'Time of transformation' at Tyson
Sept. 29, 2017
by Kimberlie Clyma
The elimination of 450 jobs is part of the company's 'financial fitness' plan going into fiscal 2018.
SPRINGDALE, Ark. – Tyson Foods President and CEO Tom Hayes told analysts during a Sept. 29 call that “This is a time of transformation at Tyson Foods.” Included in that transformation is the announcement of the elimination of 450 jobs, mostly from the corporate offices in Springdale, Chicago and Cincinnati.
|Tom Hayes, Tyson president and CEO
“Refining our organization structure to enable agility, faster decision making and greater level of accountability began with our executive leadership changes announced in August and we’re continuing to streamline our structure by eliminating 450 positions,” Hayes explained, “It’s absolutely necessary to grow our business, deliver ever increasing value to our shareholders and sustain our business for the long haul. Ultimately our customers and consumers will benefit as we improve our responsiveness and decision-making speed.
“This is a time of transformation at Tyson Foods as we continue to grow our business through differentiated capabilities, deliver ongoing financial fitness through continuous improvement and sustain our company and our world for future generations,” Hayes said.
On Aug. 2, the company shared its plans for restructuring with the announcement of the departure of two executives – Monica McGurk, chief growth officer, and Andy Callahan, president, North American Foodservice & International. The changes came less than six months after the company announced a new senior leadership team in February, following Hayes’ appointment on Dec. 31, 2016. At the time, the company said the enhanced structure was created to focus on consumers, customers, technology and sustainability, and to align management to Tyson Foods’ purpose and strategy.
The new structure is designed around Tyson Foods’ Beef, Pork, Chicken and Prepared Foods segments. Group presidents have been tapped to lead the segments end-to-end, with responsibility for growth strategy, execution and developing teams across product categories and customer channels. Sally Grimes will become group president of Prepared Foods, Doug Ramsey has been named group president of Poultry, and Noel White has been selected as group president of Fresh Meats (Beef and Pork) & International. Each will report to Hayes.
The Sept. 29 analyst call outlined the company’s adjusted projections going in to fiscal 2018, which begins Oct. 1. The company reported stronger than previous guidance primarily due to the better-than-expected earnings in the beef segment.
“We are pleased we’ll report our sixth consecutive record year of adjusted EPS, and we’re focused on delivering an even better 2018 and setting the company up for long term success,” Hayes said.
The company issued a guidance of between $5.70 and $5.85 adjusted earnings per share which represents an increase of 8 to 13 percent over fiscal 2017.
“We project all segments will perform well in 2018,” Hayes said.
Operating margins for beef are in excess of 5 percent and the pork segment outlook is above 9 percent. The chicken segment’s return on sales is approximately 11 percent and the prepared foods segment is expecting returns in the 11 to 12 percent range, according to Hayes.
“We’re extraordinarily optimistic about our outlook and we believe it’s important to proactively control costs and drive efficiencies especially when we’re on a growth trajectory,” Hayes said. “Our approach to financial fitness removes inefficiencies, reduces costs and will focus on continuous improvements to create that fuel for continued growth. We believe that now is the best time to transform our company to meet the changing needs of a dynamic marketplace.”
Tyson is benefiting from the $4.2 billion acquisition of AdvancePierre Foods Holdings Inc. in June by realizing synergies of more than $200 million for fiscal 2018. In addition, the company is anticipating cumulative net savings of $400 million for fiscal 2019 and $600 million for fiscal 2020.
“These net savings will be from a combination of the synergies of AdvancePierre integration, technology drive efficiencies and the elimination of unnecessary cost,” Hayes said.
“We expect top line sales growth of approximately 6 percent with revenue of around $41 billion as we see sales growth in each of our segments and we’ll have the benefit of a full year of AdvancePierre sales,” said CFO Dennis Leatherby. “We expect to generate a tremendous amount of cash in fiscal 2018 through strong operational execution and the proceeds expected from the sale of three non-protein related businesses. Our capital allocation priorities haven’t changed and remain governed by our disciplined focus on driving long-term shareholder value as we plan to use our cash to reduce debt and grow our business organically through operational efficiency and capital expansion projects along with investing in innovation and brand building.”
In closing Hayes said, “We are extraordinarily excited about not just ‘18 but beyond, based on everything that we’re doing here.”