Sanderson Farms, Inc.
) once again incurred losses in the fourth quarter 2011 as margins
continued to plunge due to higher feed cost, weak prices and lower
demand. The company reported adjusted loss of 70 cents per share, a
penny better than the Zacks Consensus Estimate. Including inventory
adjustment of 27 cents, the company reported net loss of 97 cents
per share during the quarter compared with the year-ago earnings of
For fiscal 2011, net loss was $5.74 versus net earnings of $6.07
recorded in the year-earlier quarter. The poultry producer reported
loss throughout 2011 owing to higher feed cost and fragile poultry
Total revenue in the reported quarter increased 5.8% year over
year to $559.8 million, due to a drop of 5% in average sales price
for poultry products that drove higher net sales and a 12.6% upside
in poultry pounds sold. For 2011, revenues came in at $1.978
billion, up 2.7% year over year.
During the quarter, boneless breast-meat prices fell 19.1% from
the last year quarter, while the average price for bulk leg
quarters leaped 29.8%, with relatively strong dark meat prices
reflecting good export demand during the year. Additionally, prices
for the company's main feed ingredients corn and soybean meal
surged 73% and 24%, respectively.
Cost of sales of poultry products for the quarter escalated
33.8% year over year to $562.3 million, as a result higher poultry
pounds sold and substantial rise in grain costs.
The company has also completed its Kinston, North Carolina
project and expects to start production by January. The higher
production at the Kingston in 2012 will likely compensate the 4%
production cut in other plants that the company plans to implement
At the end of 2011, the company had cash and cash equivalent of
$11.1 million, stockholders equity of $506.9 million and net
working capital of $324.3 million. Total long-term debt at the end
of the year was $273.7 million and total debt-to-cap ratio was
For 2012, the company expects capital expenditure to be
approximately $37.6 million.
Sanderson reported the fourth consecutive quarter of loss, but
expects the headwinds to subdue in 2012. The company will tighten
the supply of chicken and expects retail grocery demand to be
stable. Management remains optimistic over the long term and
continues to focus on growth. Moreover, we believe that a strong
balance sheet bodes well for the company. Hence, we expect
estimates to go up in the coming days. The Zacks Consensus
Estimates for 2012 and 2013 are pegged at $3.26 and $4.91,
On the flip side, the company expects corn and soybean meal
prices to be high and demand to be weak as consumer spending
remains low due to the prevailing uncertain economic
Sanderson, which competes with
Smithfield Foods Inc.
), currently retains a Zacks #2 Rank (short-term Buy rating). We
also reiterate our long-term Outperform recommendation.
SANDERSON FARMS (
): Free Stock Analysis Report
SMITHFIELD FOOD (
): Free Stock Analysis Report
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