Cal-Maine Foods reported results for the third quarter of fiscal 2021 (thirteen weeks) and thirty-nine-week period ended February 27, 2021.
Net sales for the third quarter of fiscal 2021 were $359.1 million, a 3.9% increase compared to $345.6 million for the third quarter of fiscal 2020. The company reported net income of $13.5 million, or $0.28 per basic and diluted share, for the third quarter of fiscal 2021, compared to net income of $13.7 million, or $0.28 per basic and diluted share, for the third quarter of fiscal 2020.
For the thirty-nine weeks ended February 27, 2021, net sales were $999.2 million, an 11.2% increase compared with $898.3 million for the prior-year period. The company reported net income of $6.3 million, or $0.13 per basic and diluted share, for the thirty-nine weeks ended February 27, 2021, compared to a net loss of $42.1 million, or $0.87 per basic and diluted share, for the prior-year period.
“We are pleased with our results for the third quarter of fiscal 2021, which reflect strong retail demand for shell eggs as consumers have continued to purchase more eggs for preparing meals at home,” said Dolph Baker, chairman and chief executive officer of Cal-Maine Foods. “While we saw modest improvement in the food service and hospitality business as COVID-19-related restrictions have gradually lifted in select parts of the country, this market segment has not returned to pre-pandemic demand levels.”
Total dozens sold during Q3 were up 3.1% over the same period last year, reaching 279.7 million dozen sold. Average sales price for shell eggs was $1.25 per dozen for the Q3 2021 compared with $1.24 per dozen for the same period last year.
“Sales prices have increased since the end of the third fiscal quarter, although they are not expected to approach the high prices realized in the fourth quarter last fiscal year,” Baker said. “Sales prices in the prior-year’s fourth quarter moved higher, primarily driven by the normal higher seasonal demand during the peak Easter season and the consumer shift to more meals prepared at home due to the COVID-19 pandemic.”
The total number of shell eggs produced during Q3 was 3.3% less than the same period last year as reported by the USDA.
Hen numbers reported by the USDA as of March 1, 2021 were 327.4 million, which Cal-Maine said represents 3.1 million fewer hens than a year ago. However, the USDA also reported that the hatch from October 2020 through February 2021 increased 2.6% as compared to the prior-year period, and eggs in incubators were up 20% in February over the same period last year, which Cal-Maine said may indicate an increased supply of hens in the future.
“As we emerge from the COVID-19 pandemic with an anticipated return in food service demand, these growing supply indicators could affect the overall balance of supply and demand for shell eggs and have an impact on market prices,” Baker said.
Specialty egg segment
On the specialty egg side, the company continued to see favorable demand.
“Eggs remain a very popular and inexpensive source of protein, and we strive to provide a favorable product mix of both conventional and specialty eggs for today’s health-conscious consumer,” Baker said.
Sales of specialty eggs during Q3 2021 totaled $145.2 million, accounting for 41.5% of our egg sales revenue, compared with $125.0 million, or 37.2% of egg sales revenue, in the third quarter of fiscal 2020. The higher specialty egg revenue reflects a 16.2% increase in specialty dozens sold in the third quarter of fiscal 2021 compared to the same period last year.
"Our goal remains to match our production with the needs of our customers, especially as we prepare for the expected future demand for cage-free eggs,” Baker said. “As additional states consider legislation for cage-free requirements, and assuming companies meet their previously stated goals to offer cage-free eggs, the USDA projects that over 70% of the U.S. laying flock will need to be in cage-free production by 2026.”
Since 2008, Cal-Maine has invested $418 million in facilities, equipment and related operations to expand our cage-free production.
“We have a strong balance sheet with ample liquidity and access to capital to continue to make the necessary investments in our operations, and we remain focused on having sufficient capacity to meet the needs of our customers with the same exceptional service that is a hallmark of Cal-Maine Foods.”
Operations perform well
According to Baker, the company performed well during the third quarter, despite the disruptions from the severe winter weather that affected operations across a significant portion of our footprint in mid-February.
“Our managers and employees in these locations did an outstanding job in preparing for the storm and managing through challenging conditions with sufficient feed and generator power to continue production with minimal disruptions. We experienced some short-term delays in distribution as many of our customers in these areas were temporarily closed, but we were able to quickly resume normal delivery schedules.”
For the third quarter, operating loss was $493,000 compared with operating income of $5.2 million for the same period a year ago. Farm production costs per dozen produced for the third quarter of fiscal 2021 were up 7.0%, or $0.051 per dozen, compared to the Q3 2020. This increase was primarily due to higher feed costs, which started trending higher midway through the Q2 2021.
As feed ingredient prices rose through the second and third quarters of fiscal 2021, Baker said the company benefited from normal operating practices of filling our storage bins at harvest and locking in the basis portion of our grain purchases several months in advance to help ensure availability of feed ingredients. Most of this benefit was realized in Q2 and Q3, but the company expects it will be exposed more directly to price movements in the feed ingredient market during Q4.
“We expect to see continued price volatility for the remainder of fiscal 2021 as increased export demand for both soybeans and corn is placing pressure on domestic supplies and carryout inventories are projected to be lower.”
Additionally, Baker said the ongoing uncertainties and supply chain disruptions related to the COVID-19 outbreak, weather fluctuations and geopolitical issues will continue to affect market prices for primary feed ingredients.
“We are pleased with our ability to execute our growth strategy and respond to the challenges and opportunities in a dynamic market.”
Looking ahead, the company believes retail consumer demand for eggs will remain strong but said it is difficult to predict when restaurants and food service operators will return to pre-pandemic business schedules, and how retail demand will be affected.
“Regardless of market conditions, we are focused on managing our operations in an efficient and sustainable manner that ensures the safety of our employees,” said Baker. “We will continue to make the strategic investments to support our future growth, and we are well positioned with sufficient capital to expand our own capacity or consider potential acquisitions.”
Above all, the company is focused on meeting the demands of our customers and delivering value to our shareholders, added Baker.