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Cal-Maine Foods Reports on Q2 of FY 2022

12/29/2021

In a press release dated December 28th Cal-Maine Foods (CALM) announced results for the 2nd Quarter of FY 2022 ending November 27th 2021.   

 

Cal-Maine serves as a bellwether for the shell egg sector as the only public-quoted almost pure-play company in the industry. The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as $ x 1,000 except EPS)

 

 

 

 

 

2nd Quarter Ending

Nov. 27th 2021

Nov. 28th 2020

Difference (%)

Sales:

$390,903

$347,328

+12.5

Gross profit:

$43,747

$58,451

-25.2

Operating income (loss):

$(2,065)

$14,479

-114.3

Pre-tax income (loss)

Net income (loss)

$468

$1,1731

$15,917

$12,155

-97.1

-90.3

Diluted earnings (loss) per share:

$0.02

$0.25

-92.0

Gross Margin (%)

11.2

16.8

-33.3

Operating Margin (%)

(0.5)

4.2

-111.9

Profit (Loss) Margin (%)

0.3

3.5

-91.4

Lease obligations:

$1,124

$1,472

-23.6

12 Months Trailing:

Return on Assets (%)

(1.9)

Return on Equity (%)

(0.3)

Operating Margin (%)

(2.6)

Profit Margin (%)

(0.3)

Total Assets

$1,231,994

$1,229,174

+0.3

Market Capitalization

$1,770,000

 

Note 1. $670,000 tax benefit and $2.53 million additional income in Q2 FY 2022 compared to $1.43 million in Q2 FY 2021

 

52-Week Range in Share Price:  $33.85 to $43.24      50-day Moving average  $36.46

Market Close, Tuesday, Dec. 28th pre-release: $38.36.

14H00 Wednesday, Dec. 29th post-release: $36.74 (down 4.1 percent)

 

In reviewing the CALM quarterly report the following calculated values represent key data for the most recent Quarter. (Q2 Fiscal 2021 and percent difference in parentheses):-

 

  • Shell egg sales attained $379.17 million in Q2 2022 assuming that this category represented 97 percent of total revenue. ($336.91 million in Q1 2021, up in value by 12.5 percent)
  • Dozen shell eggs sold (thousands): 276,108 (273,651; +0.9%)
  • Average selling price of all shell eggs: $1.37 per dozen; ($1.23 per dozen; +11.4%).
  • Average selling price of specialty eggs (excluding co-pack) calculated from data released: $1.86 cents per dozen; ($1.85 per dozen;  +0.5%).
  • Average selling price of generic eggs calculated from data released: $1.16 cents per dozen; ($1.01 cents per dozen; +14.9%).
  • Differential between generic and specialty eggs: $0.70 cents per dozen; ($0.84 per dozen; -16.7%)
  • Specialty eggs as a proportion of volume sold: 30.3%; (26.4%; +14.8%)
  • Specialty eggs as a proportion of sales value: 41.1%; (39.7 %; +3.5%)
  • Proportion of eggs sold actually produced by Cal-Maine flocks: 93.0%  (92.1%  +1.0%;).
  • Feed cost per dozen 52.9 cents (41.0 cents +29.0%)

 

The following observations relate to the comparison of Q2 2022 with the corresponding quarter in 2021:-

  • Q2 of FY 2022 represented a more favorable marketing comparison to Q2 2021 based on higher prices for shell eggs during the most recent quarter, as influenced by partial restoration of institutional and consumer demand with evident recovery from COVID restrictions.
  • Gross profit was impacted positively by higher unit revenue for generic eggs but offset by significantly higher feed cost and obviously inflation in expenditure on labor, fuel and packaging.
  • Loss was constrained by the relatively high proportion of specialty eggs sold that generated a higher margin compared to generics.
  • In a down-market the relative contribution of specialty eggs is amplified and Cal- Maine achieved an increase in the value sold in this category
  • Responding to the market in Q2 2022 Cal-Maine purchase of eggs was within one percent of the corresponding quarter in FY 2021.
  • Apart from family-trust shareholding of 14.7 percent, institutions hold 92.1 percent of equity. Shares short of float December 15th attained 21.5 percent. CALM must generate slightly over $20 million in net earnings before restoring the dividend.

 

In commenting on Q2 results Dolph Baker, chairman and CEO of Cal-Maine Foods, Inc., stated, “We were pleased to report higher sales for the second quarter of fiscal 2022 compared with the prior year, driven by improved shell egg pricing. We are pleased that our operating results helped drive a return to modest profitability in the second quarter despite the impacts of higher costs for feed ingredients, processing and packaging.”

 

Baker added "For the second quarter of fiscal 2022, specialty egg sales accounted for 41.1 percent of total shell egg revenue, compared to 39.7 percent, for the prior-year quarter. We continue to focus on offering a favorable product mix that meets the needs of our customers, including conventional, cage-free, organic and other specialty eggs and egg products. Consumer preference for specialty eggs, including cage-free eggs, continues to expand”.

 

With regard to expansion Baker noted “In October, we announced that our Board of Directors approved a $23.0 million capital project to expand the Company’s cage-free egg production at our Okeechobee, Florida, facility, which will add capacity for approximately 400,000 cage-free hens and 210,000 pullets. This most recent expansion project in Florida supports our strategy to position Cal-Maine Foods as an industry leader” Cal-Maine made an additional investment in Southwest Specialty Eggs, LLC, to acquire warehouse and distribution capability to expand the customer base in the southern California, Arizona and Nevada markets. Given the cage-free egg requirement in California will take effect on January 1, 2022, we believe this investment will be immediately accretive given our enhanced ability to better utilize our cage-free egg offerings and support the sales and distribution of other specialty eggs into these important retail markets”.

 

Baker concluded “In spite of current and expected inflationary headwinds, we remain focused on what we can control by managing our costs and running efficient operations. We are mindful of our essential role to support the nation’s food supply with nutritious and affordable protein. We are confident we have the right strategy in place to meet this objective, with a proven operating model that will drive long-term growth. Importantly, we have sufficient capital to fund internal expansion projects and consider potential acquisitions to support our strategy”.

 

Since 2008, Cal-Maine Foods has invested more than $482 million in facilities, equipment, and related operations to expand cage-free production and distribution capability.