higher feed costs. Our increased sales and return to profitability during the year reflect higher production as we completed the ramp up to near full production at our Kinston, North Carolina, facility. For the year, we sold 2.952 billion pounds of dressed poultry, another record, compared with 2.794 billion pounds in fiscal 2011."

According to Sanderson, overall market prices for poultry products were higher in the fourth quarter of fiscal 2012 compared with prices a year ago.

As measured by a simple average of the Georgia dock price for whole chickens, prices were higher by approximately 7.7 percent in the Company's fourth fiscal quarter compared with the same period in fiscal 2011, and were higher by 7.3 percent for the fiscal year compared with the prior year.

The higher Georgia Dock whole bird price is consistent with steady demand for our retail chill pack product during this fiscal year. Boneless breast meat prices averaged 11.6 percent higher in the fourth quarter than the prior-year period. For fiscal 2012, boneless prices were 9.1 percent higher when compared with fiscal 2011.

Jumbo wing prices averaged $1.58 per pound during the fiscal year, up 81.2 percent from the average of $0.87 per pound for fiscal 2011. The average market price for bulk leg quarters decreased approximately one percent for the quarter, but increased approximately 16.7 percent for fiscal 2012.

The relatively strong dark meat prices reflect good export demand during the year. Prices paid for corn and soybean meal, the Company's primary feed ingredients, increased during the year and were up 11.6 percent and 39.7 percent, respectively, during the fourth fiscal quarter when compared with the fourth quarter a year ago. For the year, total feed costs in broiler flocks processed were 1.4 percent higher than fiscal 2011.

"The start-up of our new Kinston, North Carolina, poultry complex continued during the first half of fiscal 2012," Mr Sanderson added. "The increased production at the Kinston plant during fiscal 2012 more than offset the four percent production cut instituted at our other plants in January 2012 to better balance our production with our customers' demand.

"Because we expect demand from our food service customers to remain soft until American consumers regain their confidence and the employment outlook brightens, and in light of continued high prices for grain and uncertainty regarding supply, we have instituted the additional two percent production cut we announced in August of 2012. We currently plan to leave our production cut in place through fiscal 2013."

Mr Sanderson concluded: "We are pleased that our profitability during fiscal 2012 allowed us to significantly reduce outstanding debt and strengthen our balance sheet.

"As a result, we believe we are well positioned to continue our growth strategy once market conditions improve. As of October 31, 2012, our balance sheet reflected $896.5 million in assets, stockholders' equity of $550.1 million and net working capital of $262.2 million. Our total long-term debt at year-end was $150.2 million.

"A strong balance sheet is an important advantage in our industry, especially given today's economic environment, and provides us with the financial strength to not only support our growth strategy, but also to manage through challenging conditions. We deeply appreciate the hard work and dedication to excellence of everyone associated with our Company, including our employees and growers."

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