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Sanderson Farms returns to profitability, beats Q4 estimates
Story Date: 12/19/2012
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Source: Chris Scott, MEATINGPLACE, 12/18/12
Despite what Chairman and CEO Joe F. Sanderson described as “a challenging year,” Sanderson Foods Inc. posted net income of 41 cents a share in the fourth quarter versus a loss of 97 cents a share in the year-ago period.
Industry analysts expected to company to report net income of 32 cents a share in the period on revenue of about $636 million. Sanderson said net sales actually reached $648.4 million in the quarter versus $559.8 million last year. Sales for the year reached a record $2.87 billion, compared with $1.98 billion in fiscal 2011.
The Laurel, Miss.-based poultry processor cited much improved poultry market prices and higher production levels throughout 2012 for the return to profitability during the last quarter of 2012. Overall poultry prices as measured by the Georgia dock price for whole chickens were 7.7 higher compared with the fourth quarter of 2011, boneless breast prices were up 11.6 percent and wing prices were nearly double the per-pound price one year ago. Sanderson Farms also noted that production at its Kinston, N.C., plant increased throughout the year, more than compensating for the 4 percent production cut at other facilities launched in January 2012.
CEO Sanderson pointed out in a conference call with analysts, however, that the improved showing was offset by higher feed costs since August 2012 and added that he believes that margins improved because of production rather than higher demand for poultry. He also noted five points the company will be watching in 2013: South American grain crop yields; the political situation in the nation’s capital; the grain planning report expected in March 2013; the development of crops in 2013; and Europe’s financial situation, which could potentially dampen a U.S. economic recovery.
The company expects volatility in U.S. grain markets to continue next year, adding that Sanderson Farms has lined up some contracts for corn, but none for soybean meal beyond January because of expected market changes in March and beyond. Sanderson also expects to make an announcement soon on a new plant now that it has eliminated restrictions on plant locations as part of an October 2012 debt covenant. Last month, Sanderson Farms pulled the plug on longtime efforts to build a new poultry processing complex in Nash County, N.C., citing depressed market fundamentals.
“We need to have a good crop in the bin, including corn and soybeans at reasonable (price) levels,” Sanderson said with regard to moving forward with new facilities.
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