Tyson
The company's Beef and Pork segments fueled growth in the quarter.
 

SPRINGDALE, Ark. – Tyson Foods Inc. raised its earnings forecast for the year after strong performances in the company’s Beef and Pork segments lifted the company’s earnings by 29 percent in the first quarter of 2017.

Net income attributable to Tyson for the quarter ended Dec. 31, 2016 totaled 593 million, or $1.59 per share, compared with 461 million, or $1.15 per share reported for the first quarter ended Jan. 2, 2016.

Sales for the quarter totaled $9,182 million, compared with $9,152 million reported in the year-ago period.

“The year is off to the best start in company history with record earnings, record operating income and record cash flows,” Tom Hayes, president and CEO, said in a statement. “Return on sales for each operating segment was in or above the normalized range. The tremendous returns generated in the Beef and Pork segments are providing fuel for growth in our value-added Chicken and Prepared Foods segments.

“Tyson Foods again led retail food manufacturers in both sales volume and sales dollars for the 13-week period corresponding with our fiscal first quarter,” he added. “Not only did we lead in sales volume, according to IRI, we were the only company to show volume growth among the top 10 branded food companies.”

Tyson’s results were helped by strong performances in the company’s Beef and Pork segments, which benefited from higher domestic and export demand, according to the company.

Sales volume in the Beef segment increased on improved availability of cattle and stronger domestic and export demand. Higher domestic availability of beef supplies and lower livestock cost weighed on average sales price. Operating income increased to $299 million due to more favorable market conditions as the company maximized revenues relative to the decline in live fed cattle costs, partially offset by higher operating costs.

In the Pork segment, supplies of live hogs increased, which lowered livestock cost and average sales price, Tyson said. Operating income increased to $247 million on stronger export markets and operational and mix performance, which were partially offset by higher operating costs.

“Due to our outstanding performance in Beef and Pork and strong market conditions in the first quarter, we are raising our annual earnings guidance to $4.90-5.05 per share,” Hayes said. “We expect the earnings cadence for the remainder of the fiscal year to follow more normal patterns, including the seasonality typical of our second quarter.”

Improved demand for Tyson chicken products lifted sales volume in the company’s Chicken segment, although the result partially was offset by a decline in rendered product sales. Average sales price increased as a result of sales mix changes which offset general market price declines. Operating income decreased to $263 million due to increased marketing, advertising and promotion spend and higher operating costs which included $23 million of compensation and benefit integration expense. Feed costs decreased $20 million during the first quarter of fiscal 2017.

Sales volume in the Prepared Foods segment increased on improved demand for the company’s prepared foods products. Input costs of approximately $100 million weighed on average sales price; however product mix changes partially offset the result.

Higher operating costs at some Tyson facilities, increased marketing, advertising and promotion spend and $22 million of compensation and benefit integration expense weighed on operating income which was $190 million in the first quarter. However, $127 million in synergies, of which $32 million was incremental synergies in the first quarter of fiscal 2017, positively impacted the segment. Tyson said the positive impact of these synergies to operating income was partially offset with investments in innovation, new product launches and supporting the growth of the company’s brands.

“We’re on a path toward what we expect to be our fifth straight year of record results,” Hayes said. “Our path won’t be linear, but our team is focused on delivering long-term growth and creating shareholder value.”