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Low sales prices drive Sanderson earnings down in second quarter

By JACK WEATHERLY

Sanderson Farms’ earnings dipped to $47.6 million, or $2.11 per share, in the second fiscal quarter ending April 30, compared with $71.2 million, or $3.13 per share a year earlier.

The Laurel-based poultry producer said in a release Thursday that earnings were hurt by sales prices – down by 11.4 percent per pound — though volume was up 8.6 percent.

However, Sanderson outperformed analysts’ expectations, so its stock rose by $2.43, or 2.7 percent, on the Nasdaq stock market, closing at $92.55.

Hard Asset Investments reported that Zacks Investments Research surveyed four analysts, whose average projection for earnings was $1.55 a share, which the company beat by 56 cents.

An analyst for Hard Asset, who owns shares of Sanderson Farms, is bullish on the stock, and likes what he calls a strong balance sheet, with no long-term debt.

He notes that the company says it second quarter results reflect “lower grain costs, favorable demand for poultry products from retail customers, higher volume and an improving export market.

Joe F. Sanderson Jr., chairman and chief executive, stated in the release that “while our sales price per pound decreased significantly during the first half of this fiscal year compared with last year, market prices improved steadily through the second fiscal quarter as poultry export market fundamentals improved.”

The poultry industry was hit hard in 2015 when Midwestern processors were decimated by avian flu, which Sanderson Farms succeeded in dodging.

All avian influenza-related import bans on United States poultry products except those in China, have been lifted,” Joe Sanderson said.

Also, the U.S. dollar relative to other currencies has weakened recently and the price of oil (on which many countries rely for revenue), has moved higher, he observed. That gives “more buying power to many of our export partners,”  Sanderson said. That’s good news for leg quarters, which are particularly popular in some foreign countries.

The executive said that he expects the Palestine, Texas processing facility to be in full production in the fourth fiscal quarter and a new hatchery, processing plant and wastewater treatment facility in St. Pauls, N.C. should open in early 2017.

Sanderson Farms is the nation’s third-largest poultry processor, behind No. 1 Tyson Foods and Pilgrim’s Pride.

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