Cal-Maine reports 'challenging market conditions'

Cal-Maine reports 'challenging market conditions'

- Feed costs expected to remain "high and volatile." - Consumer demand for specialty eggs increasing. - CEO outlines strategy to expan

CAL-MAINE Foods Inc., the largest commercial egg producer in the U.S., has reported a decrease in profits for its fiscal 2013 second quarter, citing costs of production that were almost 25% higher -- due primarily to feed prices -- than in the previous year's second quarter.

Sales for the quarter rose.

Operating results were a consequence of "challenging market conditions," Cal-Maine chair, chief executive officer and president Dolph Baker said.

Higher sales reflected an increase in eggs sold and selling prices, he said.

Baker noted that specialty egg sales accounted for more than 15% of eggs sold in the quarter and more than 20% of shell egg revenues, and he called specialty eggs "an important area of focus for our growth strategy" as they continue to increase in popularity, "with consumers looking for healthy choices."

He added that specialty eggs capture higher prices and have less cyclical prices.

Baker said second-quarter profitability was adversely affected by higher costs for corn and soybean meal, the company's primary feed ingredients, and expenses related to recent acquisitions.

The drought last summer badly damaged crop production and pushed corn prices to record highs, he said, and although prices have pulled back some, the company's feed costs per dozen eggs were 23.4% higher in the quarter than the comparable quarter the year before.

"We expect feed costs to be high and volatile for the remainder of fiscal 2013 (through May)," Baker said.

He also cautioned that the country's egg-laying flock was 2.5% larger on Dec. 1, 2012, than on Dec. 1, 2011, which could mean an increase in industry-wide production and lower egg prices.

At the same time, though, he pointed to a chick hatch that has declined for two consecutive years and was down 2.9% over the first 11 months of last year.

Accordingly, the company and the industry are faced with challenging market dynamics, he said, but Cal-Maine remains focused on its strategy to be an efficient, low-cost producer.

Baker said Cal-Maine continues to expand its operations through acquisitions.

In November, he noted, the company finished its acquisition of the commercial egg production assets of Maxim Production Co., including a feed mill and two production complexes with a capacity to house 3.5 million hens (Feedstuffs, Nov. 26, 2012). The acquisition included contractual capacity for another 500,000 hens.

Baker said the acquisition fits well with Cal-Maine's purchase last year of the egg operations of Pilgrim's Pride Corp. (Feedstuffs, Aug. 20, 2012).

Both the Maxim and Pilgrim's operations are in Texas and "further advance our strategy to grow our business through selective acquisitions," he explained.

Cal-Maine also announced that it plans to pay a cash dividend of 19.9 cents per share on the company's Class A common stock, which will be payable Feb. 14 to holders of record Jan. 30.

The company's results are shown in the Tables.

Cal-Maine, headquartered in Jackson, Miss., sells eggs in 29 states in the midwestern, southeastern, southwestern and mid-Atlantic states. The company reported fiscal 2012 sales that totaled $1.113 billion.

 

1. Cal-Maine earnings and sales*

 

-Second quarter-

-Six months-

 

2013

2012

2013

2012

Sales (million $)

328.9

290.4

601.8

534.2

Earnings (million $)

14.3

23.3

23.7

26.4

Earnings per share ($)

0.60

0.97

0.99

1.10

 

2. Cal-Maine operating statistics*

 

-Second quarter-

-Six months-

 

2013

2012

2013

2012

Eggs produced (million doz.)

179.8

166.2

337.8

325.7

Eggs sold (million doz.)**

238.1

218.1

448.1

426.2

Average selling price ($/doz.)

1.32

1.27

1.28

1.20

Feed costs (cents/doz.)

57

47

55

47

% specialty eggs sales (volume)

 16.4

16.3

16.2

16.0

% specialty eggs sales (revenue)

22.9

22.7

23.2

23.1

*For the quarters ended Dec. 1, 2012, and Nov. 26, 2011.

**Includes eggs purchased from other producers.

Source for Tables: Cal-Maine Foods Inc.

 

Volume:85 Issue:01

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish