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Cal-Maine 2017 Q1
Photo by Andrea Gantz
on December 27, 2016

Cal-Maine reports net loss of $23 million for quarter

During second quarter of 2017 fiscal year, egg company saw profits turn into losses amid challenging industry conditions

Cal-Maine Foods during the second quarter of fiscal year 2017 reported a net loss of $23 million, compared to a net income of $109.2 million during the same period during the previous fiscal year.

The company also reported a 53.6 percent decrease in net sales for the quarter, reporting sales of $253.5 million. The quarter ended on November 26.

Dolph Baker, chairman, president and chief executive officer of Cal-Maine Foods, Inc., stated, “Our results for the second quarter of fiscal 2017 reflect extremely challenging market fundamentals in the egg industry. Following the 2015 avian influenza (AI)-related laying hen losses, USDA data shows the egg industry has repopulated farms with laying hen numbers beginning to approach pre-AI levels. However, market demand trends have not kept pace with the higher production levels. While retail customer demand has been steady, egg export demand has not fully recovered following the aftermath of the AI outbreak.

“We have also experienced reduced demand for egg products, as many commercial customers reformulated their products to use fewer eggs when prices spiked, and have been slow to resume previous egg usage. Together, these factors have created an oversupply of eggs, and prices have fallen dramatically from the record high levels last year. For the second quarter of fiscal 2017, our average customer selling prices were down 50.7 percent from the same period of fiscal 2016.”

Baker added that while the egg market has been in an oversupply situation, recent USDA reports show the chick hatch has been down for three consecutive months over prior-year levels. As a result, Cal-Maine Foods expects to see a moderation in the size of the laying hen flock. Egg prices have also risen sharply since the end of the company’s second quarter.

Cal-Maine’s specialty egg business continues to expand

“We remain focused on expanding our specialty egg business, especially cage-free eggs,” said Baker. “We have made significant investments across our operations to meet anticipated demand, as food service providers, national restaurant chains and major retailers, including our largest customers, have stated objectives to exclusively offer cage-free eggs by future specified dates. While we expect this multi-year conversion will be a disruption for our industry, we believe it provides an opportunity for Cal-Maine Foods, and we are working closely with our customers to achieve a smooth transition.”

Cal-Maine’s latest joint venture to produce cage-free eggs with Rose Acre Farms in Texas is on schedule to reach full expected capacity in early calendar 2017.

Also, during the second quarter, Cal-Maine Foods completed the acquisition of the assets of Foodonics International and its related entities doing business as Dixie Egg Company, relating to their commercial production, processing, distribution and sale of shell eggs business.

The additional production capacity and the inclusion of the Egg-Land’s Best, Inc. franchise with licensing rights for portions of certain markets in AlabamaFlorida and Georgia, as well as Puerto RicoBahamas and Cuba, further advances the company’s strategy to grow its business through selective acquisitions, Baker said.

 

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