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Cal-Maine sees shares fade, places major free-range bet

By JACK WEATHERLY

Cal-Maine Foods Inc. reported on Monday net income of $39.8 million, or 82 cents per share, for the third quarter of fiscal 2019.

The Jackson-based company’s net sales for the quarter were $384 million, an 11.9 percent decrease from $435.8 million for the year-earlier period, the company said in a release.

The fiscal 2018 third quarter saw the company, the nation’s largest producer of shell eggs, record a net income of $96.3 million, or $1.99 per share, thanks to a $35 million, or 72-cent per share benefit from the federal Tax Cuts and Jobs Act.

Cal-Maine shares on the NasdaqGS market fell $1.36 to close at $43.27 even though the company beat the FactSet consensus for earnings per share of 50 cents. The 52-week range is $40.63 to $52.30.

Cal-Maine is increasingly reliant on specialty eggs, and so its board on Friday voted to invest $148 million in the expansion of two cage-free facilities.

“Specialty eggs remain a primary focus of our growth strategy,” Chairman and Chief Executive Dolph Baker in the release.

In November, California passed Proposition 12, which provides for 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.

Consequently, Cal-Maine Foods’ Board of Directors approved a major expansion of the cage-free capacity at the company’s Delta, Utah, facility, to include new facilities for 2 million cage-free hens and renovation of an existing cage-free facility for another 1.4 million hens.

Other approved expansion projects include adding pullets and cage-free capacity for 1 million hens in Pittsburg, Texas, and building new cage-free pullet housing in Zephyrhills, Fla. The total expenditure for these expansion projects is $148 million, which the Company expects to finance with cash on hand, investments, and operating cash flow.

“Specialty eggs, excluding co-pack sales, accounted for 24.7 percent of our sales volumes for the third quarter, compared with 24.3 percent a year ago,” Baker said. “Specialty egg revenue was 35 percent of total shell egg revenue, compared with 30.2 percent for the third quarter of fiscal 2018, reflecting slightly higher volumes and a 2.1 cent per dozen increase in average selling price for specialty eggs compared with the prior-year period,” said Baker.

For the third quarter of fiscal 2019, Cal-Maine will pay a cash dividend of approximately27 cents per share to holders of its common and Class A common stock. The dividend is payable on May 16 to holders of record on May 1.

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About Jack Weatherly