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Cal-Maine Foods Reports on Q4 and FY 2019

07/22/2019

In a press release dated July 22nd Cal-Maine Foods (CALM) announced results for the 4th Quarter and Fiscal 2019 ending June 1st.

Results for CALM, a bellwether for U.S. shell-egg production and sales, reflect low unit revenue experienced by the entire industry resulting in unfavorable comparisons with Q4 of 2019.

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)

Quarter Ending

June 1st 2019

June 2nd 2018

Difference (%)

Sales:

$280,573

$443,095

-36.6

Gross profit:

$12,755

$141,216

-91.0

Operating income:

$(30,420)

$90,768

neg

Net Income

$(19,761)

$71,767

neg

Diluted earnings per share:

$(0.41)

$1.48

neg

Gross Margin (%)

4.5

31.8

-85.9

Operating Margin (%)

-10.8

20.5

-53.2

Profit Margin (%)

-7.0

16.2

-43.2

Long-term Debt:

$641

$2,544

-74.9

12 Months Trailing:

     

Return on Assets (%)

9.0

   

Return on Equity (%)

15.4

   

Operating Margin (%)

11.1

   

Profit Margin (%)

9.6

   

Total Assets

$1,156,278

$1,150,447

+0.5

Market Capitalization

$1,840,000

   

52-Week Range in Share Price: $36.65 to $51.55

Market Close July 19th $39.37 Post release July 22nd 10H00 $37.90

Forward P/E 63.1 Beta 0.5

For FY 2019 CALM earned $54.2 million on revenue of $1.36 billion generating an EPS of $1.12

Comparable values for FY 2018 were net profit, $125.9 million, revenue $1.50 billion and EPS $2.60.

In reviewing the CALM quarterly report the following calculated values* represent key data for the most recent Quarter. (Q4 Fiscal 2018 and difference in parentheses):-

  • Dozen shell eggs sold: 254,772,000 (251,955,000 +1.1)

  • Average selling price of all shell eggs: $1.08 per dozen; ($1.72 per dozen; -37.2%).

  • Average selling price of specialty eggs calculated from data released: $1.94 cents per dozen; ($1.95 per dozen; -0.5%).

  • Average selling price of generic eggs calculated from data released: $0.80 cents per dozen; ($1.64 cents per dozen; -50.0%).

  • Differential between generic and specialty eggs: $0.50 cents per dozen; ($0.31 per dozen; -61.3%)

  • Specialty eggs as a proportion of volume sold: 23.3%; (25.5%; -8.6%)

  • Specialty eggs as a proportion of sales value: 41.9%; (29.0%; +44.5%)

  • Proportion of eggs sold actually produced by Cal-Maine flocks: 87.3%; (85.6%; -2.0%).

  • Feed cost per dozen 41.1cents (41.6 cents)

*Assumes that 98 percent of sales value derived from shell eggs.

In commenting on results Dolph Baker, chairman and CEO of Cal-Maine Foods, Inc., stated, "our disappointing results for the fourth quarter reflect more challenging market conditions. The average market price in the Southeast for conventional eggs dropped 52.0 percent for the fourth quarter of 2019 compared to the fourth quarter of 2018 and was down 17.1 percent for the year.

He added "the unfavorable supply and demand balance and anticipated future egg supply growth trends have continued to affect market prices and our business. Over the past five quarters, we have noted our concern about the growing hatch rate pointing to a potential significant increase in laying hens and an oversupply of eggs. The USDA reported a near record high of 341.5 million hens as of April 1, 2019. While the hen numbers as of the June 2019 USDA report were down seasonally to 331.5 million, that level still represents approximately 2.9 million more hens than a year ago. The supply issue has been further pressured by a more productive flock, with the recent rate of lay up 2.0 percent to 77.9 eggs per hundred layers, and a 12.0 percent drop in exports of shell egg equivalents for the first five months of 2019. Additionally, the hatch rate continued to increase for the same period and was up 2.0 percent year over year through June 1, 2019. If these trends continue, we expect further pressure on market prices through calendar 2019.

"Specialty eggs, excluding co-pack sales, accounted for 23.3 percent of our sales volumes for the fourth quarter, compared with 25.5 percent a year ago. Specialty egg volumes were affected by the greater price differential between conventional and specialty eggs. However, specialty egg revenue was 41.9 percent of total shell egg revenue, compared with 29.0 percent for the fourth quarter of fiscal 2018, reflecting less volatility in the average selling price for specialty eggs. Specialty egg prices were down 1.2 percent for the fourth quarter but were up 0.8 percent for the year. We remain focused on growing our specialty egg business, including addressing the expected higher demand for cage-free eggs. We are working closely with our valued customers to meet this demand, and we will continue to offer a favorable product mix including cage-free and other specialty eggs.

"As announced in November 2018, California passed Proposition 12, which increased minimum space requirements per hen beginning in 2020 and mandates that all eggs and egg products sold in California must be cage-free by 2022. In line with this ruling and other industry changes, we are making the necessary investments in our operations to expand our cage-free capacity. Our previously announced projects in Utah, Texas and Florida are under way as scheduled, providing additional processing, pullet and cage-free capacity for approximately 6 million hens upon completion. The total expenditure for these new projects is projected to be approximately $187 million. As of June 1, 2019, including these new expansion projects, remaining projected costs expected to be incurred through February 2022 are approximately $167 million, which the Company expects to primarily finance with cash on hand, investments, and operating cash flow."