Quarterly Loss Leads Cagle's to Cut Back

US - Despite higher sales for the last quarter, Cagle's has reported a net loss, attributed to higher feed costs, which is blamed for a cut in production at one of its plants at the end of this month.
calendar icon 18 August 2011
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Cagle's, Inc. has reported a net (loss) of $(5.7) million or $(1.24) per share for the quarter ended 2 July 2011 compared to net income of $3.5 million or $0.75 per share for the quarter ended July 3, 2010.

Net sales for the first quarter were $81.9 million, up 4.2 per cent from $78.6 million, reflecting an increase in pounds sold of 14.9 per cent and a decrease in sales price for poultry of $0.059 per pound as compared to the same period of fiscal 2011. Quoted market price changes for products for the first quarter of fiscal 2012 versus the same period last year were: leg quarters increased 27.4 per cent, boneless breast decreased 17.6 per cent, breast tenders decreased 11.8 per cent, wing markets decreased 40.3 per cent, and whole birds without giblets were unchanged.

Cost of sales for the first quarter of fiscal 2012 increased 27.1 per cent as compared with the same period last year, from $68.2 million to $86.7 million. Feed ingredient prices for broilers processed in the first quarter of fiscal 2012, which represented 46 per cent of the total cost of sales, increased 68.3 per cent or $16.3 million as compared to the first quarter of fiscal 2011.

Cagle's and the industry's profitability continue to be challenged by high feed cost accentuated by broiler markets pressured by over-production. Effective the end of August, Cagle's will have executed a further cut-back in production at its Pine Mountain Valley plant that will result in the company processing 22 per cent less head than capacity. Towards the end of July, the industry had begun to react in similar fashion with egg sets six per cent below the same period in 2010. These industry cut backs should have a positive effect on markets and final margins in the coming months.

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