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Cal-Maine drops as labor and feed costs eat into profits

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Cal-Maine shares (NASDAQ: CALM) tumbled 7.3 percent in pre-market trade on Wednesday after the egg producer’s second-quarter earnings below expectations. Even though the company sold more eggs at greater prices, rising costs for feed ingredients, processing, packaging, transportation, and labor knocked on earnings.

The business cautioned that market pricing for its core feed ingredients will remain volatile this fiscal year, citing continuous interruptions from the pandemic, weather fluctuations, and geopolitical challenges as reasons. Due to the company’s dividend policy, they did not pay a dividend this quarter, which weighed on the stock. The corporation hopes to return to a cumulative profit dating back to the last quarter in which a dividend was paid, which was last winter. Cal-Maine has a total cumulative loss of $21.1 million to offset before paying a dividend. The net average selling price of all eggs increased 12% to $1.37 per dozen in the second quarter ended November 27. According to a business release, total hundreds sold grew to 276 million from roughly 274 million the year before.

As restaurant visitation grew, Chairman and Chief Executive Officer Dolph Baker credited increasing volume sales to continuing improvement in food service demand. Furthermore, he noted, a better international market boosted demand for shell eggs and egg products. Farm production expenses per dozen increased by roughly 22% in the second quarter, leading to a 29% increase in feed expenditures per dozen produced, according to the business.

In the second quarter, net sales increased by more than 12% to $391 million. The company made a profit of $1.17 million, less than a tenth of its profit from the previous financial year’s second quarter.