December 18, 2013

Sanderson reports rise in Q4 profits due to higher prices, demand

 

 

 

Driven by increased sales which were boosted by higher prices and demand, Sanderson Farms, Inc. reported a significant increase in fourth-quarter profit, however, earnings per share missed analysts' estimates, while top line beat their view.

 

Joe Sanderson, Jr., chairman and chief executive officer, said, "While poultry markets improved compared to fiscal 2012, grain prices remained near record high levels during much of fiscal 2013 before moderating during the fourth quarter on optimism surrounding the current year's grain harvest. However, the improved poultry market prices more than offset the higher feed costs, and our margins improved significantly during fiscal 2013 compared to fiscal 2012."

 

The company reported net income of US$45.27 million or US$1.97/share for the quarter, higher than prior year's net income of US$9.35 million or US$0.41/share. On average, six analysts polled by Thomson Reuters expected earnings of US$2.22/share for the quarter. Analysts' estimates typically exclude special items. Operating income improved to US$71.78 million from last year's US$15.51 million.

 

Net sales for the fourth quarter were US$727.06 million, compared to US$648.38 million for the same period a year ago. Five analysts had a consensus sales estimate of US$717.82 million.

 

Sanderson said that overall market prices for poultry products were higher in the quarter from last year, but came down significantly from peaks earlier during the year.

 

As measured by a simple average of the Georgia dock price for whole chickens, prices increased about 10.9%, reflecting steady demand for retail chill pack product. Boneless breast meat prices averaged 8.4% higher, while Jumbo wing prices averaged 16.5% lower than last year.

 

The average market price for bulk leg quarters decreased about 1.4% for the quarter. The company noted that the steady dark meat prices reflect continued good export demand.

 

Cash prices for corn and soymeal, the company's primary feed ingredients, were down 32.8% and 1.6%, respectively, in the quarter.

 

Net income totalled US$130.6 million or US$5.68/share for fiscal 2013, higher than US$53.9 million or US$2.35/share last year. Net sales climbed 12.4% over-year to US$2.683 billion. The company sold 3.031 billion pounds of dressed poultry in the year, compared with 2.952 billion pounds a year ago.

 

The company said that the annual profitability helped the firm to reduce outstanding debt significantly and strengthen balance sheet.