Tyson expects revenues to surpass $40B in 2015

by Joel Crews
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“It’s Tyson 2.0 and we’re a different company.” — Donnie Smith, president and CEO.

KANSAS CITY, Mo. – In summing up its fiscal year in a call with analysts on Nov. 17, Donnie Smith, president and CEO of Tyson Foods, Inc., looked past a lackluster fourth quarter based on the overall profitable results of the year, saying, “2014 was an outstanding year,” highlighted by the completed acquisition of Hillshire Brands. Categorizing the acquisition as a “watershed event,” Smith said the deal was completed in the fourth quarter and now, after six weeks of having Hillshire on board, the combined company promises a record-breaking fiscal 2015.

Dennis Leatherby, executive vice president and CFO, quantified the reasons for Smith’s optimism, telling analysts the company expects revenues to top $40 billion for the first time, forecasting the number to be closer to $42 billion for fiscal 2015. With record revenue growth, Tyson continues investing in itself. “We spent $195 million on capital expenditures for the fourth quarter and $632 million for the full fiscal 2014,” he said. Capital expenditures in the coming year are slated to be $900 million, increasing by nearly 50 percent.

Several times, Smith referenced the company’s plans to continue growing its chicken business as pricing for pork and especially beef is expected to remain high to the advantage of the chicken segment. Specifically, growth in Tyson’s fully cooked and tray-pack offerings are expected to flourish in early 2015 as the company continues focusing on added value products.

“Demand for tray pack is growing as retail consumers seek fresh, healthy options,” he said. He clarified that the emphasis on these products doesn’t represent an increase in supply, “but rather shifting capacity to a more value-added product mix.”

Also addressing the growing demand for antibiotic-free chicken, the company expects to see double-digit growth in its NatureRaised Farm brand, which was rolled out this past year. The company is well positioned to grow the segment due in part to the fact that domestic feed costs are expected to be down by approximately $350 million in the coming year.

“We have a diverse value-added portfolio and we don’t require record (high) chicken prices and cheap corn to do well,” Smith said. “Our strategy is steady growth, not a commodity roller coaster ride.”
Meanwhile investing in brand building on the Hillshire side of the business is expected to continue.

Smith mentioned that in the last fiscal quarter the company rolled out a line of Jimmy Dean frozen sandwiches and protein-based bowls for lunch and dinner, which include 16 premium-priced items. Also, after successful test marketing, the Hillshire Snacking platforms are expected to grow in the coming year as well as Hillshire Farm Naturals sliced lunch meat, featuring cleaner labels.

Leading the innovation on the Prepared Foods segment is Hillshire’s Sally Grimes, who is part of the company’s operations in the Windy City.

“We love having an office in Chicago and we are keeping key members of the team there,” Smith said.

“It’s Tyson 2.0 and we’re a different company,” he concluded.

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