Sanderson Farms 2Q Net Drops 77% On Grain Costs>SAFM
>>>SAFM up 8.4% right now. Analysts were expecting a loss so they beat expectations. Go figure. Think I will add a little on the dark side here. This one makes all the sense in the world, but I am in the red on it.<<<
6:53 AM EDT May 22, 2008
DOW JONES NEWSWIRES
Sanderson Farms Inc. (SAFM) saw its fiscal second-quarter net income plunge 77% amid surging grain costs, though it surprised analysts who had expected a loss.
Chairman and Chief Executive Joe F. Sanderson Jr. noted the profit came "in spite of challenging industry fundamentals." Still, the chicken processor sees feed grain costs remaining "high and volatile" at least for the next year and a half.
For the quarter ended April 30, Sanderson Farms posted net income of $6.2 million, or 30 cents a share, down from $26.9 million, or $1.33 a share, a year ago. Net sales climbed 20% to $433.9 million.
The mean estimate for analysts polled by Thomson Reuters was for a loss of 7 cents on revenue of $435.3 million.
Gross profit margin slid to 5.7% from 15.7%.
Corn and soybean prices continue to surge, boosted - some say - by demand for biofuel. Sanderson said corn costs rose 28%, while soybean costs jumped 47%. The company has said it doesn't stockpile feed-grains but keeps only a week's worth in its mills at at time, leaving it exposed to volatile prices.
Sanderson said average prices for whole chickens rose 6.1%, with bulk leg quarter prices up 3.9%. But boneless breast meat prices dropped 10% and jumbo wing prices tumbled 15%.
To offset higher costs, Sanderson Farms has been raising chicken prices and boosting capacity by opening new facilities, with expectations of processing 18% more pounds of chicken during the fiscal year.
"We recognize that there are many things about our business over which we have no control, including the higher grain prices and the constant variability in market prices for chicken products," Sanderson said.
Looking forward, he noted, "While we remain confident that the fundamental rules of supply and demand will work to maintain industry profitability over the long term, we also note that current conditions are creating short-term fluctuations in markets and profitability."
Sanderson Farms shares closed Wednesday at $44, and there was no premarket trading. |
