Tyson's Hayes addresses performance, market challenges
Feb. 7, 2017
by Joel Crews
The company reported a great start of the year while facing trade uncertainties and an SEC investigation.
SPRINGDALE, Ark. – During a call with the media following the company announcing strong Q1 results on Feb. 6, Tom Hayes, president and CEO of Tyson Foods Inc., addressed some of the legal challenges that have caused the company to make headlines recently as well as its strategy for continued growth and investment in the company’s future with an eye on trade uncertainty.
Hayes confirmed the company received a subpoena from the US Securities and Exchange Commission (SEC) on the heels of recent news reports of alleged fixing of prices along with other poultry companies.
|Tom Hayes, president and CEO of Tyson Foods
“On Jan. 20, 2017, we received a subpoena from the SEC and it was in connection with the investigation related to the company,” Hayes said. “We are absolutely cooperating; this is a very early stage. Based on the limited information that we have, we believe it’s an investigation based on allegations in the broiler chicken anti-trust litigation. We believe very strongly, as we’ve said in the past, about our own operations and I guess I’ll leave it at that. We’re anxious to defend ourselves in court. We feel like we’ve got a great story to tell and that’s where I’ll leave it.”
Hayes declined to specify what information the subpoena requested.
The class-action lawsuit regarding recent allegations of collusion among several poultry companies was also addressed. “What we will say is that our average contract farmer has been raising chickens for us for 15 years,” adding that the compensation structure is made clear in contracts with producers who voluntarily enter into the contracts. Hayes pointed out contract growers are free to “discuss the terms of their contracts whenever they want.” He also said the company is willing to switch to other chicken producers in a specific area. “We also realize there is opportunity for continuous improvement all the time and we are constantly thinking about our relationships with our farmers,” he said.
Hayes added that the topic of pricing and supply issues have not been a hot-button issue among customers and that most of them have been longtime partners for many years. “They certainly vote with their wallets as it relates to how they feel about the pricing that we are offering and the programs that we have in place.”
Looking forward, Hayes says the investments in its meat and poultry facilities announced this past year, including capital improvement projects at plants in Robards, Kentucky, Council Bluffs, Iowa, Storm Lake, Iowa, Wilkesboro, North Carolina, and others reflect evolving product demand in various regions.
He said the company is trying to assess, “Where is our capacity, based on where we know growth to be. If we see a forecast that sets up to be hitting an area that we are squarely focused on growth for the company, we will make investments to either retro-fit current plants or add capacity to existing plants.”
When it comes to the company’s growth in terms of continued investments and capital expenditures, “What we want to do is make those right investments; make sure they are continually focused on how we are growing, how we are maintaining and expanding our margins.”
When asked about the potential impact of President Trump’s executive order withdrawing the US from the Trans-Pacific Partnership (TPP), Hayes pointed out that because the trade agreement was never implemented, the company isn’t in a position that it must now pull away from; rather it may face dealing with some bilateral agreements that would enhance trade to export markets. “We have seen that pork and beef exports continue to remain at high levels,” which he believes will continue, based on the demand for US red meat products outside the US. “For us, we like to keep North America open; the market that is open today, we want to continue to keep it open,” and conditions are favorable for that, at least for now, Hayes said.