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Sanderson Farms reports weak 4Q and fiscal 2018 results, but shares reverse early losses

Weak demand in the food service industry and soft market conditions hit the chicken-processing company

Sanderson Farms is an integrated poultry processing company.

Sanderson Farms Inc (NASDAQ:SAFM) reported sharply lower sales and earnings in the fourth quarter and for fiscal 2018, causing shares to weaken for the chicken-processing company in Thursday's pre-market before reversing course after the bell. 

Net sales for the fourth quarter of fiscal 2018 were $798.1 million, compared with $919.9 million for the same period a year ago. For the quarter, the company reported a net loss of $43.2 million, or $1.95 per share, compared with net income of $72.9 million, or $3.20 per share, for the fourth quarter of fiscal 2017.

Net sales for fiscal 2018 were $3.236 billion, down from $3.342 billion for fiscal 2017. Net income for the fiscal year totaled $61.4 million, or $2.70 per share, compared with net income of $279.7 million, or $12.30 per share, for last fiscal year.

In the premarket, the stock traded 1.9% lower at $94.56. The stock reversed itself when trading began, rising 3% in early business to $99.45. 

The reversal may be caused in part by the company's confidence going forward.

"We believe our balance sheet provides us with the financial strength not only to support our growth strategy, but also to consistently manage our operations through the cycles that characterize our industry," said company Chairman and CEO Joe Sanderson Jr.

READ: Sanderson Farms posts lower-than-expected fourth quarter profit hit by weak poultry prices

Sanderson said overall realized prices for poultry products were 9.2% lower in fiscal 2018 compared with prices last year, and were significantly lower for the fourth fiscal quarter of 2018.

“Market conditions weakened significantly during our fourth fiscal quarter of 2018, as market prices declined after Labor Day, reflecting weak demand for products produced for the food service market at our plants that process a larger bird," Sanderson said.

"The decrease in demand and resulting weak market prices were exacerbated by hurricane disruptions," he added.

Boneless breast meat market prices averaged 26.1% lower in the fourth quarter compared with the prior-year period. For the full fiscal year, boneless breast meat prices were 16.7% lower compared with fiscal 2017.

Jumbo wing market prices averaged $1.46 per pound during the fourth quarter of fiscal 2018, down 30.2% from the average of $2.09 per pound during the prior-year period. Jumbo wing market prices averaged $1.44 per pound during the fiscal year, down 25.2% from the average of $1.92 per pound for fiscal 2017.

Sanderson Farms is an integrated poultry processing company which produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the United States.

The company is based in Laurel, Mississippi.

Contact Rene Pastor by [email protected]

Quick facts: Sanderson Farms

Price: 148.89 USD

Market: NASDAQ
Market Cap: $3.31 billion

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