(Bloomberg) -- America’s relentless demand for chicken dinners is pushing up prices at the grocery store and boosting profit at the third-largest U.S. poultry producer.
Sanderson Farms (NASDAQ:SAFM) Inc. posted fiscal third-quarter earnings and net sales that exceeded analyst estimates as the average market price for chicken breast tenders and jumbo wings more than doubled. Sales rose to $1.35 billion from $956.5 million a year earlier.
The 74-year-old company, which is preparing to sell itself and go private, continues to benefit from the pandemic-era trend of more consumers dining at home. Sanderson also said demand from its food service customers is improving. The gains helped offset a 46% surge in chicken feed costs due to near-decade high prices for corn and soy meal.
“Demand for the products we sell to retail grocery store customers remained strong,” Chief Executive Officer Joe Sanderson said in a statement Thursday.
The poultry processor said it expects supplies of corn and soybeans it uses for chicken feed to remain tight and prices for both commodities to stay elevated “at least for the short term.”
The company has agreed to be bought by agriculture giant Cargill Inc. and Continental Grain Co. for $4.53 billion. The deal would expand on Sanderson’s current position as the third-biggest U.S. chicken producer by creating a venture with about 15% market share.
The proposed deal values Sanderson at $203 a share, a 30% premium over the share price of $155.74 on June 18, the last full trading day prior to media speculation about the potential sale. The stock rose 0.9% in before regular trading in New York on Thursday, after closing Wednesday at $193.62.
Related: Dealmaking Surge Shrinks Ranks of Poultry-Only U.S. Meatpackers
Key Insights
- For the three months ended July 31, net income was $7.38 a share compared with $1.48 a share a year earlier.
- Average market price for both chicken breast tenders and jumbo wings rose 107%.
- Output of 1.21 billion pounds, 4.2% less than it would have supplied had the company been at full production.
- Sanderson says the shortfall is due to reductions tied to less demand from food-service customers during the early stages of the pandemic last year.
- Company expects fiscal fourth quarter production to decline by 3.1% compared to a year earlier, which would mean full fiscal year output will be down 0.6% from 2020.
Get More
- See Sanderson’s full earnings statement here
- Sanderson is not hosting a conference call with analysts and investors
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