Cal-Maine experiences net loss despite rise in sales

Cal-Maine Foods reported a net loss of $16 million during the first quarter of fiscal year 2018, despite seeing an increase in net sales for the quarter, which ended September 2.

Cal-Maine, the world’s largest egg producer, saw its net sales rise to $262.8 million, compared with $239.8 million for the prior-year period.

Dolph Baker, chairman, president and chief executive officer of Cal-Maine Foods, stated: “We are pleased to report higher sales for the first quarter of fiscal 2018 compared with the same period last year, in spite of the ongoing challenges and price volatility in the egg markets. The first quarter of our fiscal year is typically a seasonally slow period for our business. While we are disappointed to report a loss for the quarter, we are encouraged by the year-over-year improvement in our performance. Our results reflect continued solid retail demand and a modest increase in both volumes and prices compared with the first quarter of fiscal 2017. Market prices for conventional shell eggs moved higher over the summer, and our average customer selling prices for all eggs were up 6.8 percent in the first quarter compared with a year ago. Market prices have significantly improved since the end of the quarter and are currently trending well above levels from a year ago."

Egg supply, demand still off-balance

Baker noted that following the 2015 avian influenza-related laying hen losses, producers repopulated their flocks and the younger, more productive hen population produced a higher number of eggs. Total supply still remained high through the first quarter in relation to overall market demand trends.

According to Nielsen data, retail demand has been in line with normal seasonal trends and continues to show year-over-year improvement. However, lower institutional demand for egg products and reduced export demand have resulted in an oversupply environment and created additional pricing pressures. The USDA reports that shell egg exports have returned to historical levels since the beginning of calendar 2017, but are still below the peak levels reached prior to the avian influenza outbreak.

“We are encouraged that the export outlook has improved for both shell eggs and egg products. While overall market conditions are more favorable than a year ago, we do not expect any sustained improvement in pricing until we have a more stable supply and demand balance. The most recent USDA reports indicate the chick hatch has been trending down for most of the past year compared with the previous year, which could influence future supply levels,” Baker said..

Cal-Maine’s specialty egg business

“Specialty eggs, excluding co-pack sales, accounted for 21.7 percent of our total sales volume for the first quarter of fiscal 2018, compared with 22.9 percent for the same period a year ago. Specialty egg revenue was 39.6 percent of total shell egg revenues, compared with 46.7 percent for the first quarter of fiscal 2017. The average selling price for specialty eggs was down 4.8 percent compared with the first quarter of last year.

Included in Cal-Maine’s specialty egg business is its cage-free egg production. The company announced that the demand for cage-free eggs isn’t on par with Cal-Maine’s cage-free egg supply, so it has made adjustments accordingly.

Hurricane impact minimal

While the recent hurricanes that hit the United States following the quarter caused disruptions to Cal-Maine Foods’ operations in Texas, Florida and Georgia, the company did not sustain any material loss of egg production.

“We commend the heroic efforts of Cal-Maine Foods employees across our operations who supported these affected locations and worked tirelessly to continue production under such extraordinary conditions,” said Baker.