Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for
the first quarter of fiscal 2019.
Net sales for the first quarter of fiscal 2019 were $743.4
million compared with $771.9 million for the same period a year
ago. The Company reported a net loss of $17.8 million, or $0.82 per
share, for the quarter compared with net income of $51.2 million,
or $2.24 per share, for the first quarter of fiscal 2018.
Net income for last year’s first fiscal quarter reflected a
one-time non-cash tax benefit of $37.5 million from an adjustment
to the Company’s deferred income tax liability, which resulted from
a lower tax rate under the December 2017 federal tax
legislation.
“Our results for the first quarter reflect continued challenging
market conditions with significantly lower market prices for
boneless breast meat produced at our big bird deboning plants
compared with last year’s first quarter,” said Joe F. Sanderson,
Jr., chairman and chief executive officer of Sanderson Farms, Inc.
“However, average prices for tray pack products sold to retail
grocery store customers were higher both sequentially and when
compared with the same period a year ago, and prices continue to
reflect a good supply and demand balance. Demand and prices for
jumbo wings strengthened seasonally during the quarter, but market
prices still averaged below last year’s first quarter. Despite the
challenging market price compared with last year’s first quarter,
market prices for boneless breast meat rose from record lows during
January and are now higher than this time a year ago.”
Overall market prices for poultry products were lower during the
first quarter compared with the same period last year. Compared
with the first fiscal quarter of 2018, the average prices of the
Company’s retail tray pack products were approximately 1.4 percent
higher, boneless breast meat prices were approximately 7.6 percent
lower, bulk leg quarter prices decreased by approximately 23.7
percent, and jumbo wing prices were lower by 4.7 percent. The
Company’s average feed cost per pound of poultry products processed
was flat compared with the first quarter of fiscal 2018, and prices
paid during the quarter for corn and soybean meal, the Company’s
primary feed ingredients, increased 3.3 percent and decreased 0.2
percent, respectively, compared with the first quarter of fiscal
2018.
“Good corn and soybean crops harvested in the United States last
fall contributed to a very healthy soybean balance table heading
into the 2019 planting season, as well as an adequate supply of
corn,” added Sanderson. “Uncertainties regarding trade with China,
however, have provided price support for both corn and soybeans
despite ample supplies of both grains, especially soy beans. Had we
priced all of our grain needs for fiscal 2019 at yesterday’s
Chicago Board of Trade futures contract prices, cash paid for feed
grains during fiscal 2019 on fiscal 2018 volumes would be $26.4
million lower than during fiscal 2018.
“Operations at our new Tyler, Texas, complex began earlier this
month and the start-up has gone well. We expect to move to full
production by the first calendar quarter of 2020, and we look
forward to the opportunities the plant represents,” added
Sanderson.
Sanderson Farms will hold a conference call to discuss this
press release today, February 26, 2019, at 10:00 a.m.
Central, 11:00 a.m. Eastern. Investors will have the opportunity
to listen to a live internet broadcast of the conference call
through the Company’s website at www.sandersonfarms.com. To listen
to the live call, please go to the website at least 15 minutes
early to register, download, and install any necessary audio
software. For those who cannot listen to the live broadcast, an
internet replay will be available shortly after the call and
continue through March 28, 2019. Those who would like to
participate in the call can do so by dialing 888-599-8686;
confirmation code 9388773.
Sanderson Farms, Inc. is engaged in the production, processing,
marketing and distribution of fresh, frozen and minimally
prepared chicken. Its shares trade on the NASDAQ Global Select
Market under the symbol SAFM.
This press release includes forward-looking statements within
the meaning of the “safe harbor” provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements are based on a number of assumptions about future events
and are subject to various risks, uncertainties and other factors
that may cause actual results to differ materially from the
views, beliefs, projections and estimates expressed in such
statements. These risks, uncertainties and other factors
include, but are not limited to those discussed under “Risk
Factors” in the Company’s Annual Report on Form 10-K for the
year ended October 31, 2018, and the following:
(1) Changes in the market price for the Company’s finished
products and feed grains, both of which may fluctuate
substantially and exhibit cyclical characteristics typically
associated with commodity markets.
(2) Changes in economic and business conditions, monetary and
fiscal policies or the amount of growth, stagnation or recession in
the global or U.S. economies, any of which may affect the value of
inventories, the collectability of accounts receivable or the
financial integrity of customers, and the ability of the end
user or consumer to afford protein.
(3) Changes in the political or economic climate, trade
policies, laws and regulations or the domestic poultry
industry of countries to which the Company or other companies in
the poultry industry ship product, and other changes that might
limit the Company’s or the industry’s access to foreign
markets.
(4) Changes in laws, regulations, and other activities in
government agencies and similar organizations applicable to the
Company and the poultry industry and changes in laws, regulations
and other activities in government agencies and similar
organizations related to food safety.
(5) Various inventory risks due to changes in market conditions
including, but not limited to, the risk that net realizable values
of live and processed poultry inventories might be lower than the
cost of such inventories, requiring a downward adjustment to record
the value of such inventories at the lower of cost or net
realizable value as required by generally accepted accounting
principles.
(6) Changes in and effects of competition, which is significant
in all markets in which the Company competes, and the effectiveness
of marketing and advertising programs. The Company competes with
regional and national firms, some of which have greater financial
and marketing resources than the Company.
(7) Changes in accounting policies and practices adopted
voluntarily by the Company or required to be adopted by
accounting principles generally accepted in the United States.
(8) Disease outbreaks affecting the production, performance
and/or marketability of the Company’s poultry products, or the
contamination of its products.
(9) Changes in the availability and cost of labor and
growers.
(10) The loss of any of the Company’s major customers.
(11) Inclement weather that could hurt Company flocks or
otherwise adversely affect the Company’s operations, or changes in
global weather patterns that could affect the supply and price of
feed grains.
(12) Failure to respond to changing consumer preferences and
negative or competitive media campaigns.
(13) Failure to successfully and efficiently start up and run a
new plant or integrate any business the Company might
acquire.
(14) Unfavorable results from currently pending litigation and
proceedings, or litigation and proceedings that could arise in the
future.
Readers are cautioned not to place undue
reliance on forward-looking statements made by or on
behalf of the Company. Each such statement speaks only as of the
day it was made. The Company undertakes no obligation to update or
to revise any forward-looking statements. The factors
described above cannot be controlled by the Company. When used in
this press release or in the related conference
call, the words “believes,” “estimates,” “plans,”
“expects,” “should,” “could,” “outlook,” and “anticipates” and
similar expressions as they relate to the Company or its
management are intended to identify forward-looking
statements. Examples of forward-looking statements include
statements of the Company’s belief about future growth plans,
future earnings, production levels, capital expenditures,
grain prices, global economic conditions, supply and demand factors
and other industry conditions.
SANDERSON FARMS, INC. AND
SUBSIDIARIESCondensed Consolidated Statements of
Operations(Unaudited)(In thousands, except per share
amounts)
Three Months Ended
January 31,
2019 2018 Net sales $ 743,388 $ 771,948
Cost and expenses: Cost of sales 708,400 702,101 Selling, general
and administrative 58,535 52,575
766,935 754,676 Operating income (loss)
(23,547 ) 17,272 Other income (expense) Interest income - 419
Interest expense (509 ) (523 ) Other - 2
(509 ) (102 ) Income (loss) before income
taxes (24,056 ) 17,170 Income tax benefit (6,223 )
(34,036 ) Net income (loss) $ (17,833 ) $ 51,206
Earnings (loss) per share: Basic $ (0.82 ) $ 2.24 Diluted $
(0.82 ) $ 2.24 Dividends per share $ 0.32 $ 0.32
SANDERSON FARMS, INC. AND
SUBSIDIARIESCondensed Consolidated Balance Sheets(In
thousands)
January 31, 2019
October 31, 2018 (unaudited) (1) Assets
Current assets: Cash and cash equivalents $ 74,710 $ 121,193
Accounts receivable, net 123,593 121,932 Receivable from insurance
companies 5,699 7,094 Inventories 261,768 240,056 Refundable income
taxes 32,851 32,974 Prepaid expenses and other current assets
53,383 43,240 Total current assets
552,004 566,489 Property, plant and equipment 2,022,063 1,961,497
Less accumulated depreciation (893,996 ) (873,909 )
1,128,067 1,087,588 Other assets 5,030 5,363
Total assets $ 1,685,101 $ 1,659,440
Liabilities and stockholders' equity Current liabilities: Accounts
payable $ 125,285 $ 128,936 Dividends payable 7,089 - Accrued
expenses 63,108 69,953 Total current
liabilities 195,482 198,889 Long-term debt 60,000 - Claims payable
and other liabilities 9,961 9,865 Deferred income taxes 56,447
62,793 Commitments and contingencies Stockholders' equity: Common
stock 22,153 22,100 Paid-in capital 81,456 81,269 Retained earnings
1,259,602 1,284,524 Total stockholders'
equity 1,363,211 1,387,893 Total
liabilities and stockholders' equity $ 1,685,101 $ 1,659,440
(1) The Condensed Consolidated Balance Sheet at
October 31, 2018, was derived from the audited consolidated
financial statements at that date, but does not include all of the
information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements.
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Mike CockrellTreasurer & Chief Financial
Officer(601) 649-4030
Sanderson Farms (NASDAQ:SAFM)
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