RIDGELAND, MISS. — Cal-Maine Foods achieved record highs in net income and net sales in the second quarter ended Nov. 28 as no positive tests for highly pathogenic avian influenza (HPAI) were found at production facilities.
Net income of $198.6 million, equal to $4.08 per share on the common stock, compared with $1.17 million, or 2¢ per share, in the previous year’s second quarter. Net sales of $801.7 million were up 110% from $381.7 million.
“These results reflect the current market environment characterized by record average selling prices for conventional eggs, primarily due to reduced supply related to the outbreak in the US of highly pathogenic avian influenza (HPAI), and good customer demand,” said Sherman Miller, chief executive officer, when results were announced Dec. 28. “There have been no positive tests for HPAI at any of Cal-Maine Foods’ owned or contracted production facilities as of Dec. 28, 2022. Consumer demand for shell eggs continued to be good in the quarter, especially leading up to the Thanksgiving holiday, and we experienced record quarterly volume levels for specialty eggs sold.”
Despite the results, Cal-Maine Foods’ stock on the Nasdaq was trading at $54.51 per share late in the morning on Dec. 29, down 12% from a close of $62.19 on Dec 28 and down 15% from a close of $63.78 on Dec. 27. Media reports said second-quarter results came in below Wall Street forecasts.
HPAI continued to impact the industry negatively in the quarter. The total number of birds, including chickens and turkeys, culled in the United States stood at 52.5 million by the end of November, which was above the estimated 50 million birds in 2015, according to the US Department of Agriculture’s Animal and Plant Health Inspection Service.
Dozens of eggs sold at Cal-Maine Foods in the second quarter increased 5.4% to 284.1 million from 269.6 million. While conventional egg volumes sold decreased 2.2% when compared with the previous year’s second quarter, specialty egg volumes increased 24%. Cage-free mandates that went into effect on Jan. 1, 2022, in California and Massachusetts further supported demand.
“Conventional egg net average selling price per dozen increased to $2.883 compared with $1.151 a year ago, and both conventional and specialty egg revenue reached record levels for the second quarter of fiscal 2023,” said Max Bowman, chief financial officer for Cal-Maine Foods. “Net average selling price for specialty eggs rose 24.9% to $2.370 per dozen, compared with $1.898 per dozen for the second quarter of 2022. We saw our highest ever quarterly sales of specialty eggs of $227.8 million, or 29.4% of total shell egg revenue. Specialty dozens sold were 33.8% of total dozens sold compared with 28.7% in the prior-year period.”
Cal-Maine Foods dealt with higher costs across inputs such as feed, labor, packaging and distribution in the quarter. Farm product costs per dozen eggs rose 22% compared to the previous year’s second quarter, primarily because feed costs increased 30%.
Cal-Maine Foods expects the HPAI outbreak will continue to impact the supply of eggs negatively. The duration of the impact will depend in part by how long it takes to replenish the layer hen flock in the United States. The five-year average for the layer hen flock from 2017-21 was about 328 million hens. A LEAP Market Analytics report issued on Dec. 8, 2022, projects the layer hen inventory to not exceed 382 million hens until December 2023.Over the first two quarters of the fiscal year, Cal-Maine Foods had net income of $323.9 million, or $6.66 per share on the common stock, which compared with a loss of $16.9 million in the same time of the previous year. Net sales over the first two quarters rose 106% to $1.46 billion from $706.7 million.