Cal-Maine Foods reported results for the second quarter of fiscal year 2020, in which the egg company reported a net loss of $10.1 million. The thirteen-week period ended on November 30, 2019.
Net sales for the second quarter of fiscal 2020 were $311.5 million, a 12.5 percent decrease, compared to $356.0 million for the second quarter of fiscal 2019. The company reported net loss of $10.1 million, or $0.21 per basic and diluted share, for the second quarter of fiscal 2020, compared to net income of $21.8 million, or $0.45 per basic and diluted share, for the second quarter of fiscal 2019.
For the twenty-six weeks ended November 30, 2019, net sales were $552.7 million compared to $696.6 million for the prior-year period. The company reported net loss of $55.8 million, or $1.15 per basic and diluted share, for the twenty-six weeks ended November 30, 2019, compared to net income of $34.2 million, or $0.71 per basic and diluted share for the year-earlier period.
Dolph Baker, chairman and chief executive officer of Cal-Maine Foods, stated: “We continued to experience challenging market conditions for the second quarter of fiscal 2020. While our sales volumes remained relatively flat in the second quarter compared to last year, our financial results reflect lower average selling prices compared with the same period of fiscal 2019. The Southeast large market average price for conventional eggs dropped 12.7 percent for the second quarter of fiscal 2020 compared to the second quarter of fiscal 2019. At the same time, our average sales price was down 11.5 percent, due to an unfavorable balance of egg supply and demand. Hen numbers, as reported by the USDA Chickens and Eggs report as of December 23, 2019, are 340.5 million, which is 4.6 more million hens than a year ago. The increase in the number of hens continues to contribute to the oversupply of eggs.
“During the second quarter of fiscal 2020, we lost a portion of our sales of non-specialty eggs to a major customer in the Southeast region, representing 4.6 percent of total shell egg dozens and 6.1 percent of non-specialty egg dozens for fiscal 2019. This did not materially affect sales during the second quarter of fiscal 2020. However, we expect our new capacity additions and our previously disclosed plans to decommission some older, less efficient facilities will help optimize our operations, improve our sales mix, and better align our production and sales within the region.”
Specialty egg business
Baker noted that Cal-Maine’s specialty egg business remains a key component of the company’s growth strategy in fiscal 2020. For the second quarter, specialty eggs, excluding co-pack sales, were $109.4 million accounting for 36.0 percent of Cal-Maine’s sales revenue, compared with $120.8 million, or 35.0 percent of sales revenue, in the second quarter of fiscal 2019.
Average pricing for specialty eggs was down by 4.1 percent to $1.88 per dozen in the second quarter compared to the prior-year second quarter. Specialty dozens sold were also down 5.7 percent, as sales of specialty dozens were negatively affected by low conventional egg prices.
"We continue our efforts to position Cal-Maine Foods as an industry leader in meeting future customer requirements for cage-free eggs. We are preparing for the additional demand created by legislation in California, Washington and Oregon requiring cage-free eggs, as well as three other states with similar laws defining minimum space requirements. We have invested over $314 million to expand our cage-free production and continue to make progress with our expansion plans in Florida, Texas and Utah, which will provide significant additional processing, pullet and cage-free capacity upon completion,” Baker said.
“We continue to pursue our strategy to grow our business through selective acquisitions as well as focused expansion and conversion of our existing farms, based on a timeline to meet our customers’ needs. During the second quarter of fiscal 2020, we completed the acquisition of certain assets of Mahard Egg Farm, relating to its commercial shell eggs production, processing, distribution and sales. We are working to integrate these operations into our existing footprint in the South Central region, and we look forward to the additional opportunities to expand our business and better serve our customers.”
Baker continued: “Across our operations, we have remained focused on efficient and responsible management of our production facilities. Our farm production costs per dozen were up 2.3 percent over the second quarter last year. A majority of the increase was amortization expense due to flock rotation adjustments, as we sold flocks early in response to market conditions, and higher labor costs. Our feed costs per dozen have remained relatively flat over the same time period. Based on the USDA’s current yield and harvest estimates for corn and soybean crops, we expect to have an adequate supply of both grains in fiscal 2020. However, ongoing uncertainties and geopolitical issues surrounding trade agreements and international tariffs could create more price volatility for the second half of the year.
Baker said despite challenging market conditions, Cal-Maine will continue to manage its business for the long term, regardless of the volatility in market prices and other external factors it cannot control.
“We are well positioned to execute our growth strategy, and we are committed to making the right investments to support our operations and continue to serve our valued customers,” said Baker.
