Sanderson Farms blames hot weather for Q3 drop
Sanderson Farms Inc. reported lower sales and earnings for its third fiscal quarter of 2010, ended July 31. Extremely hot weather in areas where its chickens are grown was a major contributing factor, Sanderson executives said.
Net sales for the period were $489.1 million, a drop of 3.1% from $504.8 million for the same period a year ago. Net income for the quarter was $36.1 million, or $1.55 per share, down 16% from $43.0 million, or $2.06 per share, for the third quarter of fiscal 2009.
For the year to date: Net sales for the first nine months of fiscal 2010 were $1.4 billion, up slightly from $1.3 billion for the first nine months of fiscal 2009. Net income for the first nine months of fiscal 2010 were $87.0 million, or $3.96 per share, compared with $62.5 million, or $3.00 per share, for the first nine months of last year.
"Sanderson Farms' financial results for the third quarter of fiscal 2010 reflect favorable market conditions and solid execution in our operations, offset by the effect of the extremely hot weather on our live operations," said CEO Joe F. Sanderson Jr. "Market prices for poultry products were lower than last year's third quarter. Retail grocery store demand has remained strong, although food service demand has remained sluggish, and will likely remain that way until the employment market gains traction and more consumers return to restaurants.”
Sanderson Jr explained that heat negatively effects bird performance reduces live weights and less favorable feed conversions, which in turn mean fewer pounds processed and sold. In fact, the company sold 33 million fewer pounds in the quarter than expected, due to pounds lost due to the heat. Management noted 20 million fewer pounds of export products sold due to timing, out of a total of 6.2 billion pounds sold overall in the period.
Meanwhile, overall market prices for poultry products also were down slightly in the quarter, driven primarily by lower dark meat prices.
Although Sanderson executives praised its team for its execution during a difficult period, analysts indicated they were caught off-guard by the shortfall in results.
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