Protein Tyson reports strong second quarter results

by Editor fleischwirtschaft.com
Friday, May 10, 2019
The company delivers record second quarter prepared foods and beef operating income.
Photo: Tyson Foods
The company delivers record second quarter prepared foods and beef operating income.

Tyson Foods, one of the world’s largest food companies and a recognized leader in protein with leading brands including Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair, reported their results.

In the segment beef the sales volume increased for the six months and second quarter of fiscal 2019 due to improved availability of cattle supply and stronger demand for their beef products. Average sales price increased for the six months and second quarter of fiscal 2019 as demand for our beef products remained strong. Operating income increased for the six months and second quarter of fiscal 2019 as the company continued to maximize our revenues relative to live fed cattle costs, partially offset by increased operating and labor costs. Additionally, operating income was impacted in the second quarter of fiscal 2018 by a one-time cash bonus to frontline employees of $27 mill.

In pork the sales volume increased for the second quarter of fiscal 2019 due to increased domestic availability of live hogs. Sales volume decreased for the six months of fiscal 2019 as a result of balancing the supply with customer demand during a period of margin compression in the first quarter of fiscal 2019, partially offset by the increased sales volume in the second quarter of fiscal 2019. The average sales price decrease for the six months and second quarter of fiscal 2019 was associated with lower livestock costs. Operating income increased for the second quarter of fiscal 2019 as the company maximized their revenues relative to the live hog markets due to operational and mix performance. Operating income for the six months of fiscal 2019 remained strong, but lower than prior year results due to periods of compressed pork margins caused by excess domestic availability of pork in the first quarter of fiscal 2019. Additionally, operating income was impacted in the second quarter of fiscal 2018 by a one-time cash bonus to frontline employees of $12 mill.

Sales volume in the segment chicken increased for the six months and second quarter of fiscal 2019 primarily due to incremental volume from business acquisitions. Average sales price decreased for the six months and second quarter of fiscal 2019 due to sales mix primarily associated with the acquisition of a poultry rendering and blending business in the fourth quarter of fiscal 2018. Operating income decreased for the six months and second quarter of fiscal 2019 due to increased operating costs, in addition to higher feed ingredient costs and current market conditions. Additionally, operating income was impacted in the second quarter of fiscal 2018 by a one-time cash bonus to frontline employees of $51 mill.

Sales volume in prepared foods decreased for the six months and second quarter of fiscal 2019 primarily from business divestitures. Average sales price increased for the six months and second quarter of fiscal 2019 due to product mix which was positively impacted by business divestitures. Operating income increased for the six months and second quarter of fiscal 2019 due to strong demand for their products, improved product mix and lower raw material costs, partially offset by increased operating and labor costs. Additionally, operating income was impacted in the second quarter of fiscal 2018 by a one-time cash bonus to frontline employees of $19 mill. and a $75 mill. impairment associated with the divestiture of non-protein business.

“I’m pleased with our direction as we begin the back half of the year,” said Noel White, Tyson’s president and CEO. “The Prepared Foods segment produced its second consecutive quarter of record return on sales. Both the Beef and Pork segments were solid performers, while the Chicken segment is poised for improvement following what we believe are its margin lows for the year. Looking ahead, African Swine Fever has the potential to impact the global protein industry on a level that we have never experienced, and it is an event that will underscore the power of the Tyson business model. While Tyson’s diversity across segments provides stability and puts us in a position to capitalize when opportunities arise, all proteins could see a benefit. A worldwide decrease in pork supply would offer significant upside to our pork business, while also lifting the chicken and beef businesses as substitutes and increasing raw material costs in our prepared foods business.”

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