Laurel, Miss.-based chicken processor Sanderson Farms, has reported results for the Q2 and H1 ended 30 April 2002.
Net sales for the Q2 2002 were US$175.4m, up 7.2% compared with US$163.6m year on year. For the quarter, the company reported net income of US$7.7m, or US$0.58 per diluted share, compared with net income of US$5m, or US$0.37 per diluted share, for the Q2 2001.
For the H1, the company reported net sales of US$339.9m, up 7.7% from net sales of US$315.7m for the H1 2001. The Company reported net income of US$13m, or US$0.97 per diluted share, for the H1 2002 compared with net income of US$5.4m, or US$0.40 per diluted share, for the year-earlier period.
During the Q2, the company recognised US$1.6m, net of income taxes, or US$0.12 per diluted share, for Sanderson Farms’ share in the settlement of a class action lawsuit against a vitamin supplier for overcharges. Excluding this special item, net income was US$6.1m, or US$0.46 per diluted share, for the Q2 2002, and US$11.4m, or US$0.85 per diluted share, for the H1 2002.
“We are very pleased with the continued strength of our financial and operating performance,” said Joe F. Sanderson, Jr, president and CEO: “These results are particularly gratifying considering the softness in dark meat market prices we experienced compared with the prior quarter. Our ability to execute in this environment reflects the strength of our operating model and our capacity for delivering a product mix that favourably meets the current demands of the market.”
According to Sanderson, market prices for poultry products during the quarter were mixed. As measured by a simple average of the Georgia dock price for whole chickens, prices increased about 1.3% in the Q2 compared with the same period in 2001, but were about 1.3% lower than the Q1 2002. Boneless breast meat prices during the quarter averaged US$1.25 per pound, or 6.4% lower than the previous year. The most dramatic shift in market prices occurred for leg quarters and wings. Bulk leg quarters decreased during the quarter due in part to the Russian embargo of US poultry meat and the resulting increase of product in the domestic market. Market prices for bulk leg quarters during the Q2 2002 averaged 10.6% below the Q2 last year. Wing prices fell 29.7% from last year’s Q2.
Cash market prices for feed grains were flat during the Q2 compared to a year ago and to the Q1. Soybean meal cash market prices increased 0.7% compared to the Q2 a year ago, and decreased 0.6% compared to the company’s last fiscal quarter. Corn prices decreased 0.6% compared to the Q2 2001, and decreased 2.2% compared to the Q1 2002.
“Like others in our industry, our export business has been impacted by the ban on US poultry products imposed on 10 March 2002 by Russia,” said Sanderson. “We believe the Russian embargo, and the subsequent adverse impact on market prices for leg quarters, cost the company about US$1.6m, net of income taxes, or US$0.12 diluted per share, during the Q2. While the ban officially ended on 15 April, poultry shipments to Russia still have not fully resumed, creating continued pricing pressures in the market. We do expect, however, that shipments to Russia will slowly move toward normalisation. As such, we remain cautiously optimistic about our prospects for the year and look forward to a more stable pricing environment.”
The company said that, based on trends and internal projections, it remains comfortable with an annual earnings estimate of US$2.00-US$2.20 per share for the FY 2002.