Tyson reports quarterly, annual results and announces new CEO
Nov. 21, 2016
by Joel Crews
Tom Hayes, president, will succeed Donnie Smith as CEO on Dec. 31.
SPRINGDALE, Ark. – Tyson Foods Inc. officials reported higher profit in its fiscal fourth quarter in the shadow of lower sales ($9.16 billion in the quarter ended Oct. 1, 2016, vs. $10.51 billion during the 2015 fourth quarter ended Oct. 3, 2015). The company also announced the appointment of Tom Hayes to CEO, replacing Donnie Smith on Dec. 31, 2016.
During a call with analysts following the announcement of Smith’s retirement, the outgoing CEO said, “It’s a time of mixed emotions for me,” said Smith, who has served as CEO since 2009. He said the company’s board of directors and he agreed this was the right time to make this transition, when Tyson is performing well and growing significantly. “Simply put, I believe the company has a bright future and that Tom is the right leader for this next phase of our development.”
Smith dismissed any correlation to his retirement with the pending class-action lawsuit Tyson is facing related to allegations of poultry price fixing and collusion. He contended this was an excellent time to pass the torch, based on Tyson’s current position.
“We dispute the claims,” Smith said on the call with analysts, adding: “we’re looking forward to our opportunity to defending ourselves in court…that has nothing to do with the transition.”
In a statement issued earlier in the morning, Smith said, “I take great pride in having led Tyson Foods for the past seven years. In addition to helping the company deliver growth and strong shareholder returns, I am also proud of the efforts we have undertaken to make Tyson Foods a company with a conscience, focused on providing consumers wholesome, affordable food and making a positive difference in people’s lives,” he said.
Hayes was appointed president of Tyson earlier this year. He has spent 29 years in the consumer products industry. Prior to his role as president, he was chief commercial officer at Tyson Foods, and before that he was president of foodservice. Previously, Hayes was chief supply chain officer for The Hillshire Brands Co. Before that, Hayes was senior vice president and chief supply chain officer for Sara Lee North America, and prior to this role, he was president of Sara Lee Foodservice. Before joining Sara Lee in 2006, Hayes was group vice-president of US Foodservice, Inc.
“Tom Hayes is a proven leader who has played an important role in creating today’s Tyson Foods and driving growth across our company,” said John Tyson, chairman of the board of directors. “The plan we have announced today will result in a smooth leadership transition that positions Tyson Foods for continued growth and innovation.”
Tyson’s net income for the quarter of $391 million topped the 2015 fourth quarter mark by 52 percent. The company’s adjusted quarterly earnings per share of $.96 represents an increase of 16 percent over the same quarter of 2015. For the year, Tyson reported record-high EPS of $4.39, up 39 percent over fiscal 2015. Operating income for the year topped $2.8 billion, an increase of 31 percent. Sales for fiscal 2016 lagged behind the previous year, at $36.88 billion compared to $41.37 billion.
On a segment-by-segment basis, sales were down for the quarter and for the year. Chicken segment sales dropped 10 percent, to $2.81 billion vs. $3.02 billion during the quarter. For the year, sales in the chicken segment were off 2.6 percent at $10.93 billion compared to $11.39 billion in 2015. Pork segment sales for the quarter were $1.24 billion, a 6.8 percent decrease from the $1.31 billion posted in 2015. For the year, Pork segment sales were $4.90 billion, down 2.5 percent from $5.23 billion in fiscal 2015. Beef segment sales, hindered in part by an average price decline of 15 percent, were $3.48 billion for the quarter, a 7.4 percent slip from the same quarter last year. Likewise for the year, Beef segment sales were behind last year’s $17.24 billion by 1.1 percent, at $14.51 billion. The company’s Prepared Foods segment sales for the quarter were down 4.8 percent, at $1.84 billion vs. $2.01 billion. For the 2016 fiscal year, Prepared Foods sales were $7.35 billion vs. $7.82 billion in 2015, a drop of 2.9 percent.
Donnie Smith, CEO of Tyson since 2009, will step down at the end of the year.
Smith pointed out that there were plenty of positives in the year and even more to look forward to.
“Fiscal 2016 was our fourth consecutive year of record results,” Smith said. “We produced record earnings per share, operating income and operating margin.
“The Prepared Foods segment had a record margin for the year, while simultaneously driving industry-leading category growth at retail. The Pork segment had a record year as well, while the Chicken segment nearly matched last year’s record margin.” Smith added: “The Beef segment is a great turnaround story, producing normalized margins for the year.”
“The first seven weeks of fiscal 2017 have been phenomenal as we are off to the best start we have ever experienced. We’re confident we can increase the investment in our business while still growing and delivering another record year with earnings in the range of $4.70-$4.85 per share,” Smith said.
CFO, Dennis Leatherby pointed out, “Synergies and profit improvement for the fiscal year totaled $580 million, well exceeding our $500 million target.
“In fiscal 2016, we repurchased more than 28 million shares of our stock for $1.7 billion. This week the board of directors increased the quarterly dividend by $0.075, or 50 percent, to $0.225 per share. This continues our expectation to increase dividends for Class A shares by at least $0.10 per share annually,” Leatherby said.
Hayes added: “Looking forward, we will continue building this business for long-term, sustainable growth by investing in innovation, consumer insights, our brands, our customer relationships, our facilities and our people.”