Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for
the first quarter of fiscal 2021.
Net sales for the first quarter of fiscal 2021 were $909.3
million compared with $823.1 million for the same period a year
ago. The Company reported net income of $9.5 million, or $0.42 per
share, for the quarter compared with a net loss of $38.6 million,
or $1.76 per share, for the first quarter of fiscal 2020.
“Our results for the first quarter of fiscal 2021 reflect
continuing challenges presented by the COVID-19 pandemic and higher
feed grain prices, but we ended the quarter on a strong note amidst
encouraging end-market trends and remain optimistic about the
future,” said Joe F. Sanderson, Jr., chairman and chief executive
officer of Sanderson Farms, Inc. “While market prices for boneless
breast meat produced at our plants that process larger birds for
food service customers remained under pressure during the first two
months of the quarter, we saw more favorable trends in January and
February. Retail demand remains strong and, as a result of both
improved pricing and product mix, average prices for tray pack
products sold to retail grocery store customers were higher when
compared with the same period a year ago, 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.
“Our employees are our most important asset, and our operations
have continued to run efficiently and safely despite the ongoing
challenges created by the COVID-19 pandemic thanks to their heroic
efforts. Our employees have allowed us to continue to produce and
deliver poultry products to our customers and contribute to a
stable food supply.
“In addition to the challenges created by the COVID-19 pandemic,
our employees, managers, contractors and independent contract
poultry producers in Texas, Louisiana, and Mississippi have
navigated an historic weather event over the past two weeks.
Because of the record low temperatures, power failures, snow and
ice, and hazardous road conditions, we were unable to operate our
processing plants, deliver day old chicks to broiler farms on our
regular schedule, pick up hatching eggs from breeder farms and
place those eggs in our hatcheries, or manufacture and deliver
chicken feed to the farms of our independent contract poultry
producers. Fortunately, none of our facilities were damaged, our
employees remained safe, and we returned to normal operations at
all our facilities on February 22, 2021, except the Hazlehurst,
Mississippi, processing plant, which resumed normal operations on
February 23, 2021. However, our live production supply chain
experienced interruptions and losses similar to a hurricane. We
lost 455,000 broilers in houses that lost power, water or feed, or
had roofs collapse under the weight of snow and ice. We were forced
to humanely euthanize 545,000 chicks in our Texas hatcheries and
were unable to pick up and place 703,000 hatching eggs in our
hatcheries. We deeply regret the losses incurred due to
extraordinary circumstances beyond our control or our independent
contract poultry producers’ control.
“As a result of these interruptions, we will have approximately
1.6 million fewer chickens to process at our Mississippi,
Louisiana, and Texas processing plants over the next ten weeks.
These losses represent just under one percent of the head we
expected to process during our second fiscal quarter. In addition,
breeder and broiler chickens exposed to extreme temperatures
typically suffer some performance losses over their lives. While
the Company is insured for these catastrophic events, it retains
$2.75 million of the risk and is subject to a seven-day deductible
under its business interruption coverage. We will work with our
insurance partners over the next few months to quantify these
losses. Our primary focus as we managed through this weather event
was to ensure the safety of our employees, contractors and
independent contract producers, and the health and wellbeing of the
animals under our care. I am grateful for everyone associated with
Sanderson Farms for their resourcefulness and sheer determination.
Working with our public utility and fuel suppliers, local
authorities and emergency management authorities, our employees and
contract poultry producers enabled the Company to mitigate what
could have been a much more significant impact on our operations
and the animals under our care.”
Overall market prices for poultry products were higher during
the first quarter of fiscal 2021 compared with the same period last
year. Compared with the first quarter of fiscal 2020, the average
realized prices of the Company’s retail tray pack products were
approximately 3.1 percent higher, boneless breast meat quoted
market prices were approximately 10.5 percent higher, tender quoted
market prices increased by approximately 27.4 percent, and jumbo
wing quoted market prices were higher by 34.3 percent. Quoted
market prices for bulk leg quarters were approximately 26.4 percent
lower during the first quarter of fiscal 2021 compared with the
same period last year. The Company’s average feed cost per pound of
poultry products processed was higher by 1.3 percent compared with
the first quarter of fiscal 2020, and prices paid during the first
quarter of fiscal 2021 for corn and soybean meal, the Company’s
primary feed ingredients, increased 8.9 percent and 27.5 percent,
respectively, compared with the first quarter of fiscal 2020.
“Both corn and soybean balance tables reflect very tight
supplies heading into the 2021 planting season,” added Sanderson.
“Since May 2020, the USDA has lowered its estimate of ending corn
stocks for the current crop year by 1.8 billion bushels, and its
current estimate stands at 1.5 billion bushels, compared to a
ten-year average of 1.6 billion bushels. The USDA’s February
estimate of ending soybean stocks also moved lower to a seven-year
low of 120 million bushels. Market prices for both grains have
moved significantly higher since August. Had we priced all of our
grain needs for fiscal 2021 at yesterday’s Chicago Board of Trade
futures contract prices, cash paid for feed grains during fiscal
2021 on fiscal 2020 volumes would be $325.4 million higher than
during fiscal 2020.
“We remain optimistic about poultry markets in 2021 for many
reasons. Market prices for boneless breast meat produced for food
service customers moved significantly higher during January and
February, and we believe this is partly due to improved demand from
quick serve food service customers who are promoting new chicken
products. Market prices for chicken wings and tenders also
improved, as those products are favored by food service customers
with significant pick-up and delivery sales. We are optimistic that
demand from food service customers will improve further once the
COVID-19 vaccines are more widely distributed and consumers are
more comfortable dining in restaurants. We also expect to see
continued favorable demand from our retail grocery store customers
as U.S. consumers continue to prepare more meals at home. With
respect to the export markets, demand from customers in our
traditional export markets has improved since December as a result,
we believe, of higher crude oil prices, improved liquidity and
favorable currency valuations. This improved demand environment is
reflected in higher market prices for dark meat.”
Sanderson concluded, “We believe we can continue to generate
significant value for shareholders and other stakeholders by
executing our organic growth strategy and being prudent with
respect to capital allocation and other opportunities. We are
continuing to evaluate the site for our next new poultry complex,
and are confident in the opportunities created by our expanded
facility footprint.”
Sanderson Farms will hold a conference call to discuss this
press release today, February 25, 2021, 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 online replay
will be available approximately two hours following the conclusion
of the live broadcast and will continue for 30 days. Those who
would like to participate in the call can do so by dialing
833-685-0982 (ask to be joined into the Sanderson Farms, Inc.
call).
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, 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.
(15) Changes resulting from the COVID-19 pandemic, which could
exacerbate any of the risks described above, and could include:
high absentee rates that have prevented and may continue to prevent
us from running some of our facilities at full capacity, or could
in the future cause facility closures; an inability of our contract
growers to manage their flocks; supply chain disruptions for feed
grains; further changes in customer orders due to shifting consumer
patterns; disruptions in logistics and the distribution chain for
our products; liquidity challenges; and a continued or worsening
decline in global commercial activity, among other unfavorable
conditions.
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,
2021
2020
Net sales
$
909,306
$
823,078
Cost and expenses: Cost of sales
839,322
823,524
Selling, general and administrative
56,599
49,485
895,921
873,009
Operating income (loss)
13,385
(49,931
)
Other income (expense) Interest expense
(638
)
(1,188
)
Other
3
2
(635
)
(1,186
)
Income (loss) before income taxes
12,750
(51,117
)
Income tax expense (benefit)
3,272
(12,541
)
Net income (loss)
$
9,478
$
(38,576
)
Earnings (loss) per share: Basic
$
0.42
$
(1.76
)
Diluted
$
0.42
$
(1.76
)
Dividends per share
$
0.44
$
0.32
SANDERSON FARMS, INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands)
January 31, 2021
October 31, 2020
(unaudited)
(1)
Assets Current assets: Cash and cash equivalents
$
50,090
$
49,061
Accounts receivable, net
167,711
147,546
Inventories
325,672
290,007
Refundable income taxes
31,901
33,977
Prepaid expenses and other current assets
61,735
57,544
Total current assets
637,109
578,135
Property, plant and equipment, net
1,223,169
1,224,746
Right-of-use assets
36,894
40,785
Other assets
5,092
5,365
Total assets
$
1,902,264
$
1,849,031
Liabilities and stockholders' equity Current liabilities:
Accounts payable
$
131,332
$
111,463
Dividends payable
9,823
-
Accrued expenses
94,277
98,663
Lease liabilities
14,253
13,981
Total current liabilities
249,685
224,107
Long-term debt
55,000
25,000
Claims payable and other liabilities
12,615
12,175
Deferred income taxes
142,841
141,672
Long-term lease liabilities
22,641
26,804
Commitments and contingencies Stockholders' equity: Common stock
22,326
22,251
Paid-in capital
90,900
90,420
Retained earnings
1,306,256
1,306,602
Total stockholders' equity
1,419,482
1,419,273
Total liabilities and stockholders' equity
$
1,902,264
$
1,849,031
(1)
The Condensed Consolidated Balance Sheet
at October 31, 2020, 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/20210225005232/en/
Mike Cockrell Treasurer, Chief Financial Officer &
Chief Legal Officer (601) 649-4030
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