Cal-Maine Foods Inc. reported lower results for the third quarter ended February 29, 2020, the result of “challenging market conditions.”
The company reported net income of $13.7 million, or $0.28 per basic and diluted share, for the third quarter of fiscal 2020, compared to net income of $39.8 million, or $0.82 per basic and diluted share, for the third quarter of fiscal 2019. Net sales for the third quarter of fiscal 2020 were $345.6 million, a 10% decrease, compared to $384.0 million for the third quarter of fiscal 2019.
For the thirty-nine weeks ended February 29, 2020, net sales were $898.3 million compared to $1.08 billion for the prior-year period. The company reported net loss of $42.1 million, or $0.87 per basic and diluted share, for the thirty-nine weeks ended February 29, 2020, compared to net income of $74.0 million, or $1.53 per basic and $1.52 per diluted share for the year-earlier period.
“Our results for the third quarter of fiscal 2020 reflect more challenging market conditions than we experienced for the same period last year. However, we were pleased with our ability to execute our strategy in this environment and return to profitability for the quarter,” said Dolph Baker, chairman and chief executive officer of Cal-Maine Foods. “While our sales volumes were in line with last year, our overall sales revenue was down due to the lower average selling prices compared with the same period of fiscal 2019.”
The company reported Southeast large market average price for conventional eggs dropped 13.8% for the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019, while the average sales price was down 10.0%. Since the end of the third quarter, however, Baker said market prices have moved significantly higher to record levels and are expected to see continued price volatility through the end of the company’s fiscal year.
For the third quarter, specialty eggs, excluding co-pack sales, were $117.7 million, accounting for 35.0% of sales revenue, compared with $131.1 million, or 35.0% of sales revenue, in the third quarter of fiscal 2019. Average pricing for specialty eggs was down by 3.4% to $1.89 per dozen in the third quarter compared to the prior-year third quarter. Specialty dozens sold were also down 7.1%, as sales of specialty dozens were negatively affected by low conventional egg prices.
Baker said an unfavorable balance of egg supply and demand continued to adversely affect market prices during the third quarter and year-to-date periods. However, he noted that hen numbers, as reported by the U.S. Department of Agriculture “Chickens and Eggs” report on March 23, 2020, were 330.0 million, which is 11.8 million less hens than reported a year ago. The USDA also reported that hatch rates decreased 4.95% for the last three consecutive months through February 2020, including a 8.0% decrease in February, as compared to the same period in the prior year.
Regarding cage-free eggs, Baker said the company has worked hard to prepare Cal-Maine Foods to meet future customer requirements and the expected additional demand for cage-free eggs.
“We are committed to meeting the demands of our customers, and we have invested over $344 million to expand our cage-free production starting with our first facility in 2008. We are pleased with our progress to date, with expansion projects underway in Florida, Texas and Utah, which will provide significant additional processing, pullet and cage-free capacity upon completion.”
Overall, the company’s operations ran well during the third quarter. Farm production costs per dozen were down 1.6% over the third quarter last year, reflecting a 3.6% drop in feed costs offset by slight increases in other farm production costs.
While current supplies of corn and soybeans are favorable heading into the 2020 planting season, current ongoing uncertainties and supply chain disruptions related to the COVID-19 outbreak and geopolitical issues surrounding trade agreements and international tariffs could create more commodity price volatility in the future.
“Looking ahead into the fourth quarter of fiscal 2020 and fiscal 2021, we believe we are taking all reasonable precautions in the management of our operations in response to the outbreak of COVID-19. To date, Cal-Maine Foods facilities are operating normally, and we have not experienced any supply chain or delivery disruptions,” Baker said. “Our top priority is the health and safety of our employees, who work hard every day to produce eggs for our customers.”