Cal-Maine Foods flagged its appetite for further
acquisitions as it revealed success, so far, in seeing off high grain costs – managing
to lift the prices of its eggs faster than its grain bills.
The group's shares hit a four-year high.
The world's biggest egg group flagged its quest to "identify
suitable acquisitions to enhance our growth and build shareholder value", even
after the purchase of Texas-based operations from Pilgrim's Pride, the broiler
Dolph Baker, the Cal-Maine Foods chief executive, said that the
group was "pleased with the progress we have made in integrating" the new
acquisitions, which have capacity for some 1.4m laying hens.
Many investors have cautioned over the prospect for
consolidation in grain consuming industries forced by the hit to margins from higher
In fact, Cal-Maine Foods revealed that its own margins had
expanded, with egg prices rising by 10.8% to average of $1.238 per dozen in the
three months to September 1, ahead of feed costs up 5.4% at $0.51 per dozen.
Mr Baker acknowledged that "the impact of drought damage to
US corn and soybean crops "will likely keep our feed costs near record-high
levels" in the company's current financial year, which ends next May.
However, he was upbeat about prospects for the current
quarter, which will bring the important Thanksgiving period.
"Current market conditions are favourable with strong retail
demand for eggs, especially as we head into the busy holiday season," Mr Baker
In the three months to September 1, the rise in egg prices,
coupled with a 1.0% increase in volumes, drove revenues 11.9% higher to $272.9m.
Earnings trebled to $9.42m, equivalent to $0.39 per share,
and ahead of the $0.35-a-share result that the market had expected.
"These results reflect a strong start to our fiscal year in
what is typically our most challenging quarter," Mr Baker said.
Cal-Maine shares closed 1.8% higher at $45.74 in New York, having hit $47.00 earlier, the highest since August 2008.