Sanderson Farms returned to the black in the first quarter of its financial year, as lower grain costs more than offset “mixed” poultry prices.
The US chicken processor said net earnings rose to US$28.9m in the quarter ended 31 January, up from a loss of $6.9m in the comparable period of 2013. Operating profit increased to $45.1m compared to a loss of $9.6m in the year ago period.
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Improved profitability was underpinned by lower grain prices year-on-year, the company said. Sales, however, were down 1.8% at $584.9m in the three months. The company indicated revenues were impacted by “mixed” poultry prices.
Retail conditions for chicken are “strong” due to the high price of beef and pork, chief executive and chairman Joe Sanderson observed. However, poor macroeconomic conditions are still weighing on US consumers, the chief executive cautioned.
BB&T Capital Markets analyst Brett Hundley said the group’s first-quarter performance pointed to the possibility of higher full-year earnings. However, he remained “guarded” in his assessment of a potential upgrade to forecasts.
“[Sanderson] reported strong Q1 upside; it appears that F’14 EPS will indeed be higher yr/yr, but we are keeping our head about us, in regards to our forward earnings estimates. Indeed, we can achieve a realistic F’14 earnings scenario above our revised EPS estimate of $6.16, however our confidence on such remains somewhat guarded,” Hundley wrote in an investor note.
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By GlobalDataSanderson also announced plans to extend its share repurchase programme to 2017.
Shares in the group rose 3.88% yesterday to close at $75.03.
