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Cal-Maine records net loss of $19.8 million for quarter

By Jack Weatherly

Cal-Maine Foods Inc. reported a net loss of $19.8 million, or 41 cents per share, for the fourth quarter of fiscal 2019 ending June 1, compared with a net income of $71.8 million, or $1.48 per share, for the year-ago period.

According to Bloomberg news, the U.S. egg industry has an oversupply issue, and prices are so unprofitable that Cal-Maine, the biggest U.S. producer, posted its first net loss in six quarters.

But prices may be near, if not at, their lowest. Producers are losing money, and that’s going to force farms to make adjustments and shrink output, Cal-Maine’s Chief Financial Officer Max Bowman told Bloomberg.

The market has got to react,” he said, adding that such low prices can’t go on long. “Hopefully, we’ve found a bottom, and we’ll begin to pick up a bit.”

Cal-Maine stocks are near their lowest point in the past 52 weeks, which ranged from $36.65 to $51.55. The stock closed at $39.49 Tuesday on the NasdaqGS market, down 45 cents., according to Yahoo Finance.

Net sales for the quarter were $280.6 million, a 36.7 percent decrease, compared with $443.1 million for the fourth quarter of fiscal 2018.

Dolph Baker, chairman and chief executive officer of Jackson-based Cal-Maine, the nation’s largest producer of in-shell eggs, said in a release: “The average market price in the Southeast for conventional eggs dropped 52 percent for the fourth quarter of 2019 compared to the fourth quarter of 2018 and was down 17.1 percent for the year.

For the fiscal year, net sales were $1,361.2 million compared with $1,502.9 million for fiscal 2018. The company reported net income of $54.2 million, or $1.12 per share, for fiscal 2019, compared to net income of $125.9 million, or $2.60 per share for the prior fiscal year.

Fiscal 2018 benefited by a $43 million, or 89 cents per share, tax benefit related to the federal Tax Cuts and Jobs Act and the subsequent revaluation of the company’s deferred tax liabilities at the new, lower corporate tax rate. The fiscal 2018 results also include an after-tax charge of $54.8 million, or $1.13 per share, related to the settlement of previously disclosed antitrust litigation.

Baker said: “The USDA reported a near record high 341.5 million hens as of April 1, 2019. While the hen numbers as of the June 2019 USDA report were down seasonally to 331.5 million, that level still represents approximately 2.9 million more hens than a year ago. The supply issue has been further pressured by a more productive flock.”

Specialty eggs, excluding co-pack sales, accounted for 23.3 percent of sales volumes for the fourth quarter, compared with 25.5 percent a year ago. However, specialty egg revenue was 41.9 percent of total shell egg revenue, compared with 29 percent for the fourth quarter of fiscal 2018.

The company is investing $187 million in facilities for production of nonconventional eggs, primarily free-range.

Because of the net income loss, the company will not pay a quarterly dividend.

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About Jack Weatherly