Q4 2020 Sanderson Farms Inc Earnings Call
Good day and welcome to Sanderson farms incorporated fourth quarter 2020 conference call today's call is being recorded.
Oh, Okay remarks, and introductions I would like to turn the call over to Mr. Joe Sanderson. Please go ahead Sir.
Thank you.
Good morning, and welcome to Sanderson farms fourth quarter and since growth yearend conference call.
This morning, we reported net income of $27.9 million.
Our dollar and 26 cents per share from.
Our fourth fiscal quarter of 2020.
During the fourth quarter of last year, we lost $22.9 million or dollars and five cents per share.
For the year ended October 31, 2020, we reported net income of $28.3 million.
$1.27 cents per share.
For fiscal 2019, we reported net income of $53.3 million or $2 from 41 cents per share.
If you did not receive a copy of the release a covenant financial summary, they are available on our website www dot Sanderson farms Dot com.
Before we continue I will ask Mike to give the cautionary statement regarding forward looking statements. Thank.
Thank you Joe and good morning to everyone. This morning's call will contain forward looking statements about the business financial condition and prospects of the company. The actual performance of the company could differ materially from that indicated by the forward looking statements because of various risks and uncertainties.
These risks and uncertainties are described in our annual report on form 10-K from the fiscal year ended October 31, 2020, which was filed with the FCC. This morning and in our press release published today.
These documents are available on our website at Sanderson farms dotcom.
You should not place any undue reliance on forward looking statements we make this morning.
Each such statement speaks only as of today, we might not update or revise our forward looking statements.
External factors affecting our business such as feed grain costs market prices for poultry meat the health of the economy and of course, the COVID-19 pandemic among others remain highly uncertain and volatile and our view today might be very different from our view a few days from now.
As stated in our 10-K this morning.
The risks and uncertainties for our business created by the COVID-19 pandemic include continued a worsening absentee rates at our facilities labor shortages, the possible closure of one or more of our facilities and ability of our contract producers to manage their flocks supply chain disruptions.
And for feed grains.
Other changes in customer orders due to shifting consumer patterns disruptions and logistics and the distribution chain for our products from liquidity challenges and they continuing or worsening declining global commercial activity among other on technical conditions.
Thank you Mike.
After natural result for the fourth fiscal quarter and year ended October 31, reflecting extraordinary challenges caused by the COVID-19 pandemic.
And then precedented, social and economic impact the buyers continues to have on the United States.
These conditions have resulted in weak market prices for boneless breast meat and other products produced at our Big Bird food service plans.
On the positive side market prices and demand for chicken products showed a retail grocery store customers remained strong through the end of the fiscal year as more consumers continued preparing meals at home given the limited options far away from home dad.
Overall realized prices from poker products increased during our fourth fiscal quarter compared to last year.
But prices decrease for the year compared to fiscal 2019 feet.
<unk> cost in broad profit were lower both during the fourth quarter compared to a year ago and for the year compared to last year.
Despite the enormous challenges, we and the nation face during this past year the company performed well.
Very well in most respects our net sales from physical 20, 23.5 to six $4 billion and our net income was $1.27 cents per share. We showed record 4.805 billion pounds of hold true products. This.
This is a testament to the hard work up and down the line Mike.
All of our employees at Sanderson farms.
Throughout the last several months, we work diligently to and from that protocol to keep our teams and communities safe and we've been able to shift production to the high demand areas are.
The team at our operations have continued to perform well and have helped defeat American families and maintain the U.S. food supply during the pandemic.
We sincerely thank our employees our contract poultry producers our customers vendors the cash.
Consumers, who buy our products and the communities and states in which we operate for their hard work dedication and perseverance. During these unprecedented times I.
Im so very grateful for everyone associated with Sanderson farms for rising to the challenges of 2020.
As we look ahead, we will continue to focus on executing our strategic plan and delivering the highest quality products and the best service to our customers safely. We are confident in our ability to continue to execute our organic growth strategy and continue to.
Hey, its value for all of our stakeholders.
With that introduction I will ask lampkin and Mike to provide details on the quarter and I will return after they finish to discuss our focus.
During fiscal 2021, and then answer your questions.
[noise] [noise], Thank you Joe and good morning, everyone.
As Joe said overall market prices for chicken were lower during the fiscal year compared to fiscal 2019 in our feed cost per pound for the year were lower.
Then last year.
Trey tray pack market prices during our fourth quarter and fiscal year continued to reflect strong demand from our retail grocery store customers and from consumers, who continue to cook most of their meals at home.
Well the year, our tray pack market prices were slightly lower compared with fiscal 2019, but with the 1.86 cents per pound improvement in our mix. We really are not realized an increase of 1.56 cents per pound in our overall average realized price wood tray pack products.
For the fourth quarter realized capex sale prices were higher by 2.39 cents per pound compared with the fourth quarter of 2019 sequentially realized market prices were essentially flat we remain constructive on our outlook for the tray pack markets during 2021, we.
Added new tray pack customers over the past six months, which should allow us to continue to improve our mix.
Bulk leg quarter market prices were approximately 42.8% lower during the quarter compared to last year's fourth quarter and for the full year were lower by 20.6% compared to 2019.
Barry quoted market prices for leg quarters average 19.5 cents per pound during the fourth quarter and 26.6 cents for the fiscal year.
Total net.
And for the calendar year through October was up slightly compared to 2019, but many export markets have been under pressure.
As a result of the pandemic that said the overall tone for export leg quarters as improved in recent weeks and pricing has moved higher.
Demand from traditional markets, such as Mexico, Vietnam, Kazakhstan in Cuba has improved and that demand is supporting higher prices power demand in China remains strong.
Market prices for boneless breast during our fourth quarter were higher by 2.8% when compared to the fourth quarter, a year ago, but were lower by 4.3% for the year compared to 2019.
Coated market price from Boneless average 97 cents per pound during the fourth quarter and a dollar and one cents per pound for the fiscal year bonus.
Boneless prices remain under pressure as a result of lower demand from and the change in mix of our foodservice customers.
The change in mix for foodservice customers is also reflected in jumbo wing prices.
Our fourth quarter quoted jumbo wing prices averaged $1.89 cents per pound.
Which is up 9%.
From the average of $1.73 cents per pound during last year's fourth quarter, well the year. However, jumbo wing prices were lower by 6.6% from an average of $1.72 cents per pound during fiscal 2019 to an average of $1.61 cents per pound during 220 20.
The current Urner Barry quote for Jumbo wings is $2.10 per day.
Our average sales price for poultry products during the full year was lower by quarter per cent per pound compared to last year decreasing point for 14 EPS of 1% for the year ended October 31, 2020, when compared to the year ended October 31 2019.
The full fiscal year feed cost in broilers processed were lower by just under two cents per pound or 3.4%.
For the fourth quarter, our overall cash costs were grain delivered to our feed mills were higher than last years fourth quarter.
Sales were corn delivered during our fourth quarter were lower by 15.2% compared to last years fourth quarter.
Soybean meal prices were higher by 4.7%.
Our feed cost per pound enrolling flocks processed however were lower by three cents or 11.8%.
During this year's fourth quarter compared to a year ago.
During this year's fiscal quarter, we processed 1.259 billion pounds of dressed poultry and sold 1.252 billion pounds. We.
We processed 8.842 billion pounds during fiscal 2020 and sold 4.805 the file.
Looking ahead to fiscal 2021, we currently expect to process 4.863 billion pounds of dressed poultry during 2021.
Which would represent 8.5% increase in sales process compared to 22 any update.
Approximately 2.72 billion pounds or 56% would be processed at our big Bird food service plans, and 2.14 billion pounds or 44% would be processed wood tray pack.
If we run our plants as expected those pounds would be processed as follows.
1.127 billion in Q1 1.215 day in Q2 1.265 billion in Q3.
And 1.256 billion in Q4.
These estimates reflect our intent to keep our big bird plants below full production at least through the first calendar quarter of 2021.
As we expect foodservice demand to remain under pressure until markets returned to some semblance of order.
No.
These estimates also reflect lower bird weights at our Hazelhurst, Mississippi plan as we ship product.
At that plant from foodservice, but tray pack.
Of course as always these estimates are subject to change as real result of weather changes in target live weights market conditions and other factors.
Like Joe I am grateful for everyone associated with Sanderson farms.
Employees growers customers and vendors and look forward to the new year.
At this point I'll turn the call over to Mike for a discussion of the quarter's financial results.
Thank you Lampkin and good morning, again net sales for the fourth fiscal quarter totaled $940 million and that's up from 906 and a half million dollars for the same quarter during fiscal 2019.
Increase in net sales for the quarter reflect an increase in realized prices for poultry products of 6.5% offset by a 1.1% decrease in pounds of poultry sold compared to last year.
Cost of sales of poultry products for the quarter ended October 31 decreased 3.2%, reflecting a slight decrease in pounds sold and the lower cost of feed and broadridge process during the quarter offset by an increase of 2.58 cents per pound and non feed related costs.
For the fiscal year net sales totaled 3.56 billion up 3.6 billion from 3.44 billion a year ago.
Our cost of sales for the year increased 6.7% compared to a year ago and totaled $3.37 billion.
The average cost per pound in our poultry business increased 1.72 cents or 2.7% compared to last fiscal year, we flein, reflecting higher non feed related costs offset by lower feed costs.
Non feed related Cogs were 42.72 cents per pound during fiscal 2022.
Two and a third cents per pound compared to fiscal 2019.
Non feed related line calls, we're three quarters a percent per pound higher compared to fiscal 2019 on higher chicken costs and lower all fall returns.
Labor cost in our processing plants were higher by 1.2 seats excuse me 1.26 cents per pound fixed costs were higher by 30% in pounds and other costs were higher by <unk> 0.13 cents per pound, primarily as a result of $23.7 million.
Average book to Cogs from Kobin related expenses.
We saw 31.2 million fewer pounds of prepared chicken during our fiscal year, a 24% decrease but our sales price averaged 1.68 cents per pound higher which was almost a 1% increase.
EPS DNA expenses for fiscal 2020 were lower by $5.4 million compared to 19, due primarily to a decrease in training expenses and startup cost associated with our Taiwan facility.
Offset by increases in professional expenses administrative salaries and $12.7 million in co bid related expenses booked SGN net.
For fiscal 2021, we're modeling $220 million for SGN net.
That estimate does not include any approvals from bonus compensation plans or the sop, both of which depends on profitability and will consider whether or not to add approvals from that as we move through the year.
We estimate SG M&A expenses of $51 million in Q1 $53 million in Q2 $56 million, Inc, Q3, and 60 million in Q4.
We've included in these estimates $6 million each quarter for continued co bit 19 related expenditures, which relate primarily to our own slight medical clinics and our continued deep cleaning of all of our facilities.
At the end of the fiscal year on balance sheet reflected stockholders' equity of $1.419 billion and net working capital of $354 million.
For the year, we spent $202.4 million on capital improvements and paid $31.1 million in dividends.
For fiscal 2020 interest expense was $5.2 million, an increase from the $4.2 million of interest expense last year.
We had $25 million in long term debt on the balance sheet at the end of the year.
Our effective tax rate was 273% and I know that sounds strange, but as I explained last quarter, we had discrete income tax benefit due to the cobot related care that.
Absent those discrete income tax benefit our effective tax rate would have been 21.3% and going forward for twist for fiscal 2021, we're modeling a 24% tax rate and that will be exclusive of any discrete items.
We continue to be well capitalized, enabling us to invest in our business and pursue pursue organic growth opportunities to drive value for our company.
We expect our capex for construction maintenance and special projects during 2021 to be approximately $163.8 million and to be funded by cash on hand internally generated working capital cash flows from operations and as needed liquidity under our revolving credit.
Credit facility.
That totaled $10.1 million as for the New Hatcheries Jones County, Mississippi that we're building to replace and expand the hatchery. That's currently serving mall.
24, excuse me $12.4 million from vehicles $28.5 million for large scale equipment and building upgrades at multiple facilities and 112.8 million for annual maintenance.
The company has a 1 billion dollar unsecured revolving line of credit.
Which $949.8 million was available at October 31, 2020.
Our depreciation and amortization during 2020 was $156.8 million and we expect approximately 172 million for fiscal 2021.
We're breaking that down and modeling 41.3 million and depreciation in Q1.
43 million in Q2.
43.8 million in Q3, and 43.9 million in Q4.
With that I'll turn the call back over to Joe for comments on grade and thoughts about 2021.
Thank you Mike.
Our feed cost per pound during fiscal 2020 were lower by just under a cents per pound compared to the previous year.
And this represented the eighth straight year of lower are relatively flat feed cost. However, given current estimates regarding the supply of feed grains and increased export demand for both corn and soybeans.
We now expect that trend to end and 2021.
We had locked in prices for all of our needs for fiscal 2021.
Including what we had have already priced at current values.
That is infusing new Chicago Board of trade contract prices for current and future needs as it closed last night.
Our cash cash cost for grain during fiscal 2021 will be a $193.2 million higher than during fiscal 2020.
Nice down 2020 volumes.
You ask da's estimates for the carry out of both corn and soybeans, but a 20 2021 craft beer have both tightened considerably since August et.
As a result of challenges.
What's a 2020 crops in the United States.
Corn and soy meal basis values have also moved higher.
We have our basis for both corn and soy meal ball true Mark and we have priced our corn and soybean meal needs through December.
As always on this year end call I'll share a few things were watching closely as we start the new fiscal year from.
Sorry.
Well keep an eye on the South American corn, and soybean crops as of today expectations for those crops in Brazil, and the rest of South America are cautious as our pockets of dry hot weather.
In South America. It is still early but we will keep an eye on those crops.
Of course in Canada, so crops will affect export demand for domestic supplies Jack.
Second we will watch the United States planting intention reports next March.
You ask yeas current estimates as a corn acres will be essentially flat at 90 million acres in 2021, well shortly and acreage will increase 7% to 89 million acres. If realize these acres would be the second hatched acreage on record.
And would be consistent with strong export demand lower ending stocks and higher prices.
Third we will watch chicken production numbers, you Ashkar estimates that the industry will produce approximately 1% more pounds of chicken during calendar 2021 compared to 2020.
Looking at egg sets chick placements pullet placements and the size of the hen flock, we believe the U.S.G.H. bass from it is reasonable.
We will of course also be watching chicken markets.
Market prices for boneless breast meat produced at our Big bird plants for the foodservice market have moved counter seasonally higher over the past few weeks. The same is true for dark meat prices.
However, we expect demand from foodservice customers to remain under pressure.
Well the Cove and vaccine is widely distributed.
Consumers feel comfortable going up to eight again in large number.
We will also be watching global markets as export demand continues to face pressure in key markets such as China.
That said, we are encouraged by reports of a chicken Sandwich war in 2021.
And the QSR market and we wish you all the participants much success.
As Lampkin said, we feel good about retail growth in demand going forward volumes during 2020 reflected the shift in consumer demand away from foodservice and toward cooking at home and we expect that trend to continue.
We start fiscal 2021 in good shape.
Balance sheet is strong our operations are performing very well our sales team has done an outstanding job, placing new business and continues to do so and we are well positioned to continue to execute our strategic growth plan. As noted we have a high degree of confidence.
So our strategy, our financial position and our ability to continue to deliver shareholder value as a result, our board of directors recently increased our annual cash dividend by 48 cents, a share and extended our share repurchase plan.
We continue to evaluate a site for our next phase of growth.
We are optimistic we'll be able to an EPS that site and start work on that project here in 2021.
Well, we never try to predict the chicken markets. There are reasons for optimism as we move into calendar 2021.
Hopefully consumers will feel more comfortable dining out much to covert vaccines become widely available.
And demand will begin to rebound.
That together with announced plans for a large QSR participant to push a chicken sandwich should support higher boneless breast meat prices during the new year.
Regardless of foodservice demand, we expect good retail growth in demand to continue into 2021.
As Lampkin mentioned, we've picked up from new business through the summer and fall and that will improve our sales mix as we move into the new calendar year.
I want to close by again thanking our employees and contract producers for their work during this past year their resilience dedication commitment to their responsibilities as a central workers and their performance under challenging conditions as nothing short of or.
Mark will it.
It is my honor to be on the team.
And they provide reason to be optimistic as we move into the new year and continue to grow this company with that we will now take your questions.
Hi.
Thank you we will begin the question and answer session. That's a question you May Press Star then one on your Touchtone phone.
Using the speakerphone, please pick up your handset before pressing the keys.
At any time and your question has been addressed and do we'd like to withdraw. Your question. Please press Star then two please.
Please limit yourself to one question and one follow up.
First question is from Ken Goldman from JP Morgan. Please go ahead.
Rebounding.
Thank you good morning.
I wanted to ask you Joe you.
You talked about some reasons for optimism you mentioned the potential chicken Sandwich War.
[music].
Broadening it out to foodservice in general are you hearing or seeing any signs that foodservice customers.
As they look toward what hopefully will be a much better demand summer for them are.
Are you hearing about any of them starting to ask to build inventory are asking you to build inventories for them or is it just too early to even think about that.
It's too early.
We have no.
We are aware of.
The one one.
Major QSR.
Our test mailing inventory just one.
And preparing for their rollout of a chicken sandwich, that's only one day were aware of.
And but nobody else.
I don't think any of that's going to happen until the.
The vaccine is widely distributed in.
And and.
You know people start going out to eight again, but the thing weve been waiting on and we have talked about the resolution.
Joe This is a vaccine and now we have it and it's going to take time for.
To get people to take it weighted we don't know how many people are going to take.
I think that has a question.
Yeah that makes that makes sense and then.
I wanted to follow up on your comment that you.
You felt the Ustašas to me I think 1% increase.
Our 1% increase in chicken supply this year from the us.
Are you disappointed Joe let the industry Didnt cut back more.
I think you are maybe a little more optimistic a couple of quarters ago I'm not sure it came in.
Sales of the cutbacks as you expected I just wanted to really follow up and get your thoughts on how things played out versus what your your.
Your anticipation of it was.
No.
Okay.
There was a cut back.
Uh huh.
Well I can't remember if my numbers now let me share.
They're very small, they're putting them up on the screen farming and they're so small I can't read them.
But.
If you look at to February.
Chick placements for the U.S. total they were running at 190 to 191 million share.
Chicks a week in February and March.
And then and.
Oh.
I I tell you more recently, they're running 187 188, but in March they were cut back to 186.
So that's.
Net debts cut back we have but I'm not disappointed and I have no idea what the industry is going to do and.
The industry is going to respond to profitability and demand.
My guess is that true factors.
And fast food people have not cut it all and the paper that did cut we're big bird debone ownership or selling boneless breast for.
77 cents a pound right now.
And we're selling leg quarters from Glencore prices are up that day adventure leg quarters for.
18 cents.
17, 18 trench power from their up substantially from January Lampkin report that momentum.
But I'm not disappointed.
Great. Thanks, Joe.
Thank you very much.
The next question from Peter Galbo from Bank of America. Please go ahead.
Hey, guys. Good morning, and thank you for putting in question.
You bet.
Joe and Mike I, just wanted to ask John on the cadence around around Green costs. Certainly a question that we're getting this morning, I think last quarter you had talked about that you would really see more material increases in grain cost and maybe your your fiscal second quarter EPS as it will begin to roll through I just.
Wanted to see if that was still kind of the case or if your thinking changed around that.
Yes, I mean I think so.
We actually.
The unit costs for corn delivered to our feed mills during our fourth fiscal quarter was actually down a little bit chickens that eat that the will be processed in Q1. So the full impact of the higher grade and second point, you'll have a blended that's right you will have a blended in the first quarter.
Yes, it will have some of the new prices from some of the oil price actions, but in the second quarter you will see the.
Right.
The new.
New board price.
Got it thank you for clarifying that.
And Joe I wanted to make sure I was remembering this correctly or I guess in in the early months of 2020, particularly in some of the markets where were you guys have your operation. It was particularly warm end to end. The chickens had gained a lot of weight, maybe more so than normal just as we think about modeling.
Now ill potential pounds processed and.
Within the context of your guidance.
If we have a more normal.
Normalized winter right, we kind of just.
Revert to the mean.
Is there a possibility that you would be a number and maybe even your own number is it's a bit too high production standpoint.
Our our art white.
Yes.
So, yes and no.
That's a number that that lampkin threw out we model our target live weights.
It's always subject to.
Weather and fluctuation in last year's first quarter was extraordinarily mile and we did have our weighted across industries line.
Yeah.
You're going to wait close though.
Trying to remember what I cant remember last year.
Yes, I think Mike. These numbers are good and we do that either yeah. They are always subject to.
Fluctuate.
Okay that is that first quarter is she talking about.
Yeah, I don't have right on the money right now.
That way should run from money.
Got it okay, great. Thanks, very much guys have and have a great holiday.
Thank you you too.
The next question is from Ken that flow from Bank of Montreal. Please go ahead Mike.
Everyone Mike.
Good morning, Ken.
Just two questions. One is how much pricing question can you take on press me was created Michael that.
Yes, when you look back at it.
You bet.
All other restaurant flow.
Distributor orders.
Down 60% when it started and then Andy.
Zimmer this deal down 28% to 30%.
And if you look at it if you look at the items the distributors by.
Boneless breast wings and tenders.
Boneless breast.
Right now is all 31% and volume.
Weightings income wings are only off 6%, 14% so not.
Not only is there more pressure on.
There's pressure on all foodservice products because of the restaurants are closing.
But also you got.
More demand from wings and tenders than you do for boneless breast.
Hi, John better it got better this summer, but right now you are in the midst of mower flow.
Growth.
In different parts of the country is not New York levels and I can't serve in straightening mower, California flow throughout we close.
And it's all told me every bit of Gulf Wood.
So you see that pricing would be well into the dollar <unk> dollar 20 dollar thirtys without if coal wood came back and then.
If we get the vaccine and everything kind of goes back to normal is that a fair expectation there.
There's no way to know what it would be I mean, if we didn't have coven it'd be better than what it is now.
No telling.
What it would be there's still a lot of beef and pork and.
Chicken up there.
But you know without covert it would certainly be better than what it is.
Okay and then my second question is.
As you prepare for coming out of coal that what are you guys going to do in terms of your mix. We you keep the mix when you start shifting that the big Bird how do you play that out and what will be the cadence of that what do you need to look for for the milestones and I'll leave it there and be well guys.
Thank you where.
We will we would not be able to move a little harsh.
Back into big Bird because of.
Right now, we need net product and our tray pack plants.
Lampkin and the sales people.
Have a sold from additional tray pack products net.
This fall and as of right now, we need that product and the tray pack plants.
We can add back and we would add back.
Where when we're at a reduced level instead of running a million 300000 birds a week.
At our.
Day bone in plants, where in a million 200000.
So we would we would immediately.
Take don't back to normal production level.
And that would be the first step would do well, we I don't believe Weve take Hayes will have no what as long as we keep zone right right.
Oh, we need that Evan.
We need to get product out of Hazelhurst that are.
Correct that plant.
Yeah.
The next question is from Ben BN and Neil from Stephens incorporated. Please go ahead.
Hey, guys. Good morning. This is Scott.
Who are on from.
Steven.
On for Ben good.
I just wanted to get your thoughts on freight cost what are you thinking about freight costs for a slide 21 at the moment do you think this is something that we need to be mindful of as a cost pressure potentially.
I don't think so we've got a sheet.
Britain, reducing net.
It's up a little bit.
[music].
It's not a lot.
It Oh.
Well, we have quantified that.
But it's not a huge.
Now.
We checked on that after.
Uh huh.
The.
Third quarter call.
Net was not a huge issue.
It was.
Mm Hmm Britney share.
Just yeah.
Yes, I mean, there is now I don't think they wear out for bid right now on a.
Good day, the 2021 net for our carriers.
And.
So I don't know, what we're going to see but she didn't think it was going to be.
Our manager of logistics did not think it was going be.
A huge increase yes to answer your question I don't think is anything to be concerned about maybe pay attention.
We were flat with 2019 on a unit basis.
For 2020.
And of course, it was up in 90 compared to 80, but its not going to be as just on the uptick now the issue was not fuel it was.
They are.
Age of the drivers and the.
Availability of the driver.
Was the issue and.
We contract I was out for the year.
So we don't use spot drivers so.
We don't run into net we don't expect to see a huge increase in grades.
Thanks, Amy right in line.
Yeah Yeah.
Driver pay will improve and driver.
Well, we'll be through with our bids and we'll be able to quantify that data volume fourth quarter call.
Okay, great. Thank you I just wanted to ask about from so.
Supply indicators that we're seeing just wanted to get your thoughts on on the pullet placement numbers, which have been up quite a bit we're particularly interested just given the fact that weekly sales numbers are declining.
Do you think it's fair to characterize what went on.
More short term in nature.
Just given that production is still expected to be up next year.
<unk>.
We are we have our doubts about the September pullet placement number.
We we believe that is a five week.
Number instead of a four week number which it normally is.
And matter of fact, we know that.
One of the.
One of the primary breeders reported a five week.
Area instead of a four week period.
ER, that's the largest number that's ever been published.
We don't think theres enough pull it housing.
Out there to and the in the industry to house.
And four weeks 9.7 million College.
So we are.
That's the only one I have any doubt about the rest of them I think are pretty accurate but.
But that 9.7 September number is not a I don't.
Mike.
Uh huh.
Right.
The next day the October one I'm comfortable with that one.
But.
If you go back and take these and look at the level ability.
The postage.
Well it mortality is.
Running very high and that's because.
The Pulitzer not been vaccinated.
And.
They're not using antibiotics on the.
Pullets.
Because.
They have from the half from the breeder.
What are your Fox or mail and people are taking share with males and using them.
As in their growth division and if there if there are no no antibody program.
They don't want those males to have.
Any antibiotics.
So additive because of that they're not using momentum on the Polish.
Oh, there you get a heavy mortality on poach.
And so I think there's an element of placing more pullets cause a lot of them are died.
Got it thanks for the color I appreciate it guys I'll get back in the queue.
You bet. Thank you.
The next question is from Michael Piken from Cleveland Research. Please go ahead.
Yeah. Good morning, I, just wanted to get a little more detail on your proposed new facility up in terms of is it going to be a big bird plants tray pack I would imagine then how do you ultimately you'll in light of Cove, it or whatever you want to have a different long term net between retail and food service.
It will be at a retail plant.
We will incorporate some of the things we've learned about covert and.
Ventilation man one of them Oh.
Expire exchange.
Some spacing employee sat.
Separation spacing in some areas, where we don't have that now.
And.
No those kind of things.
Oh.
But it will be a tray pack plant.
Okay, Great and then in terms of your long term net Mike you want to get closer to 50 50, or historically, you've been closer to like 60 40 between Big Bird and tray pack do you have sort of an ideal mix your target or do you think we're going to see kind of more people eating at home you know even after vaccine or is this Joe.
Because the profit in your estimation.
No we think we.
We don't we still believe the people are going to go out to eat.
When they feel comfortable doing that.
We're just in a period right now.
Uh huh.
After 2014, 15 and 17.
All of the people in the protein business.
Beef pork and chicken.
Made a lot of money.
And as a result of that day all expanded all three.
Industries expanded and draw from that profitability.
And so we're in a period right now in 18 19 and 20.
Of expansion.
So you've got a lot of protein, which will resolve at some point.
And.
But we.
We believe that.
When.
People are vaccinated.
And feel comfortable going back half day, they're going to go back out to eat.
They're not going to stay home I want to go back after they all go back into New York.
And go to the two or three restaurants up there that.
I like to eat where I like to eat and.
Moving on call model.
[laughter] go nowhere I like to eat up there.
You know my based on the numbers that we were running right now and that might be described where we'd have a mix of 40, 56% big bird and 44%.
If you built a new tray pack plants and move Hazelhurst back paper there are lot of EPS in this space, but if you did that you are really out of your mix is then going to move to 43.
Excuse me 45.
43, 43 or things like that it's just not going to be a big shift because you're going to moving hazelhurst back in big bird.
It was it was built to be a big bird plants, Scott to grow out.
So if you ultimately moved it back and build the new tray pack is not moving.
<unk>.
Yes, well we're comfortable net.
And then you know a big burden has been a day bone in had been the most profitable segment.
For 20 cents from mid Nines that's.
That's 25 years.
And so we're very comfortable but.
Uh huh.
Good day.
Joe going way the case.
And but where we need to be into market segments.
We can't just be a player and one.
[music].
Oh right now tray pack is excellent.
And.
We're in we're in the right mix.
All right. Thank you.
Thank you.
[laughter] from next question is from Ben Hur from Barclays. Please go ahead.
Hey, Good morning, Joe Mike I'm Kim.
Good day Paul.
Hope you're doing well so just a quick one could you elaborate a little bit on what's driving your your EPS GMI outlook up by 70% next year in particularly the spike into.
Q in Fourq is that cost you assume that's going to be related to forward. When you plan to do every day, which one to announce in the first fiscal off and then basically started up.
To see some startup costs during the second top or what's driving that significant increase.
There won't be any startup costs.
No I mean looking at 2021 compared to 2020.
I'm not sure I'm following what your question was but in.
Yeah first quarter, we are we're estimating $50 million in 2021, we had 49 and a half million dollars last year. So there's not a big move there.
And.
No for the year, you're a $40 million, but most of that is Kobe 11, they invest coded.
Yeah, and we've increased our travel.
No watch Cove it wants to vaccines in place, we'll start moving around a little bit I'm traveling so cold dinnertime, yet it's almost all from Sol Kobe 11 on 14 day.
Okay. Okay, that's basically incremental coal that was already covered last year, but still still upon on that okay.
Okay, and then Bob you've talked about that export markets and wanted to follow up if you could elaborate a little bit on what youre thinking of the impact from hypothesis, <unk> and Europe and Asia is having on the export demand because you said there was being relatively positive sign so one of the check if that's related.
To some of the issues in Europe and Asia.
Oh, we think those issues.
Could create some opportunities from 2021, we really haven't felt that directly any demand from that directly.
The kind of what you got booked in January our price in November our export products, Scott as low as 21 cents delivered four.
And 20 and below Fob plant shipping into Mexico and.
And those prices have improved.
Oh, they improved to 24 25 cents in December.
And Oh, we're beginning to quote higher than that for January January shipments.
Our export people believe it.
It's a mixture of things it's the dollar the <unk> dollar is a little weak and that always helps exports.
We for some reason right now demand in Mexico is better.
And then most most big bird debone or cut back for the holiday So you've got less a little less supply.
And it's been that way for half of December going into new years.
And so you got a little less supply from an improved demand.
Some of the export markets, we ship to Cuba, Mexico, and even China or maybe aren't as China's steel in the mix. So the.
And then he had any books from 26 cents, Yes January yes.
Okay, well I hope that answers. Your question, we we're still benefiting from China by Dark me to say that last year, they didn't buy it at all.
And that's really the only thing with moving but other than this what's going on in Europe.
With hogs and they are it's a it should be a plus four from next year.
And you've seen some some more demand out of two are correct.
Yes.
Okay.
Perfect.
That's it thank you very much congrats and happy holidays. Thank you same to you.
The next question is from Adam Samuelson from Goldman Sachs. Please go ahead.
Yes, thanks, good morning, everyone.
Hey, Adam.
Hi.
So I guess first I just wanted to owning a little bit on the non feed cost part of Cogs, and just thinking a little bit.
Better handle how you're thinking about that specifically with some of the lower utilization in the big bird plants and the first part of the year.
Yeah, so not the non <unk> your plant costs are going to be up a little bit because Q1, you got two things happening.
Well have a.
Labor.
And wage increases and our plants are effective January one.
ER and then by not running full.
Uh huh.
You will have increases what's your depreciation have you calculated depreciation and purchase.
Yeah.
It's a hassle.
Sure.
Our cash burn.
From the start of a center pound.
For the year.
Uh huh.
Hi.
No I'm talking about 21, Oh, you can calculate 21 yet.
Uh huh.
Oh.
Well, if you're everything and.
Uh huh.
What about your labor and 21.
Exactly that it okay.
Okay.
Yeah.
That's going to be up some light your labor is going to be a depreciation going be a.
Until we get back to around a million sorry.
Okay and is that offset by maybe a little bit lower cobot related costs as we get into the spring selling on a full year basis, you can kind of hold the line or is that just the whole non feed kind of buckets still or do you have in there I. Just saw you you have $11 million and free cash in this DNA.
Yeah, It's just you and I.
And is that the cleaning and the nurses and the nurse or stations with <unk>.
That's going to be the whole year.
Got it.
And integrate them well.
Yes, yes.
We put that and we've put nurses' stations well, we already had nurses at the plant we put an additional physical nurses station at every plant.
To screen, new employees coming to the plant.
From bad flu shots.
We're screening for.
Corona virus and flow for new employees coming to work.
We're providing flow shots from.
For everybody and.
And were preparing.
Hopefully to give cohen.
Vaccination range.
When that becomes available we think in March or April.
Oh, we had we were less than 10% of our employees.
The flu shot.
We've been we've now we have we've had a program.
Where they all of our employees have been.
Then had a doctor or on video and own or App on their telephone.
Explain there were a lot of misconceptions, we determined by interviewing our employees.
They didn't take flu shot show, we had a doctor.
A draft so its misconceptions.
So now we've had another seven or 800 people.
Text flow shot.
We do not want that to happen with the Cove in vaccine.
So weve built these nurses stations.
And we hope more than that will take us covert vaccination.
So that's that's the source of.
Somebody noted that our EPS.
[noise] ASG DNA was up.
14.
Yeah, that's part of it.
Depreciation is going to be up for the year of 15 million and 2021.
[laughter].
Okay.
Okay. That's all that's all Inc. Incredibly helpful I'll stop there, how well how happy holidays.
You too Adam Thank you.
The next question is from Robert Moskow from Credit Suisse. Please go ahead.
Hi, Thanks.
A couple of quick ones I.
I think you said, there's some counter seasonal price behavior going on right now and at retail also.
Should I expect retail pricing to stay kind of flat in the current quarter sequentially.
Sure tray pack pricing typically go down sequentially in first yeah can you help me that I had a quick follow up yes, and they will go down.
They were I wouldn't be I, I haven't seen anything, but I would not be surprised.
If a November December.
I don't know about January January that could go up that November December.
Uh huh.
For two weeks each of those much.
The week before Thanksgiving the week of Thanksgiving, a week before Christmas week up thanks.
Personally.
[noise] day, then were cut back a week or a day, but.
But it wouldn't surprise me if prices are down.
For two weeks each of those too much.
We just don't.
Have any show net january might be different.
And by wants to run chicken after person.
Right.
That's just has you still below breakeven for from first quarter and and I just want to since from this quarter was such a positive surprise because of the mix I'm just trying to get roughly like Mike.
Taking into account that your feed costs are probably higher and then their seasonal impact on pricing you know.
Do you think it will be close to breakeven in the first quarter.
Well done really well.
Tell me, where we are operating very well, but we.
You have the headwind of.
Turkey, and I am Thanksgiving and Christmas.
And we don't really hadn't hit yet we're going to have the headwind of these higher grain prices.
In addition to this quarter is always our most challenging quarter.
It it we're not going to.
Well, we're operating well.
<unk> grow at good plants are running well we are as this.
Nobody has asked EPS, but I'll report it.
As east Coast vacations rise and the United States.
And as a REIT as a.
Come more numerous and Texas, Mississippi, Georgia Carolina.
Louisiana.
We are having more and more cases in our.
And and our employee base.
We're still running.
And we're still running at our capacity.
But.
Where it had been more instances of absence age now than we had.
All summer are back in the spring.
And it's becoming more of a challenge for US right now and is bench. This.
Pandemic started.
Right now we're okay.
But oh.
We haven't had any breakout at any plans.
But we are having more absenteeism we've had since.
Section dish and demo the game.
Okay, I'm, sorry to hear that all right well. Thank you very much. Thanks.
Thank you.
The next question is from Eric Larson from Seaport Global Securities. Please go ahead.
Yeah. Thanks, guys happy holidays to you and Oh Hope you <unk> you know how heavy he'd be good season here. So my question is Joe you guys always lock in your basis at the beginning of the year. So what is your basis on corn and beans for for 21.
We we locked in through March was not available or past March.
We locked it in early.
And right now it looks really good compared to what is out there.
Now basis has strengthened considerably.
From where we purchased it Oh.
I hadn't gotten a quote or we will get a quote every week just to see where it is but it's much higher than where we price it.
It's a solid basis is a little bit higher than a year ago.
Corn is.
A little bit lower than a year ago, where we bought it.
But now it's it's much higher than.
Well, we bought it and it's higher than it was a year ago.
Okay.
So you took advantage of some some good market opportunities I mean, that's that's great. So.
Well your second half be be more.
Just point, you think negatively impacted by grain cost versus let's say your first half.
Mike.
ER it depends on the South American crop if China.
Historically, they start buying out of South America.
In January February March when net no product becomes available. It also depends on the current.
Currency exchange rates.
Ray all versus the dollar.
And.
It it you know their line moving arch.
That Brazil, the crop in Brazil, right now looks okay.
The crop in Argentina is a little.
A little more challenged right now and next two weeks look fine from Brazil.
There's a lot of Nino event going on in a specific and that's what causing the weather questions in.
And it.
<unk> Mi spotty it just not a.
It's not it doesn't do the profit just cause them not to reach their full yield.
Sounds good I know were short a time, thanks, guys have a great holiday season. Thank you Eric appreciate you too.
[noise] [noise] Wood concludes our question and answer session I would like to turn the conference back over to Joseph Anderson for any closing remarks.
Good thanks, everyone for bad weather day, and on behalf of everyone at Sanderson farms.
We wish you all happy Hanukkah, Merry Christmas and a happy and safe new year.
[noise] Conference is now concluded. Thank you for attending today's presentation you may now disconnect.
[music].