Cal-Maine Foods reported a return to profitability and an 11.5% increase in net sales for the second quarter of the 2021 fiscal year. The quarter ended on November 28, 2020.
Net sales for the second quarter of fiscal 2021 were $347.3 million, compared to $311.5 million for the second quarter of fiscal 2020. The company reported net income of $12.2 million, or $0.25 per basic and diluted share, for the second quarter of fiscal 2021, compared to a net loss of $10.1 million, or $0.21 per basic and diluted share, for the second quarter of fiscal 2020.
For the 26 weeks ended November 28, 2020, net sales were $640.1 million compared to $552.7 million for the prior-year period. The company reported net loss of $7.2 million, or $0.15 per basic and diluted share, for the twenty-six weeks ended November 28, 2020, compared to a net loss of $55.8 million, or $1.15 per basic and diluted share for the prior-year period.
Dolph Baker, chairman and chief executive officer of Cal-Maine Foods, stated: “Our results for the second quarter of fiscal 2021 reflect favorable demand trends for shell eggs, primarily at the retail level as consumers continue to prepare more meals at home during the COVID-19 pandemic. Demand from food service customers has been less consistent and remains well below pre-pandemic levels, due in part to various restrictions on restaurants in place for different areas of the country. For the second quarter, total dozens sold were up 4.8 percent over the same period last year. We achieved the highest total dozens sold of any second quarter period at 273.7 million dozens, and our ratio of total dozens produced to total dozens sold was the highest of any quarterly period at 92.1 percent. We are especially grateful for the hard work and dedication of our employees who have worked to meet customer demand through extraordinary conditions. As the COVID-19 pandemic continues to affect our daily lives, our top priority is the health and safety of our employees, and we remain vigilant in managing our operations in a safe manner.
Market prices, egg supply
Market prices for eggs rose steadily in the early part of the second quarter and then leveled off for the remainder of the period, Baker noted. For example, the Urner Barry (UB) Southeastern Regional Large Price ('UB southeastern large index') for conventional eggs for the second quarter of 2021 was $1.21 per dozen, up 3.5 percent compared to $1.17 for the second quarter of fiscal 2020, and our average sales price was up 5.8 percent compared with the prior-year second quarter.
“We did not experience a typical seasonal spike in market prices around Thanksgiving; the UB southeastern large index peaked on October 8, 2020, at $1.30 and then declined to $1.20 at quarter close,” said Baker.
“The overall supply of eggs reported by the United States Department of Agriculture ('USDA') declined in the second quarter of fiscal 2021 compared to the same period last year. The USDA also reported that the hatch from July through November 2020 decreased 1.5 percent as compared to the same period last year, and hen numbers reported by the USDA as of December 1, 2020, were 325.2 million, which represents 15.6 million fewer hens than a year ago. However, the decreased hen and egg supply has been offset by the decreased food service demand as noted above.
Emphasis on specialty eggs
Specialty eggs remain an important focus of Cal-Maine’s growth strategy, Baker said, noting that the company has worked hard to provide customers with a favorable product mix in line with current demand trends.
For the second quarter of fiscal 2021, Cal-Maine’s sales of specialty eggs totaled $134.1 million, accounting for 39.7 percent of its egg sales revenue, compared with $115.9 million, or 38.2 percent of egg sales revenue, in the second quarter of fiscal 2020. The higher specialty egg revenue reflects a 17.7 percent increase in specialty dozens sold.
“Demand for specialty eggs was positively affected by the higher conventional egg prices as compared to the same period in the prior year,” said Baker.
"We have continued to take aggressive steps to position Cal-Maine Foods to meet the expected future demand for cage-free eggs. As a growing number of states have passed legislation requiring cage-free eggs by specified future dates, we are working closely with our customers who are transitioning to meet expected requirements. Over the past twelve years, we have invested approximately $405 million in facilities, equipment, and related operations to expand our cage-free production. In addition, we have committed another $57.8 million towards the production of cage-free facilities, including the latest $40.1 million conversion project, previously announced on December 15, 2020, at our production facility in Guthrie, Kentucky. Together with our other cage-free expansion projects, we believe we will continue to enhance our ability to provide exceptional service and distribution capabilities to our customers.”
Input costs and other factors
“Our operations performed well during the second quarter with operating income of $14.5 million compared to an operating loss of $16.6 million for the same period last year. Farm production costs per dozen produced for the second quarter of fiscal 2021 decreased 2.6 percent, or $0.019 per dozen, compared to the second quarter of fiscal 2020. This was primarily due to slightly lower feed costs and more favorable feed conversion. However, feed costs started trending higher midway through the second quarter and continued volatility is expected for the remainder of fiscal 2021 as increased export demand for both soybeans and corn is placing pressure on domestic supplies. Additionally, the ongoing uncertainties and supply chain disruptions related to the COVID-19 outbreak, weather fluctuations and geopolitical issues surrounding trade agreements and international tariffs will continue to affect market prices for our primary feed ingredients,” said Baker.
“We are pleased with our ability to respond to dynamic market conditions and manage our operations in the face of the unprecedented challenges created by the COVID-19 pandemic. While we are still facing an uncertain environment, we believe retail demand for eggs will remain strong, and we are optimistic that effective vaccines will soon be widely available, restoring consumer confidence and allowing restaurants and food service operators to resume regular schedules. As we move to the second half of our fiscal year, we are well positioned to execute our growth strategy - provide a favorable product mix, including cage-free and other specialty eggs, invest in our operations and identify potential acquisitions or additional growth opportunities that enhance our production. We continue to work to identify risks and strengthen our commitment to operational resilience as we drive our enterprise sustainability efforts. We have a strong balance sheet with the financial flexibility to support our growth initiatives and we look forward to the opportunities ahead for Cal-Maine Foods.”