SPRINGDALE, Ark. – Tyson Foods Inc. reported a profit for the third quarter despite multiple challenges, including lower prices, supply-demand imbalances and the impact of tariffs on exports of chicken and pork products.
For the third quarter ended June 30, 2018, the company reported sales of $10,051 million, compared with $9,850 million reported in the year-ago period on July 1, 2017.
Net income attributable to Tyson was $541 million, or $1.47 per diluted share, compared with $447 million, or $1.21 per diluted share reported in the third quarter of 2017.
“We continued to grow our business in Q3, even with the headwinds we faced related to oversupply and pricing,” said Tom Hayes, president and CEO. “In this challenging environment, we delivered a solid quarter overall, growing earnings, operating income and margins.
For the nine months ended June 30, 2018, net income attributable to Tyson Foods was $2,487 million, compared with net income of $1,380 million reported in the year-ago period. Sales for the nine months of fiscal 2018 $30,053 million compared with $28,115 million reported in the nine months ended July 1, 2017.
On a segment basis:
The company’s Beef segment reported sales of $3,993 million in the third quarter. Higher sales volumes for the period were driven by improved availability of cattle supply, stronger demand for Tyson beef products and increased exports.
Average sales price in the segment declined during the third quarter on increased availability of live cattle supply and lower livestock costs. For the nine months of fiscal 2018, average sales price increased as demand for our Tyson products and strong exports outpaced the increase in live cattle supplies in the first six months of fiscal 2018, partially offset by lower livestock cost in the third quarter of fiscal 2018, the company said
Operating income in the segment increased to $318 million as the company worked to maximize revenues relative to live fed cattle costs. The result was partially offset by higher labor and freight costs and a one-time cash bonus to frontline employees of $27 million in the second quarter.
A supply imbalance of pork, along with higher labor and freight costs weighed on operating income in Tyson’s Pork segment during the third quarter and nine months of fiscal 2018. The company reported operating Income of $67 million in the third quarter, down from $136 million in 2017. For the nine months of fiscal 2018, the company reported $285 million compared with $524 million reported a year ago.
Sales volume in the Pork segment decreased for the nine months and third quarter as a result of efforts to balance supply with customer demand during a period of margin compression, Tyson said.
Average sales price decreased in the third quarter on lower livestock costs. Tyson said that for the nine months of fiscal 2018, average sales price was down slightly due to price decreases in the second and third quarters of fiscal 2018 associated with lower livestock costs.
In the Poultry segment, sales volume advanced in the nine months of fiscal 2018 driven by incremental volume from acquisitions, Tyson said. In the third quarter, sales volume decreased slightly because of sluggish demand for certain chicken products, partially offset by incremental volume from business acquisitions.
Operating income in the Poultry segment was lower at $692 million for the nine months compared with $790 million reported a year ago. Third quarter operating income was $189 million compared with $294 million reported in 2017.
“Higher labor, freight and grow-out expenses, in addition to $89 million of higher feed ingredient costs and derivative losses in the third quarter of fiscal 2018, and $51 million of one-time cash bonus to frontline employees incurred in the second quarter of fiscal 2018,” the company noted. The result was partially offset by savings generated through the company’s Financial Fitness program, a multi-year restructuring program that Tyson expects will improve operational effectiveness while reducing overhead.
“As part of this program, we anticipate eliminating approximately 550 positions across several areas and job levels with most of the eliminated positions originating from the corporate offices in Springdale, Arkansas; Chicago, Illinois; and Cincinnati, Ohio,” the company said.
Average sales price increased for the nine months and third quarter of fiscal 2018 in the Poultry segment due to sales mix changes and price increases associated with cost inflation.
“Our diverse portfolio continues to be a key advantage for us. Our Beef and Prepared Foods segments had a strong quarter, helping to balance the results in our Chicken and Pork segments, which faced stiff headwinds,” Hayes said. “We have a sound strategy and a solid foundation, which will continue to serve our business and shareholders well. We remain confident in our ability to create long-term value.”