Higher sales volumes, prices lift Tyson in Q4

by Erica Shaffer
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Tyson
The company's beef and pork segments delivered strong results.
 
SPRINGDALE, Ark. – Strong demand for red meat drove higher results for Tyson Foods Inc. in the fourth quarter ended Sept. 30.

Net income attributable to Tyson was $394 million, or $1.07 per share, up from $391 million, or $1.03 per share, reported a year ago.

Sales for the fourth quarter were $10,145 million, compared with $9,156 million reported in the year-ago quarter.

The AdvancePierre acquisition contributed approximately $425 million of revenue in fiscal 2017, and Tyson expects incremental revenue of approximately $950 million in fiscal 2018 for a total of approximately $1.4 billion in the first full fiscal year as part of the Tyson Foods operation.

In the company’s beef segment, strong domestic demand and increased exports raised sales volume. Operating income climbed due to favorable market conditions as the company maximized revenues relative to a decline in live fed cattle costs, which was partially offset by higher operating costs, Tyson said.

Sales volume in the pork segment declined in the fourth quarter as Tyson worked to balance supply and demand. Average sales prices increased on higher demand for Tyson pork products and increased exports that outpaced live hog supplies. “Operating income increased as we maximized our revenues relative to the live hog markets, partially attributable to stronger export markets and operational and mix performance, which were partially offset by higher operating costs,” the company noted.

In the chicken segment improved demand for Tyson chicken products coupled with incremental volume from the AdvancePierre acquisition lifted sales volume, the company said. Sales mix changes drove increases in average sales prices. Higher operating costs weighed on operating income for the fiscal year. However operating income for the fourth quarter increased despite $56 million of restructuring and related charges, Tyson said. Feed costs dropped $65 million in the fourth quarter, and $80 million for fiscal 2017.

The prepared foods business saw sales volume increases for fiscal 2017, driven by improved demand for Tyson retail products and incremental volumes from the AdvancePierre acquisition, which were partially offset by declines in foodservice. Fourth quarter sales volume increased mostly on incremental volumes from AdvancePierre. Average sales price increased due to better product mix which was positively impacted by the acquisition of AdvancePierre as well as higher input costs of $50 million for fiscal 2017 and $105 million in the fourth quarter of fiscal 2017, Tyson said.

“Fiscal 2017 was a year of great change and, despite some challenges, our team remained focused on the long term by keeping consumer relevance, customer growth and shareholder value creation at the forefront,” Tom Hayes, president and CEO said in a statement. “Not only did we generate exceptional financial results, we also strengthened the foundation needed to accelerate growth through several initiatives. 

“We refined our strategy and put in place a new management team to implement it. With a renewed focus on protein packed brands, we initiated the divestiture of some non-protein businesses,” he said. “We acquired and are successfully integrating AdvancePierre Foods to expand our manufacturing capabilities in sandwiches and other prepared foods and to increase our presence in the convenience store channel.

“We repurchased roughly $650 million in shares before the AdvancePierre acquisition and then redirected cash flow and proceeded to pay down more than $600 million of debt. We announced a restructuring and cost cutting program to increase our agility as an organization. To cap off a great year, the board of directors increased the dividend by $0.30 to $1.20 per share annually, an increase of 33 percent.”

Looking ahead, Tyson’s “Financial Fitness Program” is expected to contribute to the company’s goal of increased operational effectiveness and overhead reduction. The program is expected to produce net savings of $200 million in fiscal 2018, $400 million in fiscal 2019 including new savings of $200 million, and $600 million in fiscal 2020 including additional savings of $200 million. Tyson expects to achieve these savings through a combination of synergies from the integration of AdvancePierre and reductions in non-value-added costs.

Most of the savings are focused on supply chain, procurement, and overhead improvements in the Prepared Foods and Chicken segments.

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