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Glut forces Cal-Maine into loss for quarter, year

By JACK WEATHERLY

Slammed by a market glut, Cal-Maine Foods Inc. on Monday reported a net loss of $24.5 million, or 51 cents per share, for the fourth fiscal quarter ending June 3, compared with a net loss of $376,000, or a penny a share, a year earlier.

In the 53-week fiscal year the company had a net loss of $74.3 million, or $1.54 per share, in contrast with a net income of $316 million, or $6.56 per share, for the fiscal 2016.

“Our results for the fourth quarter of fiscal 2017 reflect the volatile and challenging egg market fundamentals that have prevailed throughout this fiscal year,” Dolph Baker, chairman, president and chief executive officer, said in a news release Monday morning.

The company’s stock fell $2.25, or 6 percent, to close at $34.85 on the NasdaqGS stock market on Monday, down 16 percent since the beginning of the year, according to MarketWatch. The 52-week range is $33.40 to $46.47.

After the 2015 avian flu outbreak, producers replaced flocks with younger, more productive chickens, and consumer demand has not kept pace with these production levels — creating a glut.

Also, “institutional egg customers” re-configured their products to use fewer eggs during the height of the avian flu outbreak and price spikes, according to the company.

“ Our average customer selling prices for the fourth quarter of fiscal 2017 were down 15.5 percent from the same period a year ago. For fiscal 2017, average customer selling prices were down 42 percent compared with fiscal 2016,” Baker said.

Institutional customers have not returned to their previous usage levels, even though prices have dropped.

“ We do not expect to see any meaningful improvement until there is a better balance of supply and demand,” Baker said. “However, we are encouraged by recent USDA reports indicating the chick hatch has been trending down for the last 10 out of 11 months, suggesting there may be a moderation in the size of the laying hen flock as we move forward.”

For the year, specialty eggs accounted for 43.6 percent of total shell egg revenues, compared with 29.1 percent last year, even though specialty egg prices were down 12.4 percent compared with fiscal 2016 prices. according to the company.

“Our specialty egg business has continued to be a primary focus of our growth strategy. We have made significant investments across our operations to meet anticipated demand for cage-free eggs, as food service providers, national restaurant chains and major retailers, including our largest customers, have stated objectives to exclusively offer cage-free eggs by future specified dates,” Baker said.

“In addition to cage-free eggs, our product mix provides a wide variety of healthy choices for consumers including conventional, nutritionally enhanced and organic eggs.”

Cal-Maine is the largest producer and marketer of shell eggs in the United States. In fiscal 2017, it sold approximately 1,031 million dozen shell eggs, approximately 2 percent of domestic shell egg consumption.

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