July 21, 2020

Cal-Maine Foods reports fourth quarter and fiscal 2020 results

Cal-Maine Foods, Inc. has reported on July 20 its results for the fourth quarter (13 weeks) and fiscal year ended May 30, 2020.

Net sales for the fourth quarter of fiscal 2020 were US$453.3 million, a 61.6% increase compared to US$280.6 million for the fourth quarter of fiscal 2019. The company reported net income of US$60.5 million, or US$1.25 per basic share and US$1.24 per diluted share, for the fourth quarter of fiscal 2020, compared to net loss of US$19.8 million, or US$(0.41) per basic and diluted share, for the fourth quarter of fiscal 2019.

For the fiscal year 2020, net sales were US$1,351.6 million compared to US$1,361.2 million for the prior year. The company reported net income of US$18.4 million, or US$0.38 per basic and diluted share, for fiscal 2020, compared to net income of US$54.2 million, or US$1.12 per basic and diluted share, for the prior year.

Dolph Baker, chairman and chief executive officer of Cal-Maine Foods, Inc., said: "Fiscal 2020 demonstrated Cal-Maine Foods' resiliency in the face of challenging business conditions and volatile egg prices.

"After three fiscal quarters characterised by an oversupply of eggs and depressed market prices, demand for eggs increased and market prices rose 62.4% during our fourth fiscal quarter over the average price for the first three quarters, as consumers purchased more eggs for preparing meals at home in response to the COVID-19 pandemic. This demand trend also coincided with higher seasonal demand during the peak Easter season. As a result, our sales volumes were up 10.9% compared with the fourth quarter of fiscal 2019.

"We are extremely proud of the dedicated work of Cal-Maine Foods' employees across our operations who worked particularly hard to meet the unexpected and unprecedented demand for eggs. The Southeast large market average price for conventional eggs for the fourth quarter of fiscal 2020 increased to US$1.71 compared to US$0.86 for the fourth quarter of fiscal 2019, with a high of US$3.18 and a low of US$1.02. For fiscal 2020 the Southeast large market average price for conventional eggs was US$1.22 compared to US$1.23 for fiscal 2019, with a high of US$3.18 and a low of US$0.62."

According to Baker, "The supply of eggs has continued to trend downward through the fourth quarter of fiscal 2020. Hen numbers reported by the United States Department of Agriculture (USDA) as of June 1, 2020, were 319.8 million, which represents 13.9 million less hens than reported a year ago, when the USDA also reported high flock productivity. The USDA reported that the hatch from January through May 2020 decreased 5%, including a 13.1% decrease in May, as compared to the same period in 2019, which will likely further reduce future egg supply levels."

Baker added: "For the fourth quarter, sales of specialty eggs were US$133.3 million, accounting for 29.9% of our egg sales revenue, compared with US$119.9 million, or 44.1% of egg sales revenue, in the fourth quarter of fiscal 2019. The increase in specialty egg revenue in the fourth quarter 2020 resulted from a 10.4% increase in specialty dozens sold in the fourth quarter of fiscal 2020 over the fourth quarter of fiscal 2019, as well as slight increase in specialty egg prices.

"Specialty eggs are an important part of our growth strategy, and we strive to provide a favorable product mix in line with consumer demand. We have continued to position Cal-Maine Foods to meet the expected additional demand for cage-free eggs. California, Colorado, Washington, Oregon, Massachusetts, Rhode Island and Michigan have all passed minimum space and/or cage-free requirements, mandating sale of only cage-free eggs with implementation of these laws ranging from January 2022 to January 2026. These states represent approximately 22.9% of the US total population according to the US Census Bureau. Legislation is also pending in Arizona and Hawaii for cage-free requirements. We have invested over US$371.7 million in facilities, equipment and related operations to expand our cage-free production starting with our first facility in 2008. Throughout the next two years, additional cage-free capacity will come online in Florida, Texas and Utah, which will provide significant additional processing, pullet and production capacity in time to meet expected customers' needs."

"Our operations ran well during the fourth quarter, and our managers and employees have done an outstanding job, especially during the outbreak of COVID-19. Despite the challenges, we have remained focused on efficient and responsible management of our production facilities," said Baker.

He added: "Operating income was US$76.1 million in the fourth quarter compared to an operating loss of US$30.4 million in the prior-year fourth quarter. We also benefited from a more favorable effective tax rate in fiscal 2020 and in the fourth quarter, as we recorded a tax benefit of US$2.4 million related to the carryback provisions of the Coronavirus Aid, Relief and Economic Security Act of 2020 (CARES Act). Overall, our farm production costs per dozen were down 0.8% over the fourth quarter of fiscal 2019, reflecting a 1.5% drop in feed costs. According to USDA reports, current supplies of corn and soybeans are favorable, and we believe we will continue to have an adequate supply of both grains in fiscal 2021. However, current ongoing uncertainties and supply chain disruptions related to the COVID-19 outbreak, weather fluctuations and geopolitical issues surrounding trade agreements and international tariffs may lead to further price volatility."

Baker said: "While we are facing an uncertain environment, we will continue to execute our growth strategy in fiscal 2021 - provide a favorable product mix, including cage-free and other specialty eggs, invest in our operations, identify acquisition or other growth opportunities that enhance our production, and manage our operations in a responsible and sustainable manner.

"On June 29, 2020, we published the Cal-Maine Foods 2019 Sustainability Overview, which includes our corporate initiatives that support environmental and social responsibility throughout our operations. Above all, we are focused on safely meeting the needs of our customers and providing outstanding products and service. We have a strong balance sheet with the financial flexibility to support our growth strategy, and we look forward to the opportunities ahead for Cal-Maine Foods in fiscal 2021."

- Cal-Maine