Cal-Maine Foods’ net income for the third quarter of fiscal year 2018 increased exponentially on a year-over-year basis.
The world’s largest egg company on April 2 released its quarterly financial results for the period ending March 3.
Cal-Maine’s net income for the quarter was $96.3 million, up dramatically when compared to the net income of $4.1 million for the third quarter of fiscal year 2017.
The net income got a boost from a 42.2 percent increase in net sales for the quarter. The company netted $435.8 million for the quarter, compared to the $306.5 million for the same quarter of the 2017 fiscal year.
The company’s third-quarter results were also positively impacted by a $35.0 million, or $0.72 per basic and diluted share, discrete tax benefit related to the Tax Cuts and Jobs Act (TCJA) tax reform legislation enacted during the period, and the subsequent revaluation of the company’s deferred tax liabilities at the new, lower corporate tax rate.
Executive commentary
Dolph Baker, chairman and chief executive officer of Cal-Maine Foods, stated, “We are pleased to report very strong financial and operating results for the third quarter of fiscal 2018, as we capitalized on improved market conditions compared with the third quarter last year. Our sales were up 42.2 percent from a year ago, reflecting strong consumer demand trends, continued grocery store promotions for shell eggs, and more moderate production growth. Together, these factors have supported higher market prices. We continued to execute our growth strategy in this favorable market environment, resulting in a significant improvement in profitability compared with the prior-year period.
Baker, in a press release, stated that market prices for shell eggs have continued to trend higher this fiscal year with our average customer selling prices up 36.7 percent over the third quarter last year. Market prices for non-specialty eggs have been especially strong and were up 66.6 percent compared with the prior-year period, Baker added.
“Prices remained high through the peak holiday selling season and have continued to move up since the end of the quarter. Reports from IRI, a consumer market research firm, indicate retail demand has been very good through this same period. We also benefitted from higher egg exports compared with the same time last year. While production has moderated, the laying hen flock size has moved up modestly compared with prior-year levels, resulting in an improved balance of supply and demand. Recent USDA reports, however, show an increase in chicks hatched, which could indicate future increases in supply,” said Baker.
“Our specialty egg business remains a primary focus of our growth strategy as we continue to see favorable consumer demand trends. For the third quarter of fiscal 2018, specialty eggs, excluding co-pack sales, accounted for 24.3 percent of our total sales volume, compared with 23.6 percent for the same period a year ago. Specialty egg revenue was 30.2 percent of total shell egg revenue, compared with 40.8 percent for the third quarter of fiscal 2017, as a result of significantly higher market prices for non-specialty eggs in the current period.
“We are also focused on aligning our future production capacity with the anticipated industry-wide change in product demand, as our largest customers have made public commitments to exclusively offer cage-free eggs by future specified dates. Our primary objective is to ensure we are ready to meet our customers’ needs through this transition period, and we are prepared to make the necessary investments in our operations. As always, Cal-Maine Foods provides a diverse product mix that includes cage-free eggs, as well as other healthy and affordable options for consumers including conventional, nutritionally enhanced and organic eggs.”
Baker added, “Our operations ran well during the third quarter, as we continued to focus on efficient and responsible management across all of Cal-Maine Foods’ locations. Operating income for the third quarter was $76.2 million, compared with an operating loss of $5.2 million a year ago. Farm production costs per dozen were up slightly compared with the prior-year period. For the third quarter of fiscal 2018, our feed costs per dozen produced were consistent with the same costs incurred a year ago. Based on 2017 harvested crops, we expect to have an ample supply of our primary feed ingredients for the balance of the fiscal year.”
