Cal-Maine Foods, Inc. Announces Expansion Plans for Additional Cage-Free Production Capabilities

Rhea-AI Summary

Cal-Maine Foods, Inc. (NASDAQ: CALM) has announced $40 million in new capital projects to expand its cage-free production capabilities. The expansion includes five new cage-free layer houses across Florida, Georgia, Utah, and Texas, with construction starting by the end of 2024 and completion expected by late summer 2025. This will add capacity for approximately 1.0 million cage-free layer hens.

The company also provided an update on its conversion of former Tyson Foods facilities in Dexter, Missouri, acquired in March 2024. Cal-Maine Foods is working with local contract growers to add approximately 1.2 million additional free-range hens by fall 2025. These expansions align with the company's strategy to increase free-range production in response to customer demand and expanding state requirements for cage-free eggs.

Positive

• $40 million investment in new capital projects for cage-free production expansion
• Addition of capacity for approximately 1.0 million cage-free layer hens by late summer 2025
• Progress in converting Dexter, Missouri facilities for shell egg production
• Commitments from local contract growers for approximately 1.2 million additional free-range hens by fall 2025

Negative

• None.

Insights

Financial Analyst

Cal-Maine Foods' $40 million investment in cage-free production expansion is a strategic move aligning with market trends and regulatory changes. This capital allocation demonstrates the company's commitment to meeting growing consumer demand for cage-free eggs and complying with evolving state requirements. The planned addition of 1.0 million cage-free layer hens by late summer 2025 should significantly boost production capacity. The Dexter, Missouri facility conversion progress, with commitments for 1.2 million free-range hens by fall 2025, further strengthens CALM's market position. These expansions are likely to enhance revenue streams and potentially improve margins due to the premium pricing of cage-free and free-range eggs. However, investors should monitor the impact on short-term profitability as these investments may temporarily pressure margins. The company's ability to fund these projects through a mix of cash, investment securities and operating cash flow indicates a strong financial position, which is reassuring for shareholders.

Market Research Analyst

The expansion of cage-free and free-range egg production capabilities by Cal-Maine Foods is well-timed with shifting consumer preferences and regulatory landscapes. The egg industry is experiencing a significant transformation, with many retailers, foodservice operators and states mandating cage-free eggs. This $40 million investment positions CALM to capitalize on this trend and potentially capture market share. The diversification across multiple states (Florida, Georgia, Utah and Texas) mitigates regional risks and aligns with different market demands. The Dexter, Missouri project's progress, leveraging local contract growers, demonstrates CALM's ability to integrate acquisitions effectively and scale operations. This expansion strategy could lead to increased market penetration and enhanced brand reputation among conscious consumers. However, it's important to monitor potential oversupply risks in the cage-free egg market and the impact on pricing dynamics as more producers transition to these production methods.

Company Updates Progress on Dexter, Missouri Conversion

RIDGELAND, Miss.--(BUSINESS WIRE)-- Cal-Maine Foods, Inc. (NASDAQ: CALM) today announced that on October 4, 2024, its Board of Directors approved $40 million in new capital projects to further expand the Company’s cage-free production capabilities. The Company plans to fund the projects through a combination of available cash on hand, sales of investment securities and operating cash flow.

The projects will include the addition of five new cage-free layer houses across the Company’s locations in Florida, Georgia, Utah and Texas. The Company plans to start construction by the end of calendar 2024 and expects the projects to be completed with additional production capacity for approximately 1.0 million cage-free layer hens by late summer 2025. These additions will primarily replace recently retired caged facilities and add to the Company’s cage-free capacity.

The Company also provided an update on its conversion of the former Tyson Foods facilities in Dexter, Missouri, acquired on March 14, 2024. Following the closing, the Company began work to remodel and repurpose these assets for use in shell egg production. Cal-Maine Foods has also been working with local contract growers and has commitments that would result in approximately 1.2 million additional free-range hens by fall 2025, with plans to add more capacity in the future.

Sherman Miller, president and chief executive officer of Cal-Maine Foods, Inc., said, “We are pleased to announce these new expansion projects, which support our strategy to increase our free-range production in line with customer demand and expanding state requirements for cage-free eggs. The additional capacity will further enhance our ability to serve our growing customer base. We have made considerable progress with the conversion of the Dexter facilities and look forward to the additional production and distribution capabilities from this location. We greatly appreciate the support we have received from the existing network of local contract growers. As we continue to expand our operations, we remain committed to being the most efficient and sustainable producer of fresh shell eggs and egg products, and we will look for additional opportunities to further advance our growth strategy.”

About Cal-Maine Foods

Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packaging, marketing and distribution of fresh shell eggs, including conventional, cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced eggs. The Company, which is headquartered in Ridgeland, Mississippi, is the largest producer and distributor of fresh shell eggs in the nation and sells most of its shell eggs throughout the majority of the United States.

Forward Looking Statements

Statements contained in this press release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on management’s current intent, belief, expectations, estimates and projections regarding our company and our industry. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include, among others, (i) the risk factors set forth in the Company’s SEC filings (including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K), (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions and potential for recall), including but not limited to the current outbreak of highly pathogenic avian influenza affecting poultry in the U.S., Canada and other countries that was first detected in commercial flocks in the U.S. in February 2022 and that first impacted our flocks in December 2023, (iii) changes in the demand for and market prices of shell eggs and feed costs, (iv) our ability to predict and meet demand for cage-free and other specialty eggs, (v) risks, changes or obligations that could result from our recent or future acquisitions of new flocks or businesses and risks or changes that may cause conditions to completing a pending acquisition not to be met, (vi) our ability to complete our pending and anticipated construction projects on time and on budget, (vii) risks relating to changes in inflation and interest rates, (viii) our ability to retain existing customers, acquire new customers and grow our product mix, (ix) adverse results in pending litigation matters, and (x) global instability, including as a result of the war in Ukraine, the conflicts in Israel and surrounding areas and attacks on shipping in the Red Sea. SEC filings may be obtained from the SEC or the Company’s website, www.calmainefoods.com. Readers are cautioned not to place undue reliance on forward-looking statements because, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. Further, the forward-looking statements included herein are only made as of the respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required by law, we disclaim any intent or obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241007124521/en/

Sherman Miller, President and CEO

Max P. Bowman, Vice President and CFO

(601) 948-6813

Source: Cal-Maine Foods, Inc.

FAQ

What is Cal-Maine Foods' (CALM) recent investment in cage-free production?

Cal-Maine Foods (CALM) has approved a $40 million investment in new capital projects to expand its cage-free production capabilities, including five new cage-free layer houses across Florida, Georgia, Utah, and Texas.

When will Cal-Maine Foods (CALM) complete its new cage-free expansion projects?

Cal-Maine Foods (CALM) expects to complete the new cage-free expansion projects, adding capacity for approximately 1.0 million cage-free layer hens, by late summer 2025.

What progress has Cal-Maine Foods (CALM) made with the Dexter, Missouri facilities?

Cal-Maine Foods (CALM) has been working to remodel and repurpose the former Tyson Foods facilities in Dexter, Missouri for shell egg production, and has secured commitments from local contract growers for approximately 1.2 million additional free-range hens by fall 2025.

Why is Cal-Maine Foods (CALM) expanding its cage-free production?

Cal-Maine Foods (CALM) is expanding its cage-free production to align with growing customer demand and expanding state requirements for cage-free eggs, as part of its strategy to increase free-range production.