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Improved Market Conditions for Sanderson in Q2 of Fiscal 2012

by 5m Editor
30 May 2012, at 8:05am

US - Sanderson Farms, Inc. has reported net sales for the second quarter of the 2012 financial year of $595.0 million compared with $479.3 million for the same period a year ago.

For the quarter, net income was $23.9 million, or $1.04 per share, compared with a net loss of $16.3 million, or $0.74 per share, for the second quarter of fiscal 2011.

Net sales for the first six months of fiscal 2012 were $1,112.9 million compared with $907.1 million for the same period of fiscal 2011. Net income for the first half of the year reached $15.9 million, or $0.69 per share, compared with a net loss of $49.8 million, or $2.25 per share, for the first six months of last year.

Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. said: "The results for our second quarter of fiscal 2012 reflect improved market conditions driven primarily by a decrease in the supply of poultry products. Our net sales were 24.1 per cent higher than during the second quarter of fiscal 2011, reflecting increased production and higher average sales prices of chicken.

"We sold approximately 10.8 per cent more pounds of poultry products during the quarter as a result of increased production at our Kinston, North Carolina facility. This increase was partially offset by our previously announced four per cent production cut at our other facilities. Demand for chicken remains steady from retail grocery store and export customers. However, demand from our casual dining customers remains soft, and we expect this trend will continue with macroeconomic concerns and continued high unemployment affecting consumers' spending decisions.

"Our profitability for the second quarter continued to be adversely affected by relatively high feed costs. Feed costs in flocks sold decreased 9.8 per cent compared to last year's second fiscal quarter, but remained high relative to historical costs. Because of the tight supply of both corn and soybeans, we expect grain prices to remain high and volatile at least until markets get some visibility on the quantity and quality of this year's corn and soybean crops. While there is some degree of optimism regarding the 2012 corn crop fueled primarily by the rapid planting progress this spring and the large number of acres expected to be planted, there is no margin for error with this year's crop. Until the crop is harvested, we expect to pay higher prices, at least over the short term, for both corn and soybean meal."

According to Mr Sanderson, market prices for poultry products were higher during the second quarter of fiscal 2012 compared with the same quarter a year ago. As measured by a simple average of the Georgia dock price for whole chickens, prices increased approximately 7.5 per cent in the Company's second fiscal quarter compared with the same period in 2011. Bulk leg quarter market prices were 22.4 per cent higher compared with last year's second quarter, and reflected continued strong export and demand. Boneless breast meat prices during the second quarter were 2.3 per cent higher than the prior year period. Jumbo wing prices were up 121.5 per cent for the second quarter of 2012 compared with the same period last year. Prices paid for corn and soybean meal, the Company's primary feed ingredients, decreased 6.44 per cent and 15.19 per cent, respectively, compared with the second quarter of fiscal 2011.

Mr Sanderson added: "We are pleased with the continued progress at our Kinston, North Carolina, facility. We began processing chickens in January 2011 and this plant is now operating at about 96 per cent capacity. We plan to hold that production level for at least the rest of this calendar year.

"Looking ahead, we will continue to closely monitor the chicken markets and production levels as we head into the summer months and what is typically a period of better demand for chicken. Weekly broiler egg sets continue to run below last year's numbers, and breeder placements are lower. With economic conditions continuing to affect consumer behavior, we expect to see continued soft casual dining demand. However, market prices for boneless breast meat sold to our food service customers improved seasonally the first two weeks of May, and market prices for retail grocery store product have also moved higher. We believe these market improvements are supply driven and, while market conditions remain fluid, we will maintain our focus on our operating performance and sales execution."