Jun 7, 2011

 

Cagle's net loss increases due to expensive feed costs 

 

 

Increasing feed costs cause Cagle's Inc. to experience a net loss of US$0.6 million or US$0.12 per share for fiscal year 2011 in contrast to net income of US$2.5 million or US$0.55 per share for fiscal year 2010.

 

Net sales, however, increased to US$310.1 million, up 1% from fiscal 2010, reflecting an increase in sales lbs. of 2.6% and a decrease in sales price of US$0.0217 per lb.

 

For fiscal 2011, the company's feed cost increased by US$17.7 million or 18.5% compared with fiscal 2010, driven by a 75% increase in the cost of corn.

 

During the first six months of fiscal 2011, Cagle's realised some profit, with net income of US$6.6 million. However, in the last two quarters of the year, the company experienced the pre-mentioned feed price hikes without a corresponding increase in market prices, which resulted in losses in both its third and fourth quarters.

 

Feed prices continue to present a difficult challenge. Industry must lower supply in order to offset reduced demand and to support higher market prices. Cagle's continues to process at 80% of capacity at its Pine Mountain Valley deboning facility and does not contemplate any increase in the foreseeable future.

 

Quoted markets were variable with boneless breast up 6.8%, tenders up 5.3%, wings down 21.7% and leg quarters down 4%, the company said.

 

Cost of sales for the fiscal year increased US$7.5 million or 2.6% from last year reflecting higher feed cost of US$18/tonne or 7.2%. Fourth-quarter feed cost rose US$82/tonne or 34% above the same quarter of last year, increasing our cost of sales for the fourth quarter by US$11.7 million.

 

Industry egg sets are beginning to reflect restraint with the latest USDA Broiler Hatchery statement reporting egg sets at 98%, or 3.2 million less eggs for the week ending May 14. The reported reduction in egg sets would equate to a reduction in supply of approximately 14.4 million lbs. of ready-to-cook poultry per week. Continued reductions of this magnitude or larger would be very supportive of industry prices and margins, the company concluded.

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