Tyson Foods Record year overshadowed by CEO exit
The Chicken business shortfall combined with the announcement chief executive officer Donnie Smith is retiring at the end of the year, pushed the company’s stock price down 14% in trading on 21 November.
Net income for the year ended 1 October totaled $1,768 mill., equal to $4.67 per share on the common stock, up from net income of $1,220 mill., or $3.06 per share, in fiscal 2015. Sales for the year fell to $36,881 million from $41,373 million.
The company had announced Mr. Donnie Smith, CEO of Tyson, pending retirement and that Tom Hayes, president of the company, will succeed him. It was Mr. Hayes who addressed the challenges the company faced, most notably in its Chicken business, during the fourth quarter. During the quarter Tyson Foods recorded net income of $391 mill., or $1.06 per share, up from $258 mill., or 65c per share, in the same period a year ago. Sales for the quarter dipped to $9,156 mill. from $10,506 mill. the previous year.
In the Chicken segment, the company’s largest, for the fourth quarter, operating income was $220 mill. with a 7.8% operating margin. Adjusted volume was down 3.2% and average price was up 3.5%. For the year, Chicken segment operating income was $1,305 mill. on sales of $10,927 mill. Both were below segment results during fiscal 2015.
Analysts expressed concern the fourth quarter Chicken business performance may continue in fiscal 2017. Mr. Hayes said he expected strong results in the first quarter, and Mr. Smith added that he expected Chicken earnings to be at or above the company’s normalized range.
Looking ahead, the company said in fiscal 2017, the US Department of Agriculture indicates domestic meat protein production will increase approximately 2% to 3% from fiscal 2016 levels. Specifically, chicken production is expected to increase 2%, beef 2% to 3% and pork 3%. The increased production is expected to translate into lower input costs of an estimated $125 mill. in Tyson’s Prepared Foods business.