Sanderson Farms reports fiscal Q2 net income of US$24.4M, up 2.1% from year-ago period as net sales rise 4.4% to US$621.2M

Nevin Barich

LAUREL, Mississippi , May 30, 2013 (press release) – Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for its second fiscal quarter and six months ended April 30, 2013.

Net sales for the second quarter of fiscal 2013 were $621.2 million compared with $595.0 million for the same period a year ago. For the quarter, net income was $24.4 million, or $1.06 per share, compared with net income of $23.9 million, or $1.04 per share, for the second quarter of fiscal 2012.

Net sales for the first six months of fiscal 2013 were $1,217.0 million compared with $1,112.9 million for the same period of fiscal 2012. Net income for the first half of the year totaled $17.4 million, or $0.76 per share, compared with net income of $15.9 million, or $0.69 per share, for the first six months of last year.

“The results for our second quarter of fiscal 2013 reflect improved market conditions driven primarily by an overall increase in demand for poultry products," said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. “Our net sales were 4.4 percent higher compared with the second quarter of fiscal 2012, reflecting higher average sales prices of chicken. While our volumes reflect the production cuts we put in place last fall, demand for chicken remains strong from our retail grocery store and export customers. In addition, while customer traffic through food service establishments remains challenged by macroeconomic factors, several new chicken items on quick serve menus and chicken promotions in casual dining restaurants, coupled with relatively high priced beef, contributed to better market prices during the quarter for products produced at our food service plants.

“Our profitability for the second quarter continued to be adversely affected by relatively high feed costs,” added Sanderson. “Feed costs in flocks processed increased 14.3 percent compared with last year’s second fiscal quarter, and remain 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. The late planting season caused by cold and wet weather across much of the corn belt is contributing to price volatility. That said, we have priced most all of our grain needs through July at levels that will allow us to slightly reduce our feed costs per pound each successive month through July.”

According to Sanderson, overall market prices for poultry products were higher during the second quarter of fiscal 2013 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 9.9 percent in the Company's second fiscal quarter compared with the same period in 2012 and remain at record levels. Bulk leg quarter market prices were flat with last year's second quarter, and continue to reflect strong export demand. Boneless breast meat prices during the second quarter were 14.2 percent higher than the prior year period, and have continued to move higher in May. Jumbo wing prices were down 4.4 percent for the second quarter of 2013 compared with the same period last year. Prices paid for corn and soybean meal, the Company’s primary feed ingredients, increased 15.9 percent and 37.2 percent, respectively, compared with the second quarter of fiscal 2012.

“Looking ahead, we are reasonably optimistic as we head into the summer months and what is typically a period of better demand for chicken. While grain costs remain above historical levels, demand for chicken products is strong. Weekly broiler egg sets continue to run slightly above last year’s numbers, but breeder placements remain lower and it appears the reduced size of the breeder flock will constrain production over the short term despite higher industry returns. While macroeconomic conditions have continued to affect consumer behavior, market prices for boneless breast meat sold to our food service customers improved through April and May, and market prices for retail grocery store products have also moved higher. Regardless of market conditions, however, we will maintain our focus on our operating performance and sales execution,” Sanderson concluded.

Sanderson Farms will hold a conference call to discuss this press release today, May 30, 2013, 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 Web site at www.sandersonfarms.com or through www.earnings.com. To listen to the live call, please go to the Web site 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 continue through June 30, 2013. Those without Internet access may listen and participate in the call by dialing 888-596-2572, confirmation code 6119362.

Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared chicken items. Its shares trade on the NASDAQ Global Select Market under the symbol SAFM.

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