Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for
the first quarter of fiscal 2020.
Net sales for the first quarter of fiscal 2020 were $823.1
million compared with $743.4 million for the same period a year
ago. The Company reported a net loss of $38.6 million, or $1.76 per
share, for the quarter compared with a net loss of $17.8 million,
or $0.82 per share, for the first quarter of fiscal 2019.
“Our results for the first quarter reflect continued challenging
market conditions with market prices for boneless breast meat
produced at our plants that process larger birds for food service
customers reaching record low levels in January,” 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 slightly higher when compared
with the same period a year ago on improved product mix, and prices
continue to reflect a good supply and demand balance in that
market. Demand and prices for jumbo wings strengthened seasonally
during the quarter, and market prices averaged above last year’s
first quarter.”
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 2019, the average realized prices
of the Company’s retail tray pack products were approximately 0.6
percent higher, boneless breast meat prices were approximately 3.4
percent lower, bulk leg quarter prices increased by approximately
22.6 percent, and jumbo wing prices were higher by 3.1 percent. The
Company’s average feed cost per pound of poultry products processed
was higher by 6.3 percent compared with the first quarter of fiscal
2019, and prices paid during the quarter for corn and soybean meal,
the Company’s primary feed ingredients, increased 10.1 percent and
decreased 2.3 percent, respectively, compared with the first
quarter of fiscal 2019.
“Both corn and soybean balance tables are healthy heading into
the 2020 planting season, and we believe the world has an adequate
supply of both grains,” added Sanderson. “Had we priced all of our
grain needs for fiscal 2020 at yesterday’s Chicago Board of Trade
futures contract prices, cash paid for feed grains during fiscal
2020 on fiscal 2019 volumes would be relatively flat with fiscal
2019.
“We have several reasons to remain optimistic about poultry
markets in 2020,” Sanderson continued. “While market prices for
boneless breast meat produced for food service customers remain
under pressure and market conditions during our first fiscal
quarter were very challenging, we continue to be positive about our
opportunities in both the domestic and export markets over the next
year. With respect to domestic markets, we expect to see continued
favorable demand in retail grocery stores. Chicken remains
favorably priced compared to other proteins, and we believe that
dynamic will continue. We also believe we will see improved demand
from food service customers, supported by an increase in
promotional activity for chicken at quick serve restaurants. With
respect to the export markets, the outbreak of African swine fever
in China has affected the worldwide supply of pork, creating a
significant protein deficit that should ultimately benefit poultry
markets in the United States. China lifted its nearly five-year ban
on the import of United States poultry at the end of calendar 2019,
and we resumed shipments to China almost immediately. Since the ban
was lifted, we have shipped to China or have received orders from
our customers in China for approximately 18.0 million pounds of
chicken products, including dark meat parts. We continue to receive
strong indications of interest for our products from buyers in
China, and we were pleased to see the recent announcement regarding
the reduction of tariffs on United States poultry, which should
further support our business. While the devastating COVID-19 virus
is currently disrupting the markets, depressing demand, negatively
affecting shipping and supply chain logistics and slowing China’s
economic growth rate, we believe demand for protein from China is
strong, and we expect to benefit in 2020 from the return to an open
market.”
“We continue to move toward full production at our new Tyler,
Texas plant, and the start-up has gone well. We expect to reach
full production during our second fiscal quarter, and we look
forward to the opportunities the plant will create,” added
Sanderson.
Sanderson Farms will hold a conference call to discuss this
press release today, February 27, 2020, 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
29, 2020. Those who would like to participate in the call can do so
by dialing 888-254-3590; confirmation code 8371925.
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, 2019, and
Quarterly Report on Form 10-Q for the quarter ended January 31,
2020, 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
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended January
31,
2020
2019
Net sales
$
823,078
$
743,388
Cost and expenses: Cost of sales
823,524
708,400
Selling, general and administrative
49,485
58,535
873,009
766,935
Operating loss
(49,931
)
(23,547
)
Other income (expense) Interest expense
(1,188
)
(509
)
Other
2
-
(1,186
)
(509
)
Loss before income taxes
(51,117
)
(24,056
)
Income tax benefit
(12,541
)
(6,223
)
Net loss
$
(38,576
)
$
(17,833
)
Loss per share: Basic
$
(1.76
)
$
(0.82
)
Diluted
$
(1.76
)
$
(0.82
)
Dividends per share
$
0.32
$
0.32
SANDERSON FARMS, INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands)
January 31, 2020 October 31, 2019
(unaudited)
(1)
Assets Current assets: Cash and cash equivalents
$
63,416
$
95,417
Accounts receivable, net
139,067
131,778
Receivable from insurance companies
-
445
Inventories
294,956
289,928
Prepaid income taxes
22,500
6,612
Prepaid expenses and other current assets
67,158
56,931
Total current assets
587,097
581,111
Property, plant and equipment
2,206,443
2,139,333
Less accumulated depreciation
(989,025
)
(953,473
)
Net fixed assets
1,217,418
1,185,860
Right of use assets
49,809
-
Other assets
6,844
7,163
Total assets
$
1,861,168
$
1,774,134
Liabilities and stockholders' equity Current
liabilities: Accounts payable
$
112,333
$
132,741
Dividends payable
7,113
-
Accrued expenses
66,516
82,940
Lease liabilities
14,664
-
Total current liabilities
200,626
215,681
Long-term debt
165,000
55,000
Claims payable and other liabilities
11,724
11,646
Deferred income taxes
79,301
74,132
Long-term lease liabilities
35,145
-
Commitments and contingencies Stockholders' equity:
Common stock
22,229
22,204
Paid-in capital
83,371
86,010
Retained earnings
1,263,772
1,309,461
Total stockholders' equity
1,369,372
1,417,675
Total liabilities and stockholders' equity
$
1,861,168
$
1,774,134
(1)
The Condensed Consolidated Balance Sheet
at October 31, 2019, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200227005204/en/
Mike Cockrell Treasurer, Chief Financial Officer
& Chief Legal Officer (601) 649-4030
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