Waco’s largest private-sector employer laid an earnings egg in 2018, but its top budget officer said Thursday that Sanderson Farms plans no job cuts.
“This company has not laid off anyone in its 71-year history. That’s not the way we operate,” Chief Financial Officer Mike Cockrell said after participating in the company’s fourth-quarter earnings report.
The Mississippi-based poultry chain saw net sales plummet 13 percent, to $798 million, during the fourth fiscal quarter, reflecting a net loss of $43.2 million. Company executives blamed sagging chicken prices, hurricane disruptions and higher feed prices.
Net sales for fiscal 2018 totaled $3.23 billion, down from $3.34 billion last year. Net income for the fiscal year totaled $61.4 million, or $2.70 per share, compared with $297 million, or $12.30 per share, last year.
“The fourth quarter marked the end of a challenging year for Sanderson Farms,” CEO Joe Sanderson Jr. wrote in a press release on the company’s performance in the fourth quarter. “Market conditions weakened significantly during our fourth fiscal quarter of 2018, as market prices declined after Labor Day.”
For example, the prices for boneless chicken breast meat was down more than 26 percent during the fourth quarter compared to the same period last year, according to the press release. Prices for jumbo wings averaged $1.44 per pound for the year, well below last year’s $1.92-per-pound norm. And prices for bulk leg quarters slumped almost 25 percent for the quarter and 5.5 percent for the year, according to the press release.
So the return on a processed bird took a hit from head to toe, so to speak. Aggravating the situation is China’s continuing refusal to accept poultry exports from the United States, a policy it enacted in 2015, Cockrell said.
Before the ban, China represented Sanderson Farms’ largest market for chicken feet. That revenue stream now is more bark than bite, as Sanderson Farms sells its feet to makers of pet food at reduced prices.
“It would be nice if we could get things settled with China,” Cockrell said.
In Waco, Sanderson Farms produces jumbo wings popular with chains including Buffalo Wild Wings, as well as boneless, skinless pieces of chicken in demand among food-service companies that supply retailers with wholesale poultry.
The company employs 1,700 locally, including at a processing plant on Aviation Parkway and a nearby hatchery on East U.S. Highway 84.
“All our plants are full,” Cockrell said.
The company sold a record 4.44 billion pounds of poultry products this fiscal year, a 200 million-pound increase over last year, according to the press release.
Still, grain prices were slightly higher, cutting into profit margins, and demand was tempered by the increasing popularity of beef and pork, Cockrell said. But he described the trend as a “blip” likely to change soon.
“This is a commodity, and commodities are a cyclical business,” Cockrell said. “The oil business there in Texas is a good example.”
During Thursday’s earnings report, Sanderson said the company is poised to spend $65 million on existing plants next fiscal year. He said a new processing plant in Tyler should become operational early in the year.
Positions already are being filled, and 300 to 400 new hires are ready to roll, Cockrell said.
Asked about finding employees in a tight labor market with low jobless figures, and with border security becoming a priority, Cockrell said Sanderson Farms chooses locations for expansion based on employee availability.
“This will be the first time in eight years we are not actually building a new plant,” Sanderson said.
“As of Oct. 31, 2018, our balance sheet reflected $1.659 billion in assets, stockholders’ equity of $1.388 billion and net working capital of $367.6 million,” he wrote in the press release. “We repurchased 823,385 shares during the fourth fiscal quarter at an average price of $101.37 per share, and we had no debt at fiscal year-end. 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.”
Stock in Sanderson Farms rose $6.56, to $102.93 per share, on Thursday.