SAFM - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to Sanderson Farms Incorporated Third Quarter Fiscal 2019 Conference Call. Today's call is being recorded. And at this time, for opening remarks and introductions, I would like to turn the call over to Mr. Joe Sanderson. Please go ahead.

Joe Sanderson

you. Thank welcome third and conference Sanderson to morning quarter Farms call. Good with and morning. Mike Butts me Cockrell Lampkin are this We reported net of $XX.X income for our or per third $X.XX share. million fiscal quarter $X.XX quarter. net $XX.X income This during compares third million, to or year's last per of share, the or the accrual during net income $X.XX a per liability of million $X.X reflects ESOP tax. our share to of quarter before income probable for Net contribution income tax, of

over comments, begin Lampkin this with before morning's turning and to general call will Mike. I a the call few

making any I comments, statements. further give the will to Before ask cautionary forward-looking Mike statement regarding

Mike Cockrell

Thank our our by report morning, business, of ended economic company and fresh will financial Joe, XXXX. expansion XX-K about materially fresh and the beliefs, XX, statements our company. consumer This Those annual uncertainties. described differ from the contain prospects uncertainties the and morning's forward-looking fiscal of the The future production of for forward-looking Form October grain of you, call supply and prices, performance risks are levels, good the in the condition Examples chicken chicken about of plans. actual forward-looking conditions, risks and demand, statements and statements products, our of that everyone. on statements, indicated could year various because include

this different days obligation view are such you our or health now. volatile, few market I morning update affecting each poultry view overall and among as place speaks for statement meat, statements from External undertake others prices the such grain to our as undue very statements. not morning, a only of no from to be today. might made caution cost, as reliance on feed revise our this the forward-looking and economy, business factors of forward-looking We

Joe Sanderson

larger Similar at seasonal to birds fiscal quarter, Mike. processing third meat our for in last reflect produced counter market weakness year's service customers. significant third boneless quarter breast plants, fiscal year's results for Thank food prices this you,

Fortunately, year, same service and at products for prices ago. averages the our a than higher all chicken last reflected period market wings and demand meat, market were other the tenders during food than prices higher jumbo dark Average of produced year good for plants were quarter.

for X.X% store Realized were Overall, dynamics. market year slightly fiscal quarter. tray products balanced were retail per demand produced for and compared prices prices pack year's last ago, than customers a to $X.XX third to continued sold higher grocery or higher and pound by supply reflect poultry

is market supply supply weak. up overall counter-seasonal We the an is due, decline the year second in the is While part, of to at only bird breast meat of competing least, abundant slightly, boneless believe demand in big prices for straight proteins.

the demand chicken food for promotional it support levels. prices during enough strong for Market tray and summer pack expect the stores we breast to up boneless seen saw normally feature see activity volume And months. wasn't we chicken our while products have we the while activity some third prices year, normally sold We of quarter. activity during meat service, during at grocery last than historical at quarter. And promotional haven't held better more we seen retail

the wings for during demand well been the On demand hand, up summer. good. export other held has And

at our As plants than prices product for a the result, other higher last market produced year. averaged food service

were with are Lab reports X/XX consistent ready-to-cook and head during USDA the weights balance up XXXX. Through chicken increase for total were the supply calendar chicken of year fewer calendar than in USDA's X.X% estimate outlook X% production from up a of of processed. this X% ago, Our quarter is X.X%. that pounds more June,

for highly line year, calendar estimate a August production, demand anticipated of chicken XXXX. XX. USDA calendar is during view our report with next The USDA's in the published on more the of grain supply to respect and With X.X%

Given for the corn the corn estimated and -- higher in million than harvested its to estimate significantly actually States, estimate Instead, that to acres the previous XX acres of United expecting was its planting estimate. delayed were weather, USDA lower planted increase season most soy acres.

to the production XXX.X estimated future bushel crop When prices offset to the per trading at XX.X%. bushels. an used per for are estimates, billion yield under fell be XXXX. ratio highest acres, of estimate the estimated applied but levels off of just end because end prices to USDA to is new to And use corn at yield, remains Market increases ratio actually from new year, now report class XX.X%. acre the when soy and lower corn very demand by XX.X its following stocks this XX of stocks the estimated of at to record similar fiscal at of year soy the last comfortable crop estimate bushel acre, the of report its maintained The the took near down year,

these year. flat per needs fiscal on cost our costs will lower we grain of chicken than year feed our million lower fiscal Based be to fiscal These this into of $XX this balance the We grain pound fiscal for compared translate fiscal processed, year year. last last purchases, approximately expect to year. have cost this priced relatively

at small very fiscal We have our priced time. of needs only this portion a XXXX

the grain, Board at very price XXXX needs we Chicago prices, Trade at Board XXXX. to similar for solely could prices of Looking actually

very also is basis close to meal XXXX values. Soy

are $X.XX going sellers, sell to supply basis bushel farmers in for However, quotes higher. view they current basis corn more that that values, My higher what inflated. when is paid new corn remain willing crop to are per Until are corn basis reluctant XXXX. quotes at we they are their USDA become than are estimates currently convinced

expect fiscal we to Tyler, reached XX% capacity capacity the where reach XXXX. we continues and progress have Our of in second full during quarter

Lampkin operations I'll the of our quarter. the a point, over and the this At third detailed for more turn to markets call during discussion

Lampkin Butts

during to compared were slightly to during our everyone. our quarter market prices Thank Pricing third a pound. and compared the environment our products continues you, retail a lower Average improved retail X/X mix. Joe, balanced quarter in XXXX reflect when supply-demand Overall, a year. good as by poultry were were quarter result stores. third for third last higher cent morning, for tray pack prices higher grocery Sequentially, to quarter per of of of chicken prices relatively

a plants production Through overall volume quarter. exports averaged bulk the last during $X.XX for $X.XXXX year's were quarter the year, third in last Bulk compared period per same compared during quarter pound were pound Quoted XX.X%. last up quarter of versus at prices the of leg our to broiler to year. prices big leg quarter, meat X% half higher. year's third up bird increasing per Market calendar were prices industry quarter for the first third

our The third year's Urner quarter pound. third $X.XX were quarters pound. per average X.X% per lower third fiscal during Jumbo an current jumbo third Urner Prices quarter. during by higher And currently compared per quarter. a leg Barry is This quarter quarter, Barry the pound. a pound per pound, breast Boneless of $X.XX ago. $X.XX of $X.XX frozen average prices year year's that's were third compared Urner to year's averaged of during quarter XX.X% a last $X.XX wings quote our last per to wings quarter. is a up from price third decreasing $X.XX average bulk for the during Barry

pound Today pound. per was changes per sold these our per of Urner The market an third quarter. overall breast price of result quoted last average of compared poultry the Barry $X.XX $X.XX sales market increase products to pound boneless in is for price year's

to being compared during last year, In poultry costs for the third feed our overall quarter lower. products to addition highest average were slightly sales price our

was quarter Our from down the average $X.XXX third per feed cost per pound third pound last $X.XXX quarter. during processed per during year's pound,

We third pounds X.XX Memorial pounds during because we but sold the fewer We last from of ran fewer last X.X% Xth that's estimated Day X.X% than processed year's July billion expected. lighter we X.XX processed third of pounds plants of at billion year's quarter poultry during our of estimated. quarter, poultry pounds the during We around a sold X.XX orders billion up during third from X.XX billion pounds increase the heads we all dressed fiscal than holidays than our quarter. were quarter

year, for to products pounds of the billion processed to we fiscal last billion last and year nine compared sold poultry X.XX of this X.XX billion period year compared months For same X.XX the year. first X.X the billion pounds

XXXX. from billion We process to expect approximately up XX.X pounds pounds fiscal approximately pounds million compared year the processed quarter, X.XX the during pounds the pounds, during XX.X chicken expect million products up to pounds of compared by X.X same We this be during quarter last our fourth quarter last fiscal processed of increase now to We year. X.XX sold X.X%. an X.X% year, billion to billion prepared

decreased average price facility that Our X.X%. sales at

Mike. call this point, I'll turn At over to the

Mike Cockrell

million a sales year. that's Net again. XX.X% million Joe morning, average quarter the during up totaled last higher same higher result the of Good from and the Lampkin. you, and was increase $XXX.X Lamp. by Thank volumes prices described $XXX.X sales for and quarter The

sales of in for in sold increase as feed offset months products same of pounds increase July per cost XX ended result non-feed-related to cost goods last months by the poultry the of X.X% year increased three three lower compared cost XXXX the and processed. the Our a pound of an

non-feed-related labor to to in goods increase as a in in primarily and $X.XXX quarter. was last decreased $X.XXX per per flocks per cost freight of pound in increase Feed third result pound pound a cost. pound cost increased processed year's $X.XXX COGS The cost $X.XXX compared compared an pound increase Non-feed-related in X.X% a or per to last increase of accounting change due per $X.XX year. fixed

$X.XXXX pound at per Inefficiencies us processed. cost Tyler

million million $X.X pound for approximately all third our will per balance for expenses million SG&A year. points QX As for grain year. quarter fiscal same from for QX, year of estimate nine the last feed Year-to-date $XX.X were ESOP to cost. Joe expenses contribution include million per during be to SG&A first the priced that's accrued and compared needs mentioned, months feed processed the $X.XXX $X.X $XX.X of pound quarter we cost XX the accrued have compared the our last the up of we through XXXX

fourth accrue as the is to expense. ESOP during SG&A our $XXX,XXX the and quarter all expect booked ESOP We approximately of for

$X.X were Year-to-date fees higher hand $X.X million lower state during discrete a start-up costs $XX.X million credits. expenses to and were by the million by legal certain were rate last income other at costs compared by by that Trainee higher but salaries $X lower the higher were million. company's effective on related tax million. XX.X% year, The to tax quarter million by $X.X benefit, and was income advertising $X.X reflects administrative Tyler were tax

of a of items the balance discrete the rate. any year, we XX.X% expect exclusive For

includes aircraft. million We million that $XX.X which $XXX.X related $XX.X approximately $X.X year for Tyler at the improvements million, Tyler, $XXX.X on onetime progress on million and the a payment will onetime maintenance we corresponding estimate includes $XXX.X and CapEx large-scale which in $XX smaller company payment capital upgrades now million for aircraft, that $X.X building a spent million million -- other processing equipment made on We be and plants projects. and fiscal various third million through for full quarter, our new progress the for expenditures in to

the Our year-to-date $XX.X million expect amortization and year. and was depreciation for we $XXX million

declared in through the first $XX.X We of the year. also million three dividends quarters

under the of $XX.X committed outstanding of credit outstanding $XX under in loans revolver today million our had in and As we letters $X approximately billion million revolver. are

at negative and was debt-to-cap total $X.X billion, our net debt-to-cap Our X%. was July was our shareholders' XX equity

We conference the hotel I'd by your questions, We'll and making morning. New you at information us before Orleans company reservations. deadline host is register like to X:XX hope Thursday, XX noon House join website. on the in Before night encourage on to you Ritz-Carlton and remind And of find morning Oyster ahead for Orleans Acme go opening will October on for October The I our you'll Relations of will page hotel end that reservations and Friday Investor host Friday. will in The conference XX that many XX. September make everyone our New dinner an We'll XXXX. up at at call start the investor Friday sharp and the

Diana questions. for call concludes So, open the remarks you up that our can and

Operator

Thank Ben will with Bienvenu Stephens you. we [Operator question Instructions] take our Inc. And Please first go from ahead.

Ben Bienvenu

Thanks. Good morning everybody.

Joe Sanderson

Dan. morning Good

Ben Bienvenu

your when numbers saw gross I Joe back July revised said commentary in and outlook thought you that were curious lower get be around I they high placement year next you number pullet you might recall too we fact outlook. to -- bigger ask want just they pullet take saw. placement and they just on said the your were year, aligns in USDA's production for your which with we earlier if on some to the

If reflects next growth expectation? about you and if might thought it be that revised of supply your lower comments kind year

Joe Sanderson

to be expect the do revised lower. July I

they I one million saw breeders have questioned in of pullets primary produce frankly spoken months these -- and the we breeders the X.X three primary row We that ability actually many. of with at to a when the

told so placements some we people and were our reported instead of that of four. of And they believe that five called weeks we

do a when that so to go restated. And I it's XXX% be will July by expect about week back so and reduced to

Ben Bienvenu

Thanks. I Very around helpful. for the particular. breast And ask meat to then demand in want outlook

some You little play breast demand the said a factors bit talked past that in that of for has about been We've meat softer. weaker the demand.

outlook the what see in Labor to you looks think So, any future talk and into about a your what Day extent do from we'll fall? Could curious I'm like improvement demand? standpoint

Lampkin Butts

of season. our post-Labor is Well, think this Day don't Lampkin. typically demand is peak We

season summer. demand the Our peak is

features don't, feature is nothing pork, featured we're their in other and most chicken beef, couple customers there and some stores of featured proteins. else, Labor do, of they're have that of competing are but they're not but lot retail We feature, the at not against other do -- them every chicken Day a but have chicken in full protein. It's for grocery not and of in our

Joe Sanderson

had It's July now running It we to not we but Monday. are to for and running Day script, not have Day, right have Memorial in our plant grocery to around we it's We're the we down We Saturday all we're Saturday a Xth. said Saturday to did not demand. big is This cover Labor demand run fill running but not at one orders Day. do -- we and Day not for -- did process, running birds before Labor bird we're Labor is in need of -- at plant unlike lot not the -- only food already stores but stores.

Ben Bienvenu

of luck. Thanks. Appreciate it. Best

Joe Sanderson

Dan. Thank

Operator

Theurer question go with next come Benjamin ahead. from our will And Barclays. Please

Benjamin Theurer

on Hey, Thanks to good XXXX. and levels down Mike. now bit mentioned for wanted grain the volatility that elaborate taking prices have you cost the significantly Joe, haven't beforehand, the into question. come morning back Lampkin, I to little priced obviously, but my and you've a much

What's outcome do obviously important also come link your an impact when whole into it behind pricing? And comes China is very used the you think out price of shipments you on could for the XXXX terms expectation do going to which to dispute think you? to trade corn what to planting fiscal down. with have be and Why turn but the in soy ultimate China, has so down is significantly for

little great. a that feed cost would outlook your on more color be Just

Joe Sanderson

much. need with going how will Yes. lot portion -- fever. variables much would hog one good gone with a I There change they outlook African China herd with left. as a need The is of -- know not China with deal are of to how know don't their don't our I swine many

don't being there need as much they'll down won't won't the be ground need I know U.S. as much with And ethanol soy. they corn use Now, some, in but

yeah, So factors. those two you have

also you crop, an early as of so this well. frost and be to You a that's with have late aware factor

not got Missouri, crop. down with lot going And to so our a but probable corn going excellent And early very have our significantly and pretty bad XXX, has the from plant They to – be have corn. the maybe is I a to maybe exception from contacts had it October telling The were since was was week, And with plus. close us away when all to on Indiana last our run and but are not. Missouri on bit late priced I and those our us, XXX the thinking caveats, thought was Illinois but yield the a now better we much board's We're every was priced better I little planted. decent that we've would drag, yields but because in better, And crop corn. me soy, and getting little right got and weather week. come the everybody we priced with going telling going this we is, reason Ohio board an have not a through are crop is and – frankly,

early So is what deal right an a looking going or right at – being XXXX. now, meal is soy change frost. we're And think now, and we're could looking at don't – I there price it price unless at to corn that's China I same

I for And price we in my same ahead at now Now, bit we price go we basis but the in the corn think bought book little bought and might through same it the XXXX. we soy could cheaper. basis we right a have frankly, soy basically get it XXXX, got and March,

caveat Soy now, substantial. the last week. crop better right And got is

The see or frost so reason them, on over the all lot change be there any booking And I outlook the don't is now. early deal over two world, to all of are soy globe. a the soy right but the might China things

don't – there be to that I lot corn. of any see So a and hasty need we about is don't

And so we feel comfortable.

when start market favorably and billion moving to begins the will this think two last basis there bushels I back when has toward that this we is harvest think come corn, occurs. year, us to maybe from on that

to be I think the So, are don't grain issue. prices going

prices I think abundant a of challenge are. protein more is than grain

Benjamin Theurer

follow-up Okay. question. me That actually brings my to

with you proteins? factor on. a So ago the pork so I just how the competition protein your coming, African be and environment chicken on what seeing year there and pieces still XXXX on I your beef With where just are then considering of on into competing competing couple during competing next fever, into which mainly now XXXX? was expectation disputes guess are into to certain mean, the growth abundant fiscal your do of degree. next for trade And supply and But said in protein you because versus again X.X%, double more obviously months than swine quarter the about lot it expected X% increase of to protein, outlook, many you still moving feel expectations of a just from also what the year but chicken that

Joe Sanderson

think banned is even – although they swine this but affect buy even, We A deal. of this XXXX, lot trade in African tariffs. protein this U.S. to is right than the the is with of backfill there more China going there will from in it, – believe fill has going heavy void China, that in to not, United this in And – if to somewhere has States – there now, we the void is fever more a and certainly somewhere poultry that it is pork if year pork China.

protein if Now, I trade that deal timing dramatic, think China, is to is it'll be there a and but it to will the made. there ships think trade if directly works exactly the – of more more U.S. dramatic, I of be and And XXXX. it deal how African will work benefit is because in and swine it U.S. indirectly if fever, going a

Benjamin Theurer

Perfect. Okay.

there little should to into the bit price? do the chicken going net-net fact it's a that also not be much that XXXX you is more think help will So on that And positive? coming

Joe Sanderson

Yeah.

said I believe X% it's increase to going more production X.X%. XXXX. You in a X% that's in be than

Benjamin Theurer

Okay.

Joe Sanderson

think. X.X% around be is somewhere we It'll what

Benjamin Theurer

X.X? Okay.

much. very you Thank Okay.

Joe Sanderson

Good. Thank you, Ben.

Operator

Research next from Eric Group. question with our Buckingham And Larson will come

Eric Larson

morning Good everyone. Yeah.

Joe Sanderson

morning Good

Eric Larson

question. the taking for Thanks

Joe Sanderson

You bet.

Eric Larson

seeing for we're -- it obviously, we weeks competing go meats dark the what well. but down Is weak, breast periodically last over Joe? already probably consistently three, was answered four helps white again fairly you the but it's know -- pricing pretty think pricing clear we're the us has now out I either this meat as seeing it So, -- been

Joe Sanderson

would nobody cycle past Well, we help, losing I now China would the like money holidays the beef into help five until the last -- right a trade help, year money time. five making losing normally normally. bad that's and year Everybody's and pork cycle shorter a is that into getting any is And did turning the just know This has years cycle. will some a years cycle. we're XX-year and deal somebody We're money of. the with cycle about that's

it any nobody to make in some will but money will what of. know naturally lost point. turn, speak it has never And turn You yet

Eric Larson

Yeah. It definitely will.

of been summer, little doesn't get probably a I one from bit a things thought materialize. So the of you'd think It's summer. the seem you benefit to that which lot cooler maybe

is still So because you've that weight are too -- mistaking you running am heat didn't you just weight your your on running normally I is Or higher do? -- the that? get are

Joe Sanderson

about in started three they in last the and three weights industry over for have here They last increasing March And had heat increased. months And August they The in the have No. April. decreased January, in and but... increased. actually February we months

Lampkin Butts

Texas We now. got heat in right

Joe Sanderson

Yeah.

or We we weight now have we summer. normally lost heat we as hot not Mississippi -- not has It right Texas like as haven't been in it's but any Carolina the Georgia normally in see. or in do

Eric Larson

contributing factor guessing. Yeah. I of little and I'm a definitely bit has that the recent of weakness probably some saw to a that

Joe Sanderson

Well, it we because had and there? July little is USDA. bit Weight bump July not get did get didn't Have down. up the summer. -- it not a Normally this seen go at go I in all weights we we down is.

Mike Cockrell

July Yeah. XX the ago from Well, trend up reversed they substantially and we in February. from and and up, have were flat. ago Weights flat. a January were were that they year June were a unchanged points year but saw

Eric Larson

I'm you Joe, that issue. seen before issues I yet labor. relief of constraints the check be finally, again side checkmarks of any you highlighted believe on And has check and assuming haven't that you still need continues one to new got start biggest okay. off to to a your XX-point I mean plant one have here the a heat been Okay, an then that you've that Good. said that you've off the you

Joe Sanderson

the is now a place there. and have don't of where We where ample to and place steel is construction labor -- there for tariffs you at any build and we correct. now. hiring on There say a are labor there you readily build our locate complex. is or no checklist. is could know you and that That's a look ample too are there want right and is are to the wouldn't of a other if thing -- time. look Contractors many right on favorable the look It's any well is just There things economy or plant things hot not aluminum available not good you not and there

we looking not are but good time to at a where, just it's thinking right We be and this know about building complex a minute.

Eric Larson

Okay, good. Well, thanks.

forward your at Barclays next too. week Looking hear presentation to

So thank then. you

Joe Sanderson

See you then Eric.

Operator

from Our with Jones will next come Please Research. question Jones Heather Heather go ahead.

Heather Jones

morning. Good

Joe Sanderson

Good morning Heather.

Heather Jones

going up BSB, some could is larger with because big a of think that a had have bird much in a So give you how of back plants the to have shift I'll you production come bird on ramping. sense production wondering me year-on-year if to

how So is boneless production do up you have this an estimate for much skinless of year? you think

Joe Sanderson

maybe. X.X%

Heather Jones

X.X%?

Joe Sanderson

Do get just. a have Hang can here. you on see we if you… -- chart me Let can

Mike Cockrell

X.X% for June.

Joe Sanderson

We skinless? that He’s don't I with boneless get talking about Heather. me. can have that

Heather Jones

Okay.

Okay. can that. follow-up I on

Joe Sanderson

the don't plant. -- only have we divisional one Yeah. a Carolina. plant only That's thing is North thing have have big bird You in new the we new the

Heather Jones

big bird. a Yeah, Yeah.

follow-up that. can Okay. on I

Joe Sanderson

Yeah.

Heather Jones

pricing. back a seen to we start question so softness -- dark export going in meat to Then the have see

like some out you have wondering what you you're seeing any markets in? sequential If could softening flush color on specific So that? if

Joe Sanderson

Cuba volume more We're production. were debone not plants but be they are are We're struggling huge more little was XX to dark closed for good. some leg seeing that little a good. seeing country, but meat. quarter continues Iraq for a has they're out closed Mexico XX been is There product there. to a about days. Heather, days, good,

leg packing quarters So they're steaks. and

leg a competing So We… little quarters more out there. seeing we're

Mike Cockrell

We fearing it rage. began Alabama they then and ice not work, rage because Georgia. and coming in ice to with the Mississippi were People rage spread into

is leg And meat the we a normal. quarters earlier there dark that export softened of production than of months couple and and less so think of deboning is market why more

Heather Jones

Okay.

or you that, we to up? tighten nobody see it with all. Joe, up? increased Is mentioned like start any will we direct or And to I you the Is Okay. start cause is going ample supply just losing mean, sticking and thing this tighten to mentioned this to to China? protein whether abundant to money it that's backfilling when that demand see is when

Joe Sanderson

what I That's think.

there in you what think will start at the yeah, if for think I I speculation go $XXX. what And April And it in features August that's look $XX of were I and lean with back April, $XX was a deal see mean, features on and that and $XX May they are and -- on were May, – think. And hogs were China to-date. is pork. $XXX and and plenty fever. trading I all swine the were they African

can move, they and more That's and $XX that's lost they and to much unless have they -- than today can move volume China. and that lost value. least $XX and what leaves then They goes have $XX the -- that at

have huge lot banned. only. U.S. saw and China paying China has didn't banned If I day other import tariff a would right that has they now buy a more. tariff, it the they

Heather Jones

Okay.

be on pork because of your sense that retailer may view? not I to that all concerns next are you other able retail is of that protein it that wanting ample with mentioned you feature decisions sense in your that playing mean, any you availability? retailers And I proteins. do role to they is mean, role how think there all ASF at the is on Then much in side in competing playing year? is a -- the a feature Okay. is

Joe Sanderson

No. I have don't. I that. heard not

Mike Cockrell

Yeah.

-- are thing, we're We have one like this customer and other know. the did people us. say that. next deficit at year saying That don't going they're they was are to off-the-cuff, looking same but They have but

Joe Sanderson

-- also beef weeks. two, last gone they in And has three mean, dramatically up the I price

Mike Cockrell

That's right. That's right.

Heather Jones

Okay.

Joe Sanderson

it more We'll a make plus… little bit

Heather Jones

so you much. Okay. Thank

Joe Sanderson

Heather. you, Thank

Mike Cockrell

Heather. you, Thank

Operator

Go question will Research. with come our Piken ahead. Cleveland And next Michael from

Michael Piken

industry Yeah. could morning. what iterates a trying of a labor that grow be done of the still be in maybe I Good in updates potentially bit in doing a just that volumes? to can in feeds, just little deeper terms understand other bit automation, I'm to there terms might dig with guys how you little work situation place. terms any things tight wanted into the took moving toward of line your

Joe Sanderson

tray We've remember. been to of that some his plants, expenditures, million Mike plants -- of couple of automation was all our $XX the and I capital deboning of made of -- can't that we it -- all about presentation during all our our big mentioned end front bird that pack

now running big our bird in… of deboning are plants All

Mike Cockrell

In one tray pack.

Joe Sanderson

at we of in deboning will plants. and one we year dark In And bird this tray deboning seven meat this pack in done and our plant big five -- complete put we've then that

Mike Cockrell

February.

Joe Sanderson

In February.

We big bird three of to and but know ice plants deboning It tray we go that have with to increasing we our meat we'll to And labor-saving increase all with converting our didn't to pack automation our -- anything go. of, have all two do plants was for capacity dark complete margins. and devices rage. plants just

Michael Piken

we put looking those at? on you time a much much automation? to with per all Can Great. savings say basis, save quantify you roughly regards How by might the you that might how pound you're in

Joe Sanderson

What guided? it? was was What

Mike Cockrell

It at plant. was different every

Joe Sanderson

Yes.

you of them some add -- And the we building add too. building of when -- it had Some to

Mike Cockrell

longer a So payback. it's

Joe Sanderson

payback. Longer

Mike Cockrell

Once that less have year room was for, payback. the than a it newer plants

Joe Sanderson

Yes.

Michael Piken

it? is Where

Joe Sanderson

want don't all away secrets. I my to give

Michael Piken

Okay.

Joe Sanderson

an But last our it was year. raised also payback, increase good employees our for wages in And than hour we then, June, a $XX margins.

Mike Cockrell

XX days.

Joe Sanderson

days. XX I mean,

up there. models in a So we lot got of

Michael Piken

the among that do you That's public And to and do major the than think have shifting if mean, too out Or away And so, from trade you I Breast few over that almost of breast Boneless boneless, helpful. so in to been Boneless the of toward continue on meat skinless a for meat? terms Are curious you Breast. meats away may taste next just many how evolving but dark the play shift like, year? going next see you secrets, a years? Skinless U.S. thigh the meat premium then, trading preferences breed think at Okay. Skinless to genetics yields? there's give to more don't how do we gears,

Joe Sanderson

or bigger legs. thighs told breeder to primary We set bigger have them what's not down and breed

Mike Cockrell

next won't do be to having They year. that

Joe Sanderson

No, that's --

Mike Cockrell

long a It's time.

Joe Sanderson

That's a woody to of but select they a -- of us breast. and told to get to right trying rid now they're And breast long deal, process, rid woody five-year get that's selection

Mike Cockrell

selecting breast mean been bigger meat They've so for -- I for long.

Joe Sanderson

it wouldn't. But,

processing primary fall with for with bigger leg they our do this people. could legs better. better of breast and to a a breeder have might be is will select our this What We that conversation go along kind that and heavier

Mike Cockrell

thigh meat, a But dark won't I demand, popular. is see Michael see shift we good. very meat drastic mean, don't do but this we know It boneless -- I -- be boneless about in do

Joe Sanderson

how doing meat when with many get we -- we of finished pounds deal, We're our are producing? boneless breast

Mike Cockrell

XX million.

Joe Sanderson

X pounds then to -- about boneless of many dark going how be doing then million And we're meat.

dark the dark So is it doing -- demand And, is meat. triple boneless increased boneless still breast is for you're than boneless meat. you're the more well, still for the the for of boneless doing a what demand white lot meat. has absolutely still There dark meat

Michael Piken

All right. you. Thank

Joe Sanderson

Thank you, Michael.

Operator

from Samuelson Adam Our will come ahead. Go with Sachs. next Goldman question

Adam Samuelson

Yes. everyone. Good you. Thank morning

Joe Sanderson

morning, Good Adam.

Adam Samuelson

the to outside I you with -- demands? of a new just and for just being was fever markets, more hoping market. the a protein China, late more get More lot of leg function swine forms leg and So partly talked of quarters, really global even and offshore trying of evaluate are quarters you increase towards redirected though, or export that on that starting finding bit the customers to and a little talk you're less to broadly, about and new new of African side poultry deboning going on weakening to some more softening

Joe Sanderson

drumsticks to shipped -- And are doing quarters dark going different of they're location export. we traditionally producing to, have some some deboning, we're and have more shipped going when Cuba? and we're into those this or the meat Caribbean We leg

Mike Cockrell

Cuba.

Joe Sanderson

boneless bit. it, And yes, for we're actually export think popped I know, it, have divulge other But, drumsticks little I meat got that had, before may few not to deboning. the I going. dark I is there when -- up but got I shipped What's have that's Rather that got and we people are it. that shipping shipped never a never meat some where we we for that boneless started dark markets new

that think quarters, wanted thought when take lean were they a them going they bringing we they into to want company down did had parts. carcasses inquiry deal, -- the deboning and were that was there China China and have -- has hog there be spring, in over bringing cut whole of And we in themselves. they a an a them history breaking leg and rather China to than back actually going And legs, we not

that to sure And so something mean going a we're different. also in so legs deboning that pretty we're would China,

Adam Samuelson

is Tyler with it production color. is fixed the inflation -- kind And stay that I of absorption -- year non-feed mean, temporary accounting pound of high I at of in is the mean, changes costs as Maybe level, guys Okay. per it's costs. how under transitory of more That's about much inflation Mike. bit have. the non-feed of versus this is the on had some we're cost we a then for next more and gears you've versus to you some This other of thinking shifting a helpful base? kind on some the going

Mike Cockrell

the well, of freight by tray, and XX get me, is to full that be Yes, Tyler on back, when would've $X.XX excuse excuse $X.XX that's running you're $X.XXX will flat, in, me baked going absent points spring, -- Tyler. been it or the next And that.

just but -- of that's COGS, And So the then for money that's change, around. the -- and is non-feed-related all of that because in accounting there moving

Adam Samuelson

-- to Your training going down. cost continue go to is

Mike Cockrell

for we've to efficiency know offset a -- permanent. labor be think that's That's yields. We've and we'll SG&A. And we with pound offset that is, hour. able the the $XX $X.XX an We place that some as is were of back, of confident back. we'll And that in already. we get -- we you'll of but Tyler, when get that that -- put all that we're

Joe Sanderson

peaking Your at was on year XXXX. probably it's in other? are And fees, legal decline. won't your It in and fees some point. going things. legal this what we think. be But to year out next going to XXXX, you're maybe stop They're three There were

Mike Cockrell

you legal SG&A, labor In SG&A. fees, ESOP, coming the had the

Joe Sanderson

Advertising.

Mike Cockrell

things. to was It advertising. going three It Not slow... was

Joe Sanderson

startup. Plant

Mike Cockrell

fees more... legal startup, and Plant one

Joe Sanderson

Administrative training. salaries. And

Mike Cockrell

away. And training. to things those are three going Yes, go

Adam Samuelson

Okay. Great.

Mike Cockrell

go Okay, ahead.

Adam Samuelson

Thank Yeah, that’s helpful. you. I very appreciate.

Operator

come Zaslow Markets. with from Please ahead. will BMO Ken question next Capital Our go

Unidentified Analyst

in This regarding lot Ben today. Ken stepping I so [ph] discussed Yes, for know a everyone. is you've XXXX. Hello

terms Just wondering, of cycles? if past you in could frame XXXX

Mike Cockrell

That's hard Ben.

parts, many Joe said If remarks, at his cost in looking to you so a think XXXX. about similar prepared we're moving environment that's very

to versus XXXX Joe of on moving for protein to always so made six pack over world plants that Every chicken exactly right. in parts beginning the cost it's he be said year, time. the a the in and at we've at grain said deficits outlook there. when the margins period highest is turned Every is different. highest was he many And last cycle time your looks year going We how this our prices -- different. so at tray and made depend the years out of

that of know. or is So we don't don't the a guess looking that think saying There know kind to today help I what to fact or be completely inform going is be. grain's of long we know can you didn't where way cycle going

Joe Sanderson

going going that's to market be going to direct -- to we work going on how that said fast China out. hit. on depends to going it's and It's be going And for deal and on and the indirect how -- and hit what to that's to to rise me, It think going the be what how that's XXXX is or that's factor you forward. chicken you to how

Unidentified Analyst

guys. me. very you Thank right. it much for That’s All

Mike Cockrell

You bet.

Joe Sanderson

Good Ben. it. question. Thanks Thanks for asking

Operator

like no turn Sanderson for are any additional call Mr. Joe there back or I'd closing to to further remarks. the And questions.

Joe Sanderson

Good. year look for Thank you in December. we joining to you and our us today results reporting end all for forward

Operator

today's and And you this disconnect. conference. for may concludes Thank participation now your you

Sanderson Farms (SAFM) 29 Aug 192019 Q3 Earnings call transcript