Sanderson Farms (SAFM, Financial) has grown from a small general feed and seed business in 1947 to one of the nation's leading food corporations in fiscal 2015 with sales of more than $2.80 billion. It is currently the third-largest poultry producer in the U.S. with plans to process over 3.6 billion pounds of meat in fiscal 2016.
The company currently operates 11 poultry plants with a recent complex opened in Palestine, Texas, in February. At full capacity, the Palestine facility will provide an additional 1.25 million head of chicken per week for the big bird deboning market. It is engaged in production, processing, marketing and distribution of fresh, frozen, further processed and partially cooked chicken. The company sells its products to retailers, distributors and casual dining operators located principally in the Southeastern, Northeastern and Western U.S.
The company reported second quarter with continued favorable demand for poultry products from retail grocery store customers and higher volume. Despite sales price per pound decreasing significantly during the first half of this fiscal year compared to the last year, market prices improved steadily through the second fiscal quarter as poultry export market fundamentals improved.
Second quarter results
Net sales during the second quarter of fiscal 2016 were $692.1 million ($716.6 million in the prior-year quarter).
For the quarter, net income was $47.6 million, or $2.11 per share, which was $71.2 million, or $3.13 per share, in the prior-year quarter.
Net sales for the first six months of fiscal 2016 were $1.297 billion ($1.384 billion in the prior-year period).
Net income for the first half of the year totaled $58.3 million, or $2.58 per share, which was $137.7 million, or $6 per share, in the prior-year period.
Diluted EPS during the quarter were $2.11.
Dividends per share during the quarter were 22 cents.
Cash and cash equivalents at the end of the quarter were $223.1 million.
The company's average feed cost per pound of poultry products processed decreased by 3.8 cents per pound, or 13.0% from the prior year quarter.
Poultry pounds sold increased 8.6% during the quarter compared to last year's second quarter.
Strong attributes of the company
- Responsible leadership.
- Quality products.
- Exceptional service.
Focus
- To continue to grow the company.
- Deliver greater value to the shareholders.
- Even in constantly changing markets, the company is rolling out new concepts.
- To extend its record of growth in the years ahead.
On a concluding note
The company has a favorable product mix and a track record of generating strong internal growth. The company’s 12,000-plus employees and over 800 independent growers are committed to offering customers the very best products on the market today.
2015 was another year of record sales and production. Sanderson began processing chicken at a new plant and commenced construction on another one. It paid a special dividend to the shareholders and ended the year with a strong financial position and no long-term debt. It continues to expect the benefit of lower grain prices in the latter half of this year.
The company has a strong balance sheet and has a potential future. Though the sell prices fell during the quarter, this was offset significantly y bmore pounds sold. This company has plenty of room to grow in the future, and I would recommend it as a buy.
Disclosure: I do not hold any position in the company.
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