SPRINGDALE, Ark. – The implications of what could be the new normal in the beef industry, along with innovation plans that include the launch of alternative protein products and possible tailwinds created by African Swine Fever (ASF) were some of the highlights gleaned from Tyson Foods Inc.’s recent conference call with financial analysts. During the Feb. 7 call, Tyson’s President and CEO Noel White and Stewart Glendinning, executive vice president and chief financial officer discussed its fiscal 2019 first-quarter results, while addressing some of the company’s innovations, opportunities and challenges in the coming year and beyond.
Having grown its stake in the plant-based protein sector by increasing its investment in Memphis over the past two years, White teased that Tyson may be announcing the rollout of a similar line of products sooner rather than later. He said incremental growth in this sector is part of Tyson’s commitment to make non-animal proteins more accessible to consumers in domestic and global markets.
“We will be leveraging all the resources we have at our disposal,” said White, which includes “our insights, our innovation, manufacturing, sales, distribution and a global platform. And in the weeks ahead, you'll be hearing more from us as we announce new products in the alternative protein space.”
In discussing Tyson’s beef segment strategy moving forward, White said the sustained supply and the strong demand for beef globally, “have spurred us to analyze and quantify the apparent structural shifts in the beef industry.”
He added the advantageous market for beef combined with Tyson’s profitable premium beef programs and value-added offerings are reasons behind it reassessing plans in the future.
“We intend to understand the dynamics of these two factors to better predict the enhanced margin structure that our beef business could generate in the coming years,” he said.
Within Tyson’s Prepared Foods business segment, White touted the bounce-back of its pepperoni products, which he attributed in part to operational investments. The resulting “turnaround of our pepperoni business,” said White, has not only impacted the Prepared Foods’ bottom line, but it is showing signs of positively impacting the foodservice segment.
“With capacity utilization percentages in the high 90s and margins strengthening in Q1, we expect the improvement in the pepperoni business to carry us through the balance of the year,” said White.
Addressing future capital expenditures, Glendinning estimated investments to be about $1.5 billion in fiscal 2019, however spending in fiscal 2020 is expected to decrease to about $1.2 billion.
“Although we're are scaling back on capex, it will remain higher than depreciation,” he said. “Net interest expense should approximate $450 million. Liquidity is expected to remain in line with our $1 billion minimum target.”
Asked about the potential global threat of ASF, White declined speculating due to discrepancies in accounts of the disease’s negative impact. He said Tyson hasn’t based any forecasts on it.
“I think the general consensus would be that it's probably a little worse than what's reported. And that would certainly provide upward potential,” he said. “But if we do see, particularly the Chinese back in the market, there could be sizable upside benefit to our pork business.”