Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for
its second fiscal quarter and six months ended April 30, 2021.
Net sales for the second quarter of fiscal 2021 were $1,133.9
million compared with $844.7 million for the same period a year
ago. For the quarter, the Company reported net income of $96.9
million, or $4.34 per share, compared with net income of $6.1
million, or $0.28 per share, for the second quarter of fiscal
2020.
Net sales for the first six months of fiscal 2021 were $2,043.2
million compared with $1,667.8 million for the same period of
fiscal 2020. Net income for the first half of the fiscal year
totaled $106.4 million, or $4.76 per share, compared with a net
loss of $32.5 million, or $1.48 per share, for the first six months
of fiscal 2020.
Results for the second fiscal quarter of 2021 reflect an accrual
of $6.5 million, or $0.22 per share net of income tax, for a
probable contribution to the Company’s Employee Stock Ownership
Plan (“ESOP”). No accrual was made for an ESOP contribution during
last year’s second fiscal quarter. Results for the second fiscal
quarter of 2021 also reflect $2.75 million, or $0.09 per share, net
of income tax, in uninsured losses associated with the severe
winter storms that affected the Company’s Texas, Louisiana and
Mississippi locations during the quarter. The $2.75 million in
losses represent the retention under the Company’s property and
casualty insurance policies. The Company’s results for the second
quarter were also negatively affected by business interruption
losses related to the storms. While the Company expects to recover
some portion of the business interruption losses, it is subject to
a seven-day waiting period deductible under the applicable
insurance policy. The Company continues to work with its insurers,
adjusters and accountants to refine the calculation of losses
stemming from the storms, as well as the amount of those losses
applicable to the deductible period, and any recoveries of the
business interruption losses will be recognized once the
calculations of the claims and negotiations with the Company’s
insurance partners are complete.
Results for the second fiscal quarter of 2020 included a net
discrete income tax benefit of approximately $37.4 million related
to the net operating loss carry-back provisions allowed by the
CARES Act, which became law during the second quarter of fiscal
2020. Excluding this discrete income tax benefit, the Company’s net
loss for the second quarter of fiscal 2020 was $31.3 million, or
$1.43 per share.
“Sanderson Farms operated very well in all areas of our business
during the second quarter of fiscal 2021,” said Joe F. Sanderson,
Jr., chairman and chief executive officer of Sanderson Farms, Inc.
“Improved poultry markets more than offset feed grain costs that
were significantly higher compared to last year’s second fiscal
quarter, resulting in increased operating margins. The improvement
in the domestic poultry markets was driven largely by increased
demand from food service customers, as U.S. consumers slowly
returned to restaurants and several quick serve restaurant chains
featured chicken sandwiches on their menus. In addition, export
demand also improved during the quarter due to higher crude oil
prices, improved liquidity as a result of currency valuations and
some relief from COVID-19-related restrictions.”
According to Sanderson, overall realized prices for chicken
products sold to retail grocery store customers increased 6.2 cents
per pound during the second fiscal quarter of 2021 compared to the
same period of last year. Volumes reflected strong demand, as many
consumers have continued to prepare more meals at home instead of
dining out. In addition, commodity quoted markets for products from
the Company’s food service plants were significantly higher across
the board. Compared with the second fiscal quarter of 2020, quoted
boneless breast meat market prices were approximately 60.4 percent
higher, the average quoted market price for bulk leg quarters
increased approximately 12.3 percent, and jumbo wing quoted market
prices were higher by 88.9 percent. Market prices for chicken
breast tenders averaged 54.5 percent higher than a year ago. As a
result of these market improvements, overall realized prices for
chicken products increased 22.3 cents per pound, or 32.6 percent.
The Company’s average feed costs per pound of poultry products
processed increased by 26.6 percent when compared with the second
quarter of fiscal 2020, while prices paid for corn and soybean
meal, the Company’s primary feed ingredients, increased 39.7
percent and 40.0 percent, respectively, compared with the second
quarter of fiscal 2020.
“Looking ahead to the second half of the fiscal year, we
continue to expect prices paid for feed grain to be significantly
higher for the year compared to fiscal 2020,” added Sanderson.
“Supplies of both corn and soybeans worldwide relative to estimated
demand remain tight. Planting progress in the United States for
corn stands at 90 percent this week compared to a five-year average
of 80 percent and 87 percent for the same week last year. At the
same time, 75 percent of the soybean crop has been planted,
compared with a five-year average of 54 percent and 63 percent
planted at this time last year. We expect prices through the
growing season to be volatile given that good crops of both feed
grains are needed to rebuild inventories. Had we priced all of our
fiscal 2021 feed grain needs at yesterday’s Chicago Board of Trade
closing prices, cash paid for feed grains during fiscal 2021 would
be higher by $367.6 million during fiscal 2021 compared to fiscal
2020 using fiscal 2020 volumes. We estimate those higher costs
would increase feed cost per pound of poultry processed during
fiscal 2021 by approximately 7.5 cents per pound.
“With respect to chicken production numbers, the USDA reports
that weekly broiler egg sets are well ahead of 2020 numbers that
were negatively affected by COVID-19. However, certain live
production challenges, including lower than historical average
hatch rates and broiler livability, have resulted in fewer poultry
pounds than expected given the size of the layer flock. The current
USDA forecast is for United States broiler production during
calendar year 2021 to increase by approximately 0.4 percent
compared to calendar year 2020. We expect our total production
during our third and fourth fiscal quarters of 2021 to be down 0.6
percent and 2.3 percent, respectively, compared to the same
quarters of fiscal 2020, primarily because we reduced our target
live weight at our Hazlehurst, Mississippi processing plant to
better meet demand from our retail grocery store customers. In
April 2020, we began reducing production at our plants processing
larger birds for food service customers by five percent in response
to lower demand at the onset of the pandemic, and by July the
planned reduction was fully implemented. We will begin returning
those plants to full production starting in June 2021, and expect
to be back to full production at all of our food service plants
except St. Pauls, North Carolina and Palestine, Texas by early
September.
“The past fourteen months have been challenging for Sanderson
Farms,” Sanderson concluded. “We are navigating a health crisis,
and faced historic ice storms and periods of political and social
unrest, all while dealing with a global recession and volatile
grain and poultry markets. I am grateful for the work and
dedication of our employees and everyone associated with Sanderson
Farms, and I believe we are a stronger company. Thanks to our
team’s efforts, we are continuing to execute on our strategic
growth plan, which is supported by strong domestic poultry market
demand, and we look forward to announcing the site for our new tray
pack poultry complex soon. However, the construction schedule will
be delayed until we have better visibility on construction costs
and the 2021 grain crops,” Sanderson concluded.
Sanderson Farms will hold a conference call to discuss this
press release today, May 27, 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 and 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 will continue for 30
days. You may listen and participate in the call by dialing
833-685-0982 and requesting 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 fiscal year ended October 31,
2020 and Quarterly Report on Form 10-Q for the quarter ended April
30, 2021, 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
the Company from running some of its facilities at full capacity,
or could in the future cause facility closures; an inability of
contract poultry producers 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 the Company’s 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 Sanderson Farms.
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 production levels, commodity market
conditions, grain prices, supply and demand factors, growth plans
and other industry conditions.
SANDERSON FARMS, INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except per share
amounts)
Three Months EndedApril 30, Six Months EndedApril
30,
2021
2020
2021
2020
Net sales
$
1,133,880
$
844,711
$
2,043,186
$
1,667,789
Cost and expenses: Cost of sales
941,936
832,283
1,781,258
1,655,807
Selling, general and administrative
64,245
56,214
120,844
105,699
1,006,181
888,497
1,902,102
1,761,506
Operating income (loss)
127,699
(43,786
)
141,084
(93,717
)
Other income (expense) Interest expense
(697
)
(1,783
)
(1,335
)
(2,971
)
Other
13
3
16
5
(684
)
(1,780
)
(1,319
)
(2,966
)
Income (loss) before income taxes
127,015
(45,566
)
139,765
(96,683
)
Income tax expense (benefit)
30,104
(51,684
)
33,376
(64,225
)
Net income (loss)
$
96,911
$
6,118
$
106,389
$
(32,458
)
Earnings (loss) per share: Basic
$
4.34
$
0.28
$
4.76
$
(1.48
)
Diluted
$
4.34
$
0.28
$
4.76
$
(1.48
)
Dividends per share
$
0.44
$
0.32
$
0.88
$
0.64
SANDERSON FARMS, INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands)
April 30, 2021
October 31, 2020
(unaudited)
(1)
Assets Current assets: Cash and cash equivalents
$
122,911
$
49,061
Accounts receivable, net
188,870
147,546
Receivable from insurance companies
3,951
-
Inventories
347,442
290,007
Refundable income taxes
12,519
33,977
Prepaid expenses and other current assets
57,503
57,544
Total current assets
733,196
578,135
Property, plant and equipment, net
1,231,106
1,224,746
Right-of-use assets
32,198
40,785
Other assets
6,696
5,365
Total assets
$
2,003,196
$
1,849,031
Liabilities and stockholders' equity Current liabilities:
Accounts payable
$
136,257
$
111,463
Dividends payable
9,826
-
Accrued expenses
101,911
98,663
Lease liabilities
13,059
13,981
Total current liabilities
261,053
224,107
Long-term debt
55,000
25,000
Claims payable and other liabilities
12,361
12,175
Deferred income taxes
145,353
141,672
Long-term lease liabilities
19,139
26,804
Commitments and contingencies Stockholders' equity: Common stock
22,332
22,251
Paid-in capital
94,616
90,420
Retained earnings
1,393,342
1,306,602
Total stockholders' equity
1,510,290
1,419,273
Total liabilities and stockholders' equity
$
2,003,196
$
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/20210527005231/en/
Mike Cockrell Treasurer, Chief Financial Officer &
Chief Legal Officer (601) 649-4030
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