USA, Springdale, Ark. Tyson Foods, Inc. 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 its results.
Beef sales volume increased due to improved availability of cattle supply, stronger demand for beef products and increased exports. Average sales price increased as demand for beef products and strong exports outpaced the increase in live cattle supplies. Operating income remained strong, although below prior year's record results, as the company continued to maximize its revenues relative to the higher live fed cattle costs, partially offset by increased labor and freight costs.
Pork sales volume decreased as a result of balancing the supply with customer demand during a period of margin compression. Average sales price increased due to price increases associated with higher livestock costs. The company was able to maintain strong operating margins, although below prior year's record results, by maximizing the revenues relative to the live hog markets due to operational and mix performance, which were partially offset by margin compression and higher labor and freight costs.
Chicken sales volume was up due to strong demand for chicken products along with the incremental volume from the AdvancePierre acquisition. Average sales price increased due to sales mix changes. Operating income benefited from $14 mill. of Financial Fitness Program cost savings, the positive incremental impact of AdvancePierre and slightly lower feed costs, partially offset by increased labor, freight and growout expenses.
Prepared foods sales volume increased primarily from incremental volumes from the AdvancePierre acquisition. Average sales price increased from higher input costs of $45 mill. and product mix which was positively impacted by the acquisition of AdvancePierre. Operating income increased due to $24 mill. of Financial Fitness Program cost savings, improved mix and the positive incremental impact of AdvancePierre, partially offset by higher input and freight costs.
The company expects industry fed cattle supplies to increase approximately 2–3% in fiscal 2018 as compared to fiscal 2017. Ample supplies in regions where the company operates its plants are expected. Tyson believes that the Beef segment's adjusted operating margin in fiscal 2018 should approach 6%.
Industry hog supplies are expected to increase approximately 1–2% in fiscal 2018 as compared to fiscal 2017. For fiscal 2018, the pork segment's adjusted operating margin should be around 9%.
AdvancePierre contributed approximately $85 mill. of revenue in the first quarter of fiscal 2018, and incremental revenue of approximately $230 million in fiscal 2018 for a total of approximately $330 million in the first full fiscal year as part of our operation is expected. The company will capture Financial Fitness Program net savings of approximately $75 mill. in fiscal 2018, which is a combination of AdvancePierre net synergies and reduction of non-value added costs. USDA projects an increase in chicken production of approximately 2% in fiscal 2018 as compared to fiscal 2017. Based on current futures prices, Tyson expects similar feed costs in fiscal 2018 compared to fiscal 2017. For fiscal 2018, the company believes that the chicken segment sales will grow with more than 4% volume growth, and adjusted operating margins should improve to around 11%.
For fiscal 2018, Tyson expects the prepared foods segment sales to grow and adjusted operating margin should be around 11%. The company will continue to evaluate the range as we complete the sale of the remaining non-protein businesses held for sale and further integrate AdvancePierre.