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Shares plunge after Cal-Maine fails to meet expectations

By JACK WEATHERLY

Cal-Maine Foods Inc.
reported on Monday that its net income for the fiscal first quarter
was $12.4 million, or 26 per share, compared with a loss of $16
million, or 33 cents per share, a year earlier.

Net sales for the quarter
that ended on Sept. 1 was $340.6 million, 29.6 percent increase ove
$262.8 million.

Despite year-over-year
improvement, Cal-Maine shares on the Nasdaq Stock Market took a hit
on Monday and Tuesday took a sizeable hit.

Shares
lost $3.30, or nearly 7 percent on Monday and $1.58, or 3.49
percent, in heavy midafternoon trading on Tuesday because the company
did not perform up to analysts’ expectations.

Dolph Baker, chairman and
chief executive officer of Cal-Maine, stated in a news release that
sales benefited from higher selling prices and “consistent sales.”

“Our average customer
selling price for shell eggs was up 28.5 percent compared with the
first quarter of fiscal 2018,” Baker said. “Food service demand
remained steady and year-to-date shell egg exports were slightly
higher than the same period last year. Although overall egg
production growth has been modest, according to recent USDA reports,
the number of chicks hatched has increased 11 percent since the
beginning of calendar 2018, indicating future increases in laying hen
numbers. Given these trends, the potential increase in the shell egg
supply could create additional pricing pressure.”

Sales by the dozen of
“specialty eggs, excluding co-pack sales, were up 9.7 percent over
the same period last year. Specialty egg prices were steady for the
first quarter of fiscal 2019, with the average customer selling price
at approximately the same level as a year ago. Specialty egg revenue
was 34.2 percent of our total shell egg revenue, compared with 39.6
percent for the first quarter of fiscal 2018, due to higher market
prices for non-specialty eggs in the current period. We remain
focused on providing our customers with a favorable product mix of
healthy and affordable options including conventional, cage-free,
nutritionally enhanced and organic eggs.

“We currently have
additional capital projects underway to convert Cal-Maine Foods’
facilities to convertible/cage-free capacity and replace less
efficient production. These projects are designed to offer the
flexibility to produce conventional eggs or cage-free eggs, allowing
us to more effectively manage our future product mix.

“For the first quarter of
fiscal 2019, our farm production costs per dozen were up 7.3 percent,
primarily due to increased feed costs. Our overall production was
down 2 percent compared with a year ago, as we adjusted flock
rotations to maximize production for the upcoming holiday season.

“Our feed costs per dozen
were up 10.1 percent, due to the higher cost of feed ingredients,
primarily soybean meal. Based on the USDA’s estimates for a record
harvest for this year’s corn and soybean crops, we expect to have
an ample supply of feed ingredients for fiscal 2019. However, grain
prices have been volatile with the recently imposed international
tariffs creating market uncertainty.”

For the first quarter of
fiscal 2019, Cal-Maine Foods will pay a cash dividend of
approximately 8.5 cents per share to holders of its common and Class
A common stock.

The company, which
is headquartered in Jackson, is the largest producer and
distributor of fresh shell eggs in the United States.

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About Ross Reily

Ross Reily is editor of the Mississippi Business Journal. He is a husband to an amazing wife, dad to 3 crazy kids and 2 dogs. He is also a fan of the Delta State Fighting Okra and the Boston Red Sox.

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