Tyson posts record Q2 performance
May 9, 2016
by Erica Shaffer
SPRINGDALE, Ark. – Tyson Foods Inc. raised its annual guidance to $4.20-$4.30, as strong consumer demand along with lower costs for feed combined to lift the company’s net income 40 percent in the second quarter.
For the quarter ended April 2, Tyson reported net income of $432 million, or $1.07 per share, compared with $310 million, or 75 cents per share in the year-ago quarter.
|Donnie Smith, president and CEO of Tyson Foods
“Our business continues to perform very well, delivering record second quarter operating income and return on sales, in what is typically the most challenging quarter of our fiscal year,” Donnie Smith, president and CEO, said in a statement. “Sales are growing in key retail product lines. The pricing and marketing investments we've made are paying off in increased volumes in strategic products including Hillshire Farm smoked sausage and lunchmeat, Jimmy Dean breakfast sausage and Ball Park hot dogs. With a focus on the longer term, we have a three-year pipeline of innovation across all segments with exciting new product launches to keep our offerings in the retail, food service and international channels relevant to consumers.”
Sales for the quarter eased 8.1 percent to $9.17 billion from $9.98 billion.
For the six months ended April 2, 2016, net income was $893 million, up from $619 million in the first six months of fiscal 2015.
Sales for the first six months slipped 12 percent to $18.3 billion from $20.8 billion reported in the first six months of fiscal 2015.
On a segment basis:
Feed costs decreased $80 million and $140 million during the second quarter and six months of fiscal 2016, respectively in the company’s chicken business. Adjusted operating income advanced to $347 million from $332 million on improved operational execution and lower feed ingredient costs. Sales volume increased during the second quarter on stronger demand for Tyson chicken products.
In the beef segment, adjusted operating income increased to $40 million from a loss of $20 million a year ago due to more favorable market conditions associated with an increase in cattle supply which drove down costs for fed cattle, Tyson said. Sales volume advanced on higher live cattle processed.
Excluding the impact of the divestiture of the company’s Heinold Hog Markets business, sales volume in Tyson’s pork business grew 3.1 percent on improved demand for pork products. Adjusted operating income in the segment was $140 million, up from $99 million in 2015. “Live hog supplies increased, which drove down livestock cost and average sales price,” according to the company. “Operating income increased as we maximized our revenues relative to live hog markets and due to better plant utilization associated with higher volumes.”
In the prepared foods business, adjusted operating income advanced to $197 million from $157 million in the second quarter of 2015. Sales volume in the segment was flat, but declined in the in the first six months of fiscal 2016, according to Tyson.
Operating income improved on product mix changes as well as lower input costs of approximately $95 million. The segment also benefitted from $111 million in synergies, of which $41 million was incremental synergies in the second quarter of fiscal 2016 above the $70 million of synergies realized in the second quarter of fiscal 2015, Tyson reported.
“The positive impact of these synergies to operating income were partially offset with heavy investments in innovation, new product launches and the strengthening of our brands,” the company said.