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Strong demand, prices for chicken boost Sanderson profit
Story Date: 5/31/2013
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Source: MEATINGPLACE, 5/30O/13
Sanderson Farms Inc. on Thursday reported a better-than-expected second-quarter profit as strong demand for poultry products from retail and export customers and higher sales prices offset feed costs that remain high. The company’s shares rose almost 5 percent in morning trading.
The addition of several new chicken items on quick-serve menus and chicken promotions in casual-dining restaurants also supported pricing during the quarter, even as restaurants continued to struggle to attract customers due to the fragile economy, said Chief Executive Officer Joe F. Sanderson Jr.
“The improved demand we are enjoying at food service is a result of menu mix shifts, not more foot traffic,” he said on a conference call with analysts. Companies including Wendy’s, which introduced a flatbread chicken sandwich, were supporting new chicken breast products with advertising.
Whether or not the advertising continues through the summer, Sanderson said, market conditions should remain good for breast meat.
Sanderson said he did not expect to see a significant increase in production near term but said the company’s plants are prepared to move to full production next week. Sales volume of fresh chicken fell 3.8 percent from last spring, reflecting production cuts announced last fall.
Regarding plans to break ground on new facilities in Texas, Sanderson said the board of directors would discuss a start date later this summer. The company has been paying down debt, its balance sheet is in good shape, and existing operations are performing well, Sanderson said.
When asked on the conference call whether the sale of Smithfield Foods to China’s Shuanghui International Holdings, announced Wednesday, would affect consolidation in the poultry sector or Sanderson’s appetite for acquisitions, Sanderson said his company is focused on building plants.
Sanderson predicted grain prices would stay high and volatile until the quantity and quality of this year's corn and soybean crops is better known.
Whole chicken prices were up 9.9 percent from a year ago, led by a 14.2 percent jump in boneless breast meat prices. Prices for bulk leg quarters were flat, while jumbo wings declined 4.4 percent, having fallen from record levels in January and February after March Madness basketball games concluded.
Sanderson said he believes the bottom for wings has been hit, noting customers have been buying them and putting them in the freezer.
Sanderson Farms earned $24.4 million, or $1.06 a share, in the quarter ended April 30, up from $23.9 million, or $1.04 a share, a year ago. Sales rose 4.4 percent to $621.2 million. Analysts on average had expected a profit of 71 cents a share, on revenue of $624 million, according to Thomson Reuters.
Sanderson shares were up $3, or 4.54 percent, at $68.99 at midday on Nasdaq.
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