Sanderson Farms Q4 Profit Surges, But Misses Estimates

(RTTNews) - Poultry processor Sanderson Farms, Inc. (SAFM) reported Tuesday a significant increase in fourth-quarter profit as sales were boosted by higher prices and demand. Earnings per share, however, missed analysts' estimates, while top line beat their view.

Joe Sanderson, Jr., chairman and chief executive officer, said, "While poultry markets improved compared to fiscal 2012, grain prices remained near record high levels during much of fiscal 2013 before moderating during the fourth quarter on optimism surrounding the current year's grain harvest. However, the improved poultry market prices more than offset the higher feed costs, and our margins improved significantly during fiscal 2013 compared to fiscal 2012."

For the quarter, the company reported net income of $45.27 million or $1.97 per share, higher than prior year's net income of $9.35 million or $0.41 per share. On average, six analysts polled by Thomson Reuters expected earnings of $2.22 per share for the quarter. Analysts' estimates typically exclude special items.

In the quarter, operating income improved to $71.78 million from last year's $15.51 million.

Net sales for the fourth quarter were $727.06 million, compared to $648.38 million for the same period a year ago. Five analysts had a consensus sales estimate of $717.82 million.

Sanderson noted that overall market prices for poultry products were higher in the quarter from last year, but came down significantly from peaks earlier during the year.

As measured by a simple average of the Georgia dock price for whole chickens, prices increased about 10.9 percent, reflecting steady demand for retail chill pack product. Boneless breast meat prices averaged 8.4 percent higher, while Jumbo wing prices averaged 16.5 percent lower than last year.

The average market price for bulk leg quarters decreased about 1.4 percent for the quarter. The company noted that the steady dark meat prices reflect continued good export demand.

Cash prices for corn and soybean meal, the company's primary feed ingredients, were down 32.8 percent and 1.6 percent, respectively, in the quarter.

For fiscal 2013, net income totaled $130.6 million or $5.68 per share, higher than $53.9 million or $2.35 per share last year. Net sales climbed 12.4 percent year-over-year to $2.683 billion. The company sold 3.031 billion pounds of dressed poultry in the year, compared with 2.952 billion pounds a year ago.

Noting that the annual profitability helped the firm to reduce outstanding debt significantly and strengthen balance sheet, Sanderson said, "A strong balance sheet is an important advantage in our industry, especially given today's economic environment, and provides us with the financial strength to not only support our growth strategy, but also to manage our operations through challenging market conditions."

Sanderson Farms closed Monday's trading at $70.75, up $1.75 or 2.54 percent.