Chicken, prepared foods lift Tyson Q4

by Erica Shaffer
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Tyson Foods fresh chicken breasts
Tyson Foods' earnings were helped by chicken and prepared foods.

SPRINGDALE, Ark. – Tyson Foods Inc. reported a fourth-quarter profit of $258 million, or 63 cents per share compared to $137 million, or 35 cents per share in the year-ago quarter, despite weakness in its beef and pork segments. 

Donnie Smith, president, CEO, Tyson Foods
Donnie Smith, president and CEO, Tyson Foods

“Fiscal 2015 was an important year for Tyson Foods, because it proved that our house of brands gives us the ability to produce record sales and earnings in less than optimum conditions, all while successfully merging two large companies,” Donnie Smith, president and CEO, said in a news release.

Prepared foods and chicken contributed to Tyson’s performance. Revenues in the company’s Prepared Foods segment improved to $2.01 billion on strong volume and a 6.5 percent average price increase. Tyson attributed the result to its acquisition of Hillshire Brands.

“Adjusted average sales price increased primarily due to better product mix which was positively impacted by the acquisition of Hillshire Brands,” the company said in its earnings statement. “Adjusted operating income improved due to an increase in sales volume and average sales price mainly attributed to Hillshire Brands, as well as lower adjusted raw material costs of approximately $85 million and $285 million for the fourth quarter and 12 months of fiscal 2015, respectively, related to our legacy Prepared Foods business.”

In the Chicken segment, revenues jumped to $3.02 billion. Higher volume and lower feed costs offset a 2.2 percent decline in average prices. “Adjusted operating income increased due to higher sales volume and lower feed ingredient costs, partially offset by disruptions caused by export bans. Adjusted feed costs decreased $130 million and $440 million during the fourth quarter and 12 months of fiscal 2015, respectively,” the company said.

Low numbers of slaughter-ready cattle dragged on Tyson’s Beef segment performance. Revenues for the quarter were $4.01 billion, compared to $4.43 billion reported in the year-ago period. Volumes declined 1.5 percent, while average prices retreated 6.1 percent. The company said a reduction in live cattle processed contributed to the decline in sales volume.

“Adjusted average sales price decreased in the fourth quarter of fiscal 2015 due to higher domestic availability of fed cattle supplies, which drove down livestock costs,” the company said. “For the 12 months of fiscal 2015, adjusted average sales price increased due to lower domestic availability of beef products.”

Additionally, Tyson incurred $70 million in losses in the fourth quarter from mark-to-market open derivative positions and lower-of-cost-or-market inventory adjustments as a result of a large and rapid decline in live cattle futures during September.

Tyson’s Pork segment also struggled in the fourth quarter. Revenues declined to $1.22 billion from $1.63 billion recorded in 2014. The company said sales volumes declined on the divestiture of Tyson’s Heinold Hog Markets business in the first quarter. Excluding the divestiture, adjusted sales volume grew 6.5 percent and 3.5 percent respectively for the fourth quarter and 12 months of fiscal 2015.

“Live hog supplies increased, which drove down livestock cost and adjusted average sales price,” Tyson said. “While reduced compared to prior year, adjusted operating income remained strong as we maximized our revenues relative to live hog markets, partially attributable to operational and mix performance.”

Looking ahead, the company is expecting earnings per share of $3.50 to $3.65 in fiscal 2016. Protein production is forecast to increase approximately 3 percent.

“As we proceed with the integration of Hillshire Brands, we expect to realize synergies of more than $500 million in fiscal 2016 and more than $700 million in fiscal 2017 from the acquisition as well as our profit improvement plan for our legacy Prepared Foods business,” the company said. “The majority of these benefits will be realized in our Prepared Foods segment.”

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