SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 2019
SANDERSON FARMS, INC.
(Exact name of registrant as specified in its charter)
Mississippi | 1-14977 | 64-0615843 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
127 Flynt Road Laurel, Mississippi |
39443 | |
(Address of principal executive offices) | (Zip Code) |
(601) 649-4030
(Registrants telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Section 2 Financial Information
Item 2.02 | Results of Operations and Financial Condition. |
On February 26, 2019, the Registrant issued a press release announcing its earnings for its fiscal quarter ended January 31, 2019. The press release is furnished herewith as Exhibit 99.1. Also on February 26, 2019, the Registrant held a conference call to discuss its earnings for its fiscal quarter ended January 31, 2019. A transcript of the conference call is furnished herewith as Exhibit 99.2. The information in the press release and transcript is not to be considered filed for purposes of the Securities Exchange Act of 1934, as amended (the Exchange Act), and is not incorporated by reference into the Registrants filings under the Securities Act of 1933, as amended (the Securities Act).
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES
THAT MAY AFFECT FUTURE PERFORMANCE
Exhibit 99.2 to this Current Report may include forward-looking statements within the meaning of the Safe Harbor provisions of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and estimates expressed in such statements. These risks, uncertainties and other factors include, but are not limited to, the risks described in Exhibit 99.1 to this Current Report and in the Registrants Annual Report on Form 10-K for the year ended October 31, 2018, and in subsequent Quarterly Reports on Form 10-Q. The risks cannot be controlled by the Registrant. Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of the Registrant. Each such statement speaks only as of the day it was made. The Registrant undertakes no obligation to update or to revise any forward-looking statements. The factors cannot be controlled by the Registrant. When used in Exhibit 99.2 to this Current Report, the words believes, estimates, plans, expects, should, could, outlook, and anticipates and similar words are intended to identify forward-looking statements. Examples of forward-looking statements include statements about the Registrants beliefs about growth plans, future demand for its products, future prices for feed grains, future expenses, future production levels, future earnings, future growth plans or other industry conditions.
Section 9 Financial Statements and Exhibits
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits:
Exhibit |
Description | |
99.1 | Press release of Sanderson Farms, Inc. dated February 26, 2019. | |
99.2 | Transcript of conference call held by Sanderson Farms, Inc. on February 26, 2019. |
EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Press release of Sanderson Farms, Inc. dated February 26, 2019. | |
99.2 | Transcript of conference call held by Sanderson Farms, Inc. on February 26, 2019. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SANDERSON FARMS, INC.
(Registrant)
Date: March 1, 2019 | By: | /s/ D. Michael Cockrell | ||||
D. Michael Cockrell | ||||||
Treasurer and Chief Financial Officer |
Exhibit 99.1
Contact: | Mike Cockrell |
Treasurer & Chief Financial Officer |
(601) 649-4030 |
SANDERSON FARMS, INC. REPORTS
RESULTS FOR FIRST QUARTER OF FISCAL 2019
LAUREL, Miss. (February 26, 2019) Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for the first quarter of fiscal 2019.
Net sales for the first quarter of fiscal 2019 were $743.4 million compared with $771.9 million for the same period a year ago. The Company reported a net loss of $17.8 million, or $0.82 per share, for the quarter compared with net income of $51.2 million, or $2.24 per share, for the first quarter of fiscal 2018.
Net income for last years first fiscal quarter reflected a one-time non-cash tax benefit of $37.5 million from an adjustment to the Companys deferred income tax liability, which resulted from a lower tax rate under the December 2017 federal tax legislation.
Our results for the first quarter reflect continued challenging market conditions with significantly lower market prices for boneless breast meat produced at our big bird deboning plants compared with last years first quarter, said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. However, average prices for tray pack products sold to retail grocery store customers were higher both sequentially and when compared with the same period a year ago, and prices continue to reflect a good supply and demand balance. Demand and prices for jumbo wings strengthened seasonally during the quarter, but market prices still averaged below last years first quarter. Despite the challenging market price compared with last years first quarter, market prices for boneless breast meat rose from record lows during January and are now higher than this time a year ago.
Overall market prices for poultry products were lower during the first quarter compared with the same period last year. Compared with the first fiscal quarter of 2018, the average prices of the Companys retail tray pack products were approximately 1.4 percent higher, boneless breast meat prices were approximately 7.6 percent lower, bulk leg quarter prices decreased by approximately 23.7 percent, and jumbo wing prices were lower by 4.7 percent. The Companys average feed cost per pound of poultry products processed was flat compared with the first quarter of fiscal 2018, and prices paid during the quarter for corn and soybean meal, the Companys primary feed ingredients, increased 3.3 percent and decreased 0.2 percent, respectively, compared with the first quarter of fiscal 2018.
Good corn and soybean crops harvested in the United States last fall contributed to a very healthy soybean balance table heading into the 2019 planting season, as well as an adequate supply of corn, added Sanderson. Uncertainties regarding trade with China, however, have provided price support for both corn and soybeans despite ample supplies of both grains, especially soy beans. Had we priced all of our grain needs for fiscal 2019 at yesterdays Chicago Board of Trade futures contract prices, cash paid for feed grains during fiscal 2019 on fiscal 2018 volumes would be $26.4 million lower than during fiscal 2018.
Sanderson Farms Reports Results for First Quarter of Fiscal 2019
Page 2
February 26, 2019
Operations at our new Tyler, Texas, complex began earlier this month and the start-up has gone well. We expect to move to full production by the first calendar quarter of 2020, and we look forward to the opportunities the plant represents, added Sanderson.
Sanderson Farms will hold a conference call to discuss this press release today, February 26, 2019, at 10:00 a.m. Central, 11:00 a.m. Eastern. Investors will have the opportunity to listen to a live internet broadcast of the conference call through the Companys website at www.sandersonfarms.com. To listen to the live call, please go to the website at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, an internet replay will be available shortly after the call and continue through March 28, 2019. Those who would like to participate in the call can do so by dialing 888-599-8686; confirmation code 9388773.
Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh, frozen and minimally prepared chicken. Its shares trade on the NASDAQ Global Select Market under the symbol SAFM.
This press release includes forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs, projections and estimates expressed in such statements. These risks, uncertainties and other factors include, but are not limited to those discussed under Risk Factors in the Companys Annual Report on Form 10-K for the year ended October 31, 2018, and the following:
(1) Changes in the market price for the Companys finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets.
(2) Changes in economic and business conditions, monetary and fiscal policies or the amount of growth, stagnation or recession in the global or U.S. economies, any of which may affect the value of inventories, the collectability of accounts receivable or the financial integrity of customers, and the ability of the end user or consumer to afford protein.
(3) Changes in the political or economic climate, trade policies, laws and regulations or the domestic poultry industry of countries to which the Company or other companies in the poultry industry ship product, and other changes that might limit the Companys or the industrys access to foreign markets.
(4) Changes in laws, regulations, and other activities in government agencies and similar organizations applicable to the Company and the poultry industry and changes in laws, regulations and other activities in government agencies and similar organizations related to food safety.
(5) Various inventory risks due to changes in market conditions including, but not limited to, the risk that net realizable values of live and processed poultry inventories might be lower than the cost of such inventories, requiring a downward adjustment to record the value of such inventories at the lower of cost or net realizable value as required by generally accepted accounting principles.
(6) Changes in and effects of competition, which is significant in all markets in which the Company competes, and the effectiveness of marketing and advertising programs. The Company competes with regional and national firms, some of which have greater financial and marketing resources than the Company.
(7) Changes in accounting policies and practices adopted voluntarily by the Company or required to be adopted by accounting principles generally accepted in the United States.
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Sanderson Farms Reports Results for First Quarter of Fiscal 2019
Page 3
February 26, 2019
(8) Disease outbreaks affecting the production, performance and/or marketability of the Companys poultry products, or the contamination of its products.
(9) Changes in the availability and cost of labor and growers.
(10) The loss of any of the Companys major customers.
(11) Inclement weather that could hurt Company flocks or otherwise adversely affect the Companys operations, or changes in global weather patterns that could affect the supply and price of feed grains.
(12) Failure to respond to changing consumer preferences and negative or competitive media campaigns.
(13) Failure to successfully and efficiently start up and run a new plant or integrate any business the Company might acquire.
(14) Unfavorable results from currently pending litigation and proceedings, or litigation and proceedings that could arise in the future.
Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of the Company. Each such statement speaks only as of the day it was made. The Company undertakes no obligation to update or to revise any forward-looking statements. The factors described above cannot be controlled by the Company. When used in this press release or in the related conference call, the words believes, estimates, plans, expects, should, could, outlook, and anticipates and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. Examples of forward-looking statements include statements of the Companys belief about future growth plans, future earnings, production levels, capital expenditures, grain prices, global economic conditions, supply and demand factors and other industry conditions.
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Sanderson Farms Reports Results for First Quarter of Fiscal 2019
Page 4
February 26, 2019
SANDERSON FARMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended January 31, |
||||||||
2019 | 2018 | |||||||
Net sales |
$ | 743,388 | $ | 771,948 | ||||
Cost and expenses: |
||||||||
Cost of sales |
708,400 | 702,101 | ||||||
Selling, general and administrative |
58,535 | 52,575 | ||||||
|
|
|
|
|||||
766,935 | 754,676 | |||||||
|
|
|
|
|||||
Operating income (loss) |
(23,547 | ) | 17,272 | |||||
Other income (expense) |
||||||||
Interest income |
| 419 | ||||||
Interest expense |
(509 | ) | (523 | ) | ||||
Other |
| 2 | ||||||
|
|
|
|
|||||
(509 | ) | (102 | ) | |||||
|
|
|
|
|||||
Income (loss) before income taxes |
(24,056 | ) | 17,170 | |||||
Income tax benefit |
(6,223 | ) | (34,036 | ) | ||||
|
|
|
|
|||||
Net income (loss) |
$ | (17,833 | ) | $ | 51,206 | |||
|
|
|
|
|||||
Earnings (loss) per share: |
||||||||
Basic |
$ | (0.82 | ) | $ | 2.24 | |||
|
|
|
|
|||||
Diluted |
$ | (0.82 | ) | $ | 2.24 | |||
|
|
|
|
|||||
Dividends per share |
$ | 0.32 | $ | 0.32 | ||||
|
|
|
|
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Sanderson Farms Reports Results for First Quarter of Fiscal 2019
Page 5
February 26, 2019
SANDERSON FARMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
January 31, 2019 | October 31, 2018 | |||||||
(unaudited) | (1) | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 74,710 | $ | 121,193 | ||||
Accounts receivable, net |
123,593 | 121,932 | ||||||
Receivable from insurance companies |
5,699 | 7,094 | ||||||
Inventories |
261,768 | 240,056 | ||||||
Refundable income taxes |
32,851 | 32,974 | ||||||
Prepaid expenses and other current assets |
53,383 | 43,240 | ||||||
|
|
|
|
|||||
Total current assets |
552,004 | 566,489 | ||||||
Property, plant and equipment |
2,022,063 | 1,961,497 | ||||||
Less accumulated depreciation |
(893,996 | ) | (873,909 | ) | ||||
|
|
|
|
|||||
1,128,067 | 1,087,588 | |||||||
Other assets |
5,030 | 5,363 | ||||||
|
|
|
|
|||||
Total assets |
$ | 1,685,101 | $ | 1,659,440 | ||||
|
|
|
|
|||||
Liabilities and stockholders equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 125,285 | $ | 128,936 | ||||
Dividends payable |
7,089 | | ||||||
Accrued expenses |
63,108 | 69,953 | ||||||
|
|
|
|
|||||
Total current liabilities |
195,482 | 198,889 | ||||||
Long-term debt |
60,000 | | ||||||
Claims payable and other liabilities |
9,961 | 9,865 | ||||||
Deferred income taxes |
56,447 | 62,793 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock |
22,153 | 22,100 | ||||||
Paid-in capital |
81,456 | 81,269 | ||||||
Retained earnings |
1,259,602 | 1,284,524 | ||||||
|
|
|
|
|||||
Total stockholders equity |
1,363,211 | 1,387,893 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 1,685,101 | $ | 1,659,440 | ||||
|
|
|
|
(1) | The Condensed Consolidated Balance Sheet at October 31, 2018, was derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. |
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Exhibit 99.2
THOMSON REUTERS STREETEVENTS
EDITED TRANSCRIPT
SAFM Q1 2019 Sanderson Farms Inc Earnings Call
EVENT DATE/TIME: FEBRUARY 26, 2019 / 4:00PM GMT
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
C O R P O R A T E P A R T I C I P A N T S
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
C O N F E R E N C E C A L L P A R T I C I P A N T S
Adam L. Samuelson Goldman Sachs Group Inc., Research Division Equity Analyst
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
Benjamin M. Theurer Barclays Bank PLC, Research Division Head of the Mexico Equity Research & Director
Eric Jon Larson The Buckingham Research Group Incorporated Analyst
Jeremy Carlson Scott Mizuho Securities USA LLC, Research Division VP of Americas Research
Kenneth B. Goldman JP Morgan Chase & Co, Research Division Senior Analyst
Kenneth Bryan Zaslow BMO Capital Markets Equity Research MD of Food & Agribusiness Research and Food & Beverage Analyst
Michael Leith Piken Cleveland Research Company Equity Analyst
P R E S E N T A T I O N
Operator
Good day, and welcome to Sanderson Farms Inc. First Quarter Fiscal 2019 Conference Call. Todays call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Joe Sanderson. Please go ahead, sir.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Thank you. Good morning, and welcome to Sanderson Farms first quarter conference call. This morning, we announced a net loss of $17.8 million or $0.82 per share for our first quarter of fiscal 2019. This compares to net income of $51.2 million or $2.24 per share for our first quarter of fiscal
2018.
Net income for last years quarter reflected a one-time noncash income tax benefit of $37.5 million from a one-time adjustment to a deferred tax liability on our balance sheet required as a result of the December 2017 federal tax reform legislation.
I will begin with the call with comments about general market conditions and grain cost, and then turn the call over to Lampkin and Mike for a more detailed account of the quarter. Before we make any further comments, Ill ask Mike to give the cautionary statement regarding forward-looking statements.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Thank you, Joe, and good morning, everyone. This mornings call will contain forward-looking statements about the business, financial conditions and prospects of the company. Examples of forward-looking statements include statements regarding supply and demand factors, future grain and chicken market prices, economic conditions, production levels, and our future growth plans.
The actual performance of the company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties. These risks and uncertainties are described in our most recent annual report on Form 10-K and in the companys quarterly report on Form 10-Q filed with the SEC early this morning in connection with our first fiscal quarter ended January 31, 2019.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Thank you, Mike. Results for the first quarter reflect continued challenging market conditions for products produced for food service customers and our plants processing a larger bird. Demand from retail grocery store of customers has remained stable, and that stability is reflected in an overall average chill pack prices that were 1.4% higher than during last years first quarter. On the other hand, market prices for boneless breast meat sold to food service customers were lower compared to last years first quarter and in fact failed to all-time lows in November and December and remained relatively weak through January.
The boneless market began to improve in January and continued to strengthen in February. Cash market prices for corn was slightly higher during the quarter compared to last year while soybean meal prices were lower. Our feed cost per pound of chicken processed were flat when compared to the first quarter of 2018. Both corn and soybean balance tables are healthy as we head into the 2019 planning season, especially soybeans, but market prices have been supported by uncertainties related to trade and potential exports.
The next events in the grain markets that we will watch are the South American harvest and the March 29 Planting Intentions report. The South American harvest is progressing well and expectations now are for good crops from that region. At its 2019 Agricultural Outlook Forum last week, the USDA estimated corn acres in 2019 will be 92 million acres versus 89.1 million last year and the acres planted in soybeans would be 85 million acres down from 89.2 million acres last year.
It is not unusual for the USDA to significantly revise its outlook before the March 29 Planning Intentions report, so we will be watching for that report. We havent priced a significant portion of our grain needs for the fiscal year and remained relatively close to the market. Based on our cost through the first fiscal quarter and what we have priced so far, when combined with prices we could have locked in for the balance of the year. At yesterdays close, our grain cost for fiscal 2019 would be approximately $26.4 million less than during fiscal 2018 based on 2018 volumes.
At our shareholders meeting last week last meeting, week before last, I told our shareholders we are focused on several things as we start 2019. As I just mentioned, we are watching the quality and the quantity of the South American crops and well be watching the March 29 Planting Intentions report. We will, of course, watch chicken production numbers and consumer spending behavior. The USDA is projecting that our industry will produce 1.6% more chicken during calendar 2019 than last year, which will compete with more beef and pork as well. According to USDA data, pullet placements have remained flat in recent months. And egg sets and chicks placed are trending higher by 1.5% compared to last year.
Finally, well focus our efforts on our growth. St. Pauls is now at full production and Tyler opened earlier this month on February 4. I remained cautious but optimistic about 2019. I believe grain markets will at worst be benign. The chill pack environment remains good, and supply and demand for trade pack product seem balanced. Food service and export demand are again the wildcards for 2019.
The Restaurant Associations Restaurant Performance Index has shown some improvement in restaurant same-store sales. But as has been true for several quarters, the legacy food service established goods continue to struggle for traffic while local chain concepts are doing better.
Regardless of the markets, however, our plan for the balance of this year is to remain focused on what we can control, focus on our operations and let the markets take care of themselves. At this point, Ill turn the call over to Lampkin for a more detailed discussion of the chicken markets and our operations during the quarter.
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Thank you, Joe, and good morning, everyone. Overall, market prices for poultry products were lower about 2.6% during the quarter when compared to our first quarter of last year. Overall, average market prices for chill pack products reflected good demand during the quarter and averaged almost $0.02 higher during the quarter compared to the first quarter of fiscal 2018, all mix improvements. Chill pack prices were higher by $0.123 per pound sequentially, again mostly on product mix.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Bulk leg quarter prices during our first quarter averaged $0.257 per pound compared to $0.336 per pound last year. Final numbers for calendar 2018 showed the volume of all broiler meat exported through November was higher by 3.3% compared to 2017.
Average price for jumbo wings was lower during our first fiscal quarter compared to last year despite a strong Super Bowl season. Jumbo wing prices averaged $1.56 per pound during our first quarter of this year compared to $1.63 per pound during last years first quarter. Boneless breast prices averaged $0.95 during this years first quarter compared to $1.03 last year. We sold 1.06 billion pounds of poultry products during the first quarter, a 3.7% decrease from 1.1 billion pounds sold during last years first quarter. Our processed pound were down from 1.1 million (sic) [1.1 billion] to 1.063 billion pounds. We expect to process approximately 1.094 billion pounds during our second quarter, up slightly from 1.092 billion pounds processed during last years second quarter.
We expect to process just over 1.22 billion pounds in Q3 and 1.25 billion pounds in Q4. Prepared chicken sales were $57.7 million, up $17.2 million or 42.4% on 10.8 million more pounds sold. Our average sales price per pound of prepared chicken was lower by $0.134 per pound or 6.8%.
We remain focused on our operations during the quarter and will be focused on getting the Tyler plant off to a good start. Our Big Bird product mix is a challenge in the environment we faced, November through January, but we will continue to look for efficiency improvements and will do everything we can to meet our goal of performing at the top of our industry. At this point, Ill turn the call over to Mike to discuss our financial statement.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Thank you, Lampkin. Net sales for the quarter totaled $743.4 million, down from $772 million for the same quarter of fiscal 2018. Our net loss of $0.82 per share during the quarter compares to net income of $2.24 per share during last years quarter, and as Joe mentioned, last years number includes $37.5 million and a one-time income tax benefit resulting from the tax reform legislation.
Our cost of sales of poultry products for the 3 months ended January 31 as compared a year ago decreased 1.3%. That decrease is all a result of the fewer pounds sold, partially offset by an increase in our average COGS. Nonfeed-related COGS were higher about $15 million or $0.022 per pound compared to last years Q1. Several factors contributed to this increase.
First, lower volumes impacted cost per pound. Hazlehurst was down a week during the quarter as we move live weights back to 9.25 per bird. Collins was down for a week for the installation of some new equipment and processing cost overall were higher by $0.014 per pound. Wages were up $2.4 million compared to last year, cost associated with antimicrobial interventions in our plants were higher by $0.0033 a pound or about 65%. And fixed cost were higher about $1.8 million as we began depreciating equipment upgrades installed last year.
Freight was up $4.8 million or $0.005 a pound. But that increase is a function of a new revenue recognition standard that we adopted during the quarter. Actually, freight was flat with the year ago.
In Q1 last year, freight build separately to customers was treated as a reduction in revenue. In Q1 of 19 and going forward, the customers who we billed directly for freight will be classifying that freight in cost of goods sold.
Live cost were higher by just over $0.017 per pound as a result of higher chip cost and litter and higher grower pay. Grower pay has been impacted by the move to tray packs sized birds at Hazlehurst and Hammond. Hazlehurst has returned to the larger bird and well be moving Hammond back this spring.
Our feed cost per pound of poultry products processed was flat at $0.245 a pound. While our feed costs per pound of poultry products processed was flat, our sales price per pound for poultry products decreased 2.6% or $0.173 per pound compared to last year. And this combination obviously resulted in lower margins during this first years quarter compared to a year ago.
SG&A expenses for our first quarter of fiscal 2019 were $6 million higher than the same 3 months a year ago. This increase compared to last year is the result of $8.5 million in startup cost in Tyler and $3 million in higher legal expenses, offset by lower marketing and stock compensation
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
expenses. We are modeling $50 million for SG&A expenses in Q2, $50 million in Q3 and $52 million in Q4. These estimates, of course, include no accrual for potential ESOP contributions or bonus awards. We spend $83.4 million on CapEx during the first quarter and have approved $230.6 million in CapEx for the 2019 fiscal year. That 2019 CapEx budget includes $30 million to finish up in Tyler.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
$39 million.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
$39 million, thank you. And also it includes $7.7 million for progress payments on a new aircraft and $70.5 million for several large-scale equipment upgrades at our older processing plants. Our depreciation and amortization during the first quarter totaled $29 million, and we expect approximately $133 million for the full fiscal year.
And Kathy, that ends our prepared remarks and you can open up the call for questions.
Q U E S T I O N S A N D A N S W E R S
Operator
(Operator Instructions) And well take our first question from Ken Goldman with JPMorgan.
Kenneth B. Goldman JP Morgan Chase & Co, Research Division Senior Analyst
Im wondering if I could ask a couple of questions. First is on tray pack prices. I realized that theres different timing, different ways of pricing these contracts. But your tone on tray pack prices, at least what youre getting or seeing in the market, is better than what some of your competitors are seeing out there. Is there anything that you would suggest youre doing differently? Or is it more a question of timing or the structure of the contract that is leading you to be a little more positive out there than maybe the industry as a whole?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
I dont have any way of knowing that. November and December were totally different than January. November and December were sluggish. People were eating turkey and ham. We also had our normal seasonal cutbacks in place in November and December. January was an excellent month for demand. Part of February was good. Second half February was slow. March, we have a lot of adds for tray pack in March, booked. But our tray pack has been good. All of 2018.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
2019.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
And we expect it to be good in 2019. Now we do have a new plant coming online. We have to get it sold. But I dont I have no clue about other peoples chill pack experience.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Our prices were fixed, though.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Yes, mix contributed to part of our increase, too Ken.
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Our peer prices were actually down a little bit but mix offset more than offset.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Yes.
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Yes.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Yes. Sequentially go ahead sequential prices were actually up just a little plus our mix advantage. But year-over-year, it was different. Go ahead, Im sorry.
Kenneth B. Goldman JP Morgan Chase & Co, Research Division Senior Analyst
No, I apologize. Can you help me understand what that means in terms of mix? I think very often, we think of your tray pack business as very commodity-oriented. Youre saying sell the same amount of...
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Probably that means you sell more boneless than you did drums and thighs.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
And tenders.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
And more tenders. You probably sold more higher priced products than you did the year before or the quarter before.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
And it could be a higher percentage of products in trays or as bulk.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Albeit the tray pack plants.
Kenneth B. Goldman JP Morgan Chase & Co, Research Division Senior Analyst
Is that something that mix effect that we should be modeling in going forward for the rest of this fiscal year? Or is that too difficult to...
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Not with the new plant coming online, particularly in the second half of the year. We just dont know we dont know how and when thats going to get in this loving hands.
Kenneth B. Goldman JP Morgan Chase & Co, Research Division Senior Analyst
One more for me, if I can. Joe you agreed last quarter when a question was asked about the stock the question asked that roughly when if when your stock gets below $100 it doesnt make sense for you to buyback some? And you said yes, how do you feel about the stock?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
And we just did.
Kenneth B. Goldman JP Morgan Chase & Co, Research Division Senior Analyst
Whats that?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
And we did.
Kenneth B. Goldman JP Morgan Chase & Co, Research Division Senior Analyst
And you did, and you did. The stocks obviously rallied since then though. I was just hoping to get your biggest thoughts on whether its still a good use of capital at $117 versus $95, wherever it was at that time.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
I wouldnt I mean, for me, I wouldnt borrow money to buy back stock. Thats just Im a bit conservative about that. But $117, based on as far based on where our stock has been historically in the last year and knowing what our volume is now and going to be $117 is an attractive price to me.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Operator
Well take our next question from Jeremy Scott with Mizuho.
Jeremy Carlson Scott Mizuho Securities USA LLC, Research Division VP of Americas Research
Mike, I appreciate all the details on the nonfeed COGS. Yes, one of the struggles in modeling Sanderson in the last couple of years has been at a persistent rate of that indirect inefficiency associated with ramping up the plants. So its a little difficult to take a toll on your organic cost basis when you incorporate labor, grower, logistics, that kind of things. So just wondering if you can unpack that nonfeed poultry COGS line a bit further. When you exclude the prepared food that sits about $0.34 a pound, what does that $0.34 would you consider to be non-productive cost associated with your Tyler ramp, whether that means labor, recruitment or the cost of switching your big bird plants to tray pack and back again? And what is the underlying what is the true underlying cost of the business? In other words, where is it going to settle once Tyler gets up to full speed?
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Yes, first of all, I appreciate your pain, Jeremy. And it has been more difficult to model over the last year just because thereve been so many more moving pieces. I will tell you we did some work on COGS this quarter, and volume alone, and Lampkin mentioned our volume, we were down at 2 plants for a week each. And just volume alone was $0.0025 a pound. When you get that volume back, you get that $0.0025 back. And then ourgrower pay in Mississippi, as Joe has been talking about frequently over the last year, when we took Hazlehurst and Hammond from big bird deboning down to tray pack size to birds, the live grow adding, grower pay is up 66 points. And youre going to move Hammond back to full production. Youre going to get 40 of that back. Now were going to get all of it back, which were going to get 2/3 of that back. Litter cost is higher about $0.0025 of a pound as well. And we think its somewhere about that...
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Were doing some you mentioned microbial...
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Antimicrobial...
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Antimicrobial expense in our plants. You all know that USDA 1 year or 1.5 year ago started classifying plants based on their salmonella count. Well, all of our plants at that time were in category 3. Well, today, theyre in category 1 or 2, and we think by March, theyll be all in 1. Well, to get to that, were spending we have spent a good bit of money on using Mike, whats the name of the product?
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Poultry litter treatment. [Keto]...
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Poultry litter treatment...
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Poultry litter treatment on the farms and antimicrobial rinses in the plants, which we think will at least half of that will go away in the future. But thats part of mean that you all would never we all would never know about that. And then between the 2 of those, thats a $0.005 a pound.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
And then you guess we had the freight I mentioned our freight was really flat for the quarter, Jeremy. I know Ive weve heard some folks talk about how they were paying more. Ours was flat. But we increased in the COGS by $0.005 a pound, and thats going to be true going forward. Thats just an accounting change to comply with the new rev rec revenue recognition standard we adopted this quarter.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Yes, also, you can look forward in the second quarter. You all would were doing some equipment changes in our plants, and were going to have 4 plants down from 2 to 5 days. And were not going to have as much volume in the second quarter as we are in the third and fourth. But to do these equipment changes and for labor savings and some mix changes and our mainly our big bird deboning plants. And...
Jeremy Carlson Scott Mizuho Securities USA LLC, Research Division VP of Americas Research
Got it. It sounds like theres at least a $0.005 per pound that may come back online.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
A $0.01 a pound.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Thats more like Id say $0.01 a pound, Jeremy.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
$0.01 a pound.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Did you got it?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
In the third and fourth quarter.
Jeremy Carlson Scott Mizuho Securities USA LLC, Research Division VP of Americas Research
Right. And then just on you talked about exports being a wildcard. First, can you speculate on what it might mean for margin to see [paw] trade to China were reestablished? And then secondly, can you update us on your deboning investment, what that might be for your leg quarter versus dark meat mix?
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Well, it will come on gradually. It would mean more in 2020. It would mean $20 million maybe this year and maybe $40 million in 2020 growth. By the time everything was implemented, more of a 2020 story than a 2019.
Jeremy Carlson Scott Mizuho Securities USA LLC, Research Division VP of Americas Research
Got it. And then just maybe lastly. Give a given your early read on your 2020 CapEx, just from a directional standpoint.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Well, you should be. You wont have any Tyler. This you wont have any aircraft. The $70 million that was spread out last year and this year for equipment upgrades, you wont have that. Our normal CapEx now is about $120 million. And you can add another $10 million to that for stuff that breaks during the year. I dont know what else will pop up between now and then. But that would somewhere around $130 million plus stuff I dont know about it yet.
Operator
Well take our next question from Ben Theurer with Barclays.
Benjamin M. Theurer Barclays Bank PLC, Research Division Head of the Mexico Equity Research & Director
Joe, actually, my question is more on your expectation, food service, retail, feature activity. I mean, obviously, all the things...
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Ben, are you still there? Did Ben get cut off? Well, okay. Maybe hell get back on and somebody else will ask the question.
Operator
Well take our next question from Eric Larson with Buckingham Research Group.
Eric Jon Larson The Buckingham Research Group Incorporated Analyst
Just a technical question. I was just what you guys were talking pretty quickly. What did you say is that your second quarter production is targeted for?
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Our second quarter is targeted to be 1.093 billion pounds. This quarter, to put that in context was 1.063 billion. And last year second quarter, 1.091 billion. So Im sorry, did I say that wrong?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
No.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Yes, I said it right. 1.093 billion.
Eric Jon Larson The Buckingham Research Group Incorporated Analyst
For Q2 this year?
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Thats right.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Right.
Eric Jon Larson The Buckingham Research Group Incorporated Analyst
Okay, perfect. And Joe, the other question that I have here, and I think we ask you every quarter this, probably. We know whats going on with your capacity. Any new industry news or anything that youve heard, how other capacity is either coming on or dragging out or can you give us a feel on maybe the next 18 months if anything new has happened on industry capacity outside of what you folks are doing?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
I dont visit with other people. I dont go to meetings anymore. I just if you look at the pullet placements and if you look at the egg sets and the chick placements, theres not any huge expansion coming on. You know that announced expansions, you have a new plant coming online in North Carolina and our plant coming online in Texas. Those are, I think, are up and running. And so you can add those to the and then, there was an expansion in Alabama of an existing plant. And you can calculate and see what those are and compare that with the egg sets and chick placements. And thats about 1.5%, and thats what you see out there. And thats kind of what USDA says and thats what the pullet, the hen flock will produce. And I think thats what youre going to see. And I dont think youll see Ill just see thats what the numbers say. Those are public numbers that USDA publishes and Im comfortable with that number. I think thats right. I dont think theres anything different, any surprises. And then that you should have the Nebraska plant, will come on at the end of this year, probably I guess. And then theres another plant coming on maybe the end of this year, first and next year.
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
In Tennessee.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
In Tennessee. That will be both of those plants will be 2020. They wont have they wont do anything in 2019. But our plant and the expansion in Alabama and the North Carolina plant. The other North Carolina plant that was built to replace a plant that was burned, those are not new chickens. Those chickens have been being processed already. We processed them last year and theyve been processed in the other plants. So you got 2 plants this year and an expansion. And you got 2 more plants coming on either end of this year, first of next year. And theyre in different markets, were at tray packs and the other one is big bird. And so thats what you have and its about 1.5% when they get up and running. Well be
up and running meaningfully by the fall. Well have 900,000 birds, and well get full production in 2020, by March probably. I dont think theres anything unknown about that. If you look at the egg sets and chick placements by USDA and theyll tell you what you got.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Operator
And well again take a question from Ben Theurer with Barclays.
Benjamin M. Theurer Barclays Bank PLC, Research Division Head of the Mexico Equity Research & Director
Now coming back. So the question was what youre seeing in terms of or what are your expectation in terms of the feature activity, both retail and food service? Have you seen some initial indication for a better demand environment remembering how weak 2018 just was throughout the main summer season sell? Is there any leading indicators or some, sort of, approach you have seen by some of the food service guys and retailers that make you feel comfortable that with the production growth thats coming in, industry as a whole, you guys with Tyler, that youre actually going to be able to place that product at a hopefully decent price? That will be my first question.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Yes, thank you. You know particularly at retail, weve had a much better start to the year than we had last year at grocery stores. Last year, we didnt have a good start in January. And now were going to have January, half of February and March, we have a lot of retail adds with our chicken. Last year, we got off to a slow start. It was all beef and pork. And so were optimistic about the grocery stores. We do not have a great deal of visibility even at particularly at the legacy fast food outlets. We do not sell them and dont do business with them. And so we dont see that. We know chicken tender prices are up and theyre holding own, which is a pretty good indicator at food service. And the boneless breast prices have weakened in February a bit and it looks like they have settled down a little bit last this week. But we just dont have the visibility into food service like some other people do. But I dont right now, it got off it did fine in January. Food service was fine in January. We think some of that had to do with before the government shutdown, the supplemental nutrition payments or food stamps were mailed out early for February. They were mailed out in January before the government shutdown. So there was some additional money in the economy, and that helped retail a good bit and made February last a little longer without money. That didnt have any effect on food service, but it did at the grocery store. The last 2 weeks of February were pretty slow. But March looks like we have a lot of adds booked in March for retail. So I feel pretty good about retail grocery being better than it was in 2018.
Benjamin M. Theurer Barclays Bank PLC, Research Division Head of the Mexico Equity Research & Director
Okay, perfect. And then one on the potential implications from African swine fever. I mean, clearly, theres more and more news coming out about the issues in China and the potential limitations in pork, and we know its an important producer of pork, but also an important consumer. So the question is, if some of that U.S. pork could disappear somewhere else in the world, not necessarily China, just somewhere, have it disappear, is theres anything you can already somehow quantify what the implications could be? Or how do you feel about the potential implications from a [fervor] ASF issue in China and the implications specifically on chicken in the U.S.?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Its hard for me to you think if you lose protein and it moves around, that be positive. Also be positive for soy, I mean, for us. They dont have the animal units. They wont need soy. And so demand for soy goes down, and that would be beneficial for us as well. But if U.S. didnt have a deal with China, the pork that moves from the U.S. to China and it appears that they my read of the extension of these talks are, the U.S. and China doesnt have a deal. So thats why they had to extend negotiations. Why? I dont know. But for sure, they dont have a deal thats why they have to extend the tariffs. And I just think theyre still wishing and hoping both parties to get a deal. But I dont know where the pork comes from. I guess, Europe and maybe South America, but I cant quantify that.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Operator
Well take our next question from Michael Piken with Cleveland Research.
Michael Leith Piken Cleveland Research Company Equity Analyst
I was wondering if you can talk a little bit about the I know you guys made a decision to move off of some of the antibiotics that have human use. But just the overall profitability of, I guess, any chicken versus kind of traditional tray pack would be helpful.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
We have no intention of moving to NAE. And thats our customer base that we just we dont feel like, thats our market, and well leave that to others. And we dont for a lot of reasons, we dont think thats good for the animals. We dont we think it takes uses a lot more resources, water and corn and soy and lumber and you have to build more chicken houses. And we also think its youre running a risk of having more salmonella and bugs and everything else. And for us, its that path weve chosen. And...
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
And Michael, we dont have any insight into what other people are making on their product...
Michael Leith Piken Cleveland Research Company Equity Analyst
Okay. I mean, but youre not getting pressured by your customers.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
We think its fine for others and its good thing for consumers to have a choice. And we dont I mean, for us, its just not the path that we choose.
Michael Leith Piken Cleveland Research Company Equity Analyst
Got it. Okay, thats fair enough. I guess, shifting gears, could we get a little up bit of an update on where we stand with when bird weights might be able to stand trailing back up? I know that we have the woody breast issue. And just how long, is it years, is it months before we might start to see the rate of weight start to go back up to historical levels?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
I think Ive been wrong about this forever. Im sorry. Im a wrong person to ask. I think the bird weights came down in December because of profitability. It was challenging environment with prices. But I think bird weights for us, bird weights, kind of, hit a wall because of woody breasts and also some customer concerns about wing counts and boxes and woody breast and things of that nature. You also have employee concerns about handling bigger chickens. And so were pretty comfortable with our live weights right now. We tried bigger chickens, and we think were about right where we are for us. There are some people running some bigger birds than were running. But we feel pretty good about where we are on our live weights. I dont know, but we do a lot of go ahead, Lamp.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Well, I was just going to say woody breast, 2 years ago, we were told it would take 5 or 6 years to fix that genetically. So its not over yet.
Operator
Well take our next question from Adam Samuelson with Goldman Sachs.
Adam L. Samuelson Goldman Sachs Group Inc., Research Division Equity Analyst
I wanted to dig in, Joe, Lampkin, and Mike on the extra market a little bit more. And just going off your earlier answer, it didnt sound like you have great hopes that if there is a trade deal, that youre actually going to see a lot of fresh poultry move from the U.S. to China. Is that a fair characterization? Sounds like you were talking mostly about the pause. And if we dont think that theres a big fresh poultry opportunity, why?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
I have no idea about that. I wouldnt comment on what I said was I was talking about the whole I dont think the whole deal is I was talking about the whole trade. I wasnt commenting on poultry at all. I dont know about poultry at all. And I was talking about the whole negotiation, not about poultry in particular.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
But you know historically, they have not been a big purchaser of chicken (inaudible) or chicken feed.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
No, Ive said that theyve never when chicken in the past, when chicken got $0.25 a pound, they quit buying. We were always hopeful that someday, they would become a major purchaser as their middle-class expanded. But theyve always been very protective of their local industry. And thats why, just recently, I think theyre putting tariffs and protections against Brazilian poultry. And they put anti-dumping tariffs on Brazilian poultry just in the last few months. So I never ever thought I never believe that but I wouldnt comment on that when I was talking about...
Adam L. Samuelson Goldman Sachs Group Inc., Research Division Equity Analyst
Okay. I guess, I was talking, I guess, I interpreted you in 20 you were talking about $20 million and $40 million, which I assumed was the paw contribution?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Yes, yes.
Adam L. Samuelson Goldman Sachs Group Inc., Research Division Equity Analyst
And you only alluded to that specifically.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Yes, yes.
Adam L. Samuelson Goldman Sachs Group Inc., Research Division Equity Analyst
And thats specifically, is it $20 million and then $40 million? Or is it and so its $60 million total and thus the phasing getting that back? Or is it $40 million total, $20 million this year and $20 million, kind of, around next year?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
I wouldnt comment on that. I thought he was asking me about dark meat. I thought he was talking...
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
No. He asked about...
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
He was asking about leg quarters. I thought in paws. Oh, well, its about the same amount on both. If we got if we were shipping paws into China, it would be about $40 million based on current pricing, its about $40 million pretax.
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
For 12 months.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Yes, over a 12 month period, not if we started today. And then if we were to the other project we were contemplating, he asked me about leg quarters and deboning, thats about a $40 million project as well. But that would be a 2020 story. More than it would be a 2019 story.
Adam L. Samuelson Goldman Sachs Group Inc., Research Division Equity Analyst
Okay, thats helpful. And then just more broadly on the export market. Just any color on how demand is has shaped up early in the year like quarters have come up a little bit but not dramatically so? Im just trying to get your view on what that looks like from some of the key demand regions.
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
It has been positive over the last, really, February and going into March. We were at the end of last year, we were at $0.26 to $0.28 delivered port. Our current pricing is $0.30 to $0.31 delivered to the port. Demand is good from Mexico, and Mexico is our best destination right now.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Kazakhstan is also gotten a lot better.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Thats up. Thats $0.31 port, but that doesnt not quite as good as Mexico.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Yes, but its moved up more than we thought it would.
Operator
And well take our next question from Ken Zaslow with Bank of Montreal.
Kenneth Bryan Zaslow BMO Capital Markets Equity Research MD of Food & Agribusiness Research and Food & Beverage Analyst
Just touching base. In terms of the current chicken environment, do you think its sustainable throughout the year? And what do you think the key drivers would be to keep it at these levels? Is it a material improvement from 2 or 3 months ago?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Well, 2 or 3 months ago, when youre talking about November and December, anything is better than November and December. Any month of the year is better than November and December. When you February is better than November and December. And just the time of year, spring is better than November and December. You just have to know Thanksgiving and Christmas are not for chicken. And but you head into the spring and its just better. Grilling season, July the 4th, Memorial Day. That was not good last year. We had no features at food service, fewer features at retail. Absolutely fewer, no doubt about that, absolutely. And were not going to have as many features as we did in 2015 because theres more beef and pork. But maybe more than we had in 2018, we did in January. And but we itll definitely be better than November and December. We dont have the visibility in the food service market as some of the other companies do. But we have pretty good visibility at retail. And we know March is going to be were going to have a lot of adds in March. I dont we dont know beyond that. But January, part of February and March is about as far as we know. But March, we have a lot of added activity.
Kenneth Bryan Zaslow BMO Capital Markets Equity Research MD of Food & Agribusiness Research and Food & Beverage Analyst
And do you think that the increase in the pullet or the flatness of the pullets is representative of the new capacity coming online?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
I do. I do. I do. I know ours is in there, and Im assuming others are in there as well. They have to be. If theyre processing. I mean, I think the pullet placements are there, always have been fairly accurate.
Operator
And well take our next question from Akshay Jagdale with Jefferies.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
I wanted to ask about your revenue per pound performance this quarter relative to the commodity prices. So first thing I note so overall, if you just take purely the Urner Barry prices and the EMI index for the whole bird, youre going to get down 10%, 11% year-over-year. And you guys were down only 2% year-over-year. The freight issue is about 1 point. So its not a huge difference. So I was looking through your the numbers you gave us in your Q, and the one thing I noticed is you said jumbo wing prices were down only 5% according to Urner Barry. Can you clarify that? I mean, I dont I see jumbo wing price is down 20%, 30% for the quarter. So maybe thats just we can follow up on that off-line. But high level, it seems to me that youre at price [indiscernible]. So that can you confirm that Im thinking about that correctly. And maybe you can help me understand like relative to spot or relative to the prices we see where you saw better realization. I know quarter-to-quarter, this tends to be some differences. But just trying to understand. There was a pretty big difference this quarter.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
When the Georgia Dock went away, and I have forgotten when that was now.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
December 16.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
A year ago?
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
16. December 16.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
16, 2 years ago. We a lot of our contracts with our customers became mainly flat contracts. Some of them are based off EMI and...
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
UB. Just features really for Urner Barry.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
For Urner Barry, right?
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Some features...
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Some Urner Barry but most of them, Akshay, are mainly flat priced. Whats arranged and then perhaps, grain escalator, in case, grain moves a lot. But theyre really, basically, they dont change very much and thats why and that is not true about food service. Im talking about retail, tray pack. And so they dont change a whole lot. And they might get they might have a different add quote or theres some flexibility if they need an add or we need an add. But mainly, the day-to-day pricing does not change a whole lot.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
And Akshay, Id be honest, I dont look at that EMI quote very often. I dont think were going to use it. But I will say, sequentially, our pricing was flat. So if theyre saying down 5%, we absolutely realize more. And overall again because of our mix, our tray pack pricing, compared to last years first quarter is up almost $0.02 a pound and sequentially, $0.0125 or so. So yes, we did realize better than what youre seeing at EMI if thats the case.
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
Thats helpful. What about wings. So the Urner Barry wing quote on jumbo or small wings is down anywhere from 20% to 30%, but in your Q, you said you were, maybe you were down only 5% or something? Is that right?
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
Well, we competed at $1.56.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Yes, its $1.56. This first were looking at this first quarter versus a year ago it was $1.63, a decrease of $0.0776 or 4.7%.
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
Okay. Well follow up off-line. I am seeing $1.06 this but I mean, Im just looking at Urner Barrys quotes. So we can follow-up on that off-line. Yes, $1.06.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
$1.06 wing.
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
No, this quarter on average.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
On wings?
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
No, well follow up off-line. Thats okay. So just another question just on demand. So you mentioned rightfully that theres little visibility in the food service channel. But before we get into that, on the retail side, I mean, so when we saw prices really move up a lot over the last couple of months, what we were hearing is the sort of, the leftover spot market loads were significantly reduced, right? So theres a whole bunch of breast meat that goes into food service and then theres leftover loads that go on to retail. Like it seems like those very few of those in the market over the December, January timeframe. So...
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
January primarily.
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
Right. So it did that reverse a little bit in February? Whats driving the softness in...
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Yes, the last 2 weeks of February, all markets slowed down. You had excess retail product. You had excess food service product. Its because, we think, those supplemental nutrition payments went out early in January and it was all spent and they people ran out of money in February. So they were not going to grocery stores. They didnt have money to go to grocery stores, a certain percentage of the population that receive those food stamps. So by the 10th, 15th of February, retail grocery traffic was down. So we had 2 pretty good weeks, 10 days good in February and then the market slowed down a good bit. And so you had excess product at retail and the last 2 weeks of February were kind of like November and December. And now its picked back up this week. You kind of get first month best.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
First of the month, yes.
Lampkin Butts Sanderson Farms, Inc. President, COO & Director
And March should be a better month just seasonally.
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
Right. And then I know theres no a very little visibility for you. And even your other larger competitors, who have presumably more insights, they also have low visibility on the restaurant demand. But from what what we have when we look back last year, just talking to everyone in the industry, seems like what happened is theres just lot of burger promotions, theres a lot of beef out there in the market. And thats where all the volumes went?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Yes, yes.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
Akshay S. Jagdale Jefferies LLC, Research Division Equity Analyst
So when you look at this year, theres still a lot of beef and pork actually on a per capita domestic availability basis. Theres projected to be more protein, beef and pork in the market than even last year. So I think the record level come over the last 30 years or something? So how do you think about that as a potential risk factor for demand for chicken?
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Well, I think it could very well be a headwind. Its just I dont know if they all want to do the exact same thing that they did a year ago or if they want some variety. I think I dont think 19 is necessarily going to be exactly like 18. That started out last year with Wendys advertising all fresh beef. And then the other chains had no choice but to feature hamburgers. They couldnt let Wendys runoff. And then it was hamburgers for everybody. And are they going to just keep running hamburger meat? Or are they going to do something different? They have ran some chicken sandwiches the last 3 months. And Im very grateful for that, although I dont sell them any. Theyve all had chicken sandwiches except from the big one. I dont think theyve had one, have they?
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
Burger King and Wendys.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
I know Burger King and Wendys have had chicken sandwiches. Everybody but McDonalds.
D. Michael Cockrell Sanderson Farms, Inc. CFO, Treasurer & Director
McDonalds
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
And Im very grateful for that. We know theres going to be beef and pork and were probably theres probably more than 1 years worth.
Operator
And that concludes todays question-and-answer session. Mr. Sanderson, at this time, Ill turn the conference back over to you for any additional or closing remarks.
Joe F. Sanderson Sanderson Farms, Inc. Chairman & CEO
Thank you for spending time with us this morning, and we look forward reporting our results to you throughout the year. Thank you very much.
Operator
That concludes todays presentation. Thank you for your participation. You may now disconnect.
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FEBRUARY 26, 2019 / 4:00PM, SAFM Q1 2019 Sanderson Farms Inc Earnings Call
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