Dive Brief:
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Tyson Foods, Inc., reported one of its strongest earnings quarters to date on Monday, with the company's CEO noting a "remarkable turnaround" in chicken and pork following a period of difficult market conditions that led to layoffs and plant closures.
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Chicken profits in the third quarter reached the highest they’ve been in the past eight years. Overall earnings were the strongest of the last seven quarters, CEO Donnie King said in a call with analysts. Adjusted operating income totaled $491 million for the three months that ended June 29, up 174% versus last year.
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“We are clearly benefiting from better market conditions,” King said. Beyond lower feed costs, the meat giant is also benefiting from operational improvements after closing or selling a number of plants to maximize its production footprint.
Dive Insight:
Following a down period for meatpacking companies pressured by high labor, input and operational costs, a global surplus of grain has weakened feed prices to the benefit of Tyson, Pilgrim’s Pride and other competitors.
In addition to lower costs, King said live operations for the chicken business continue to improve, with hatchability and livability rates up over last year, as Tyson optimizes its smaller production footprint.
Over the past year or so, the Arkansas-based company has shuttered nine processing plants — six chicken and three fresh meats — including a recent pork plant closure in Perry, Iowa, at the end of June. The closures have helped boost profits in the chicken and pork sectors even higher than executives expected, according to King.
"Our disciplined approach to capital allocation continues to improve cash flow," King said, adding: "In fact, all of our businesses are more agile, collaborative, and disciplined than they have been in some time."
Tyson is currently reinvesting some of its chicken profits to meet growing demand for value-added products, such as frozen tenders and nuggets. King said Tyson has used the proceeds to accelerate ramping up its fully-cooked plant in Danville, Virginia, for new products including honey bites and restaurant-quality wings.
“Our focus on the basics has built a fundamentally stronger chicken business with an eye on the future,” King said. Adjusted chicken income soared to $307 million in the quarter, up from a loss of $63 million last year.
The pork business also contributed to Tyson’s turnaround as herd health and productivity remained strong, driving ample supply of lean hogs. Operational efficiencies combined with strong demand led to better-than-anticipated results, King said.
Adjusted pork income totaled $22 million in the quarter compared to a loss of $70 million last year.
Meanwhile, King said Tyson’s prepared foods business, which includes branded products from Jimmy Dean, Ball Park and Hillshire Farm, fell in line with company expectations. Beef also performed as expected with little to no sign of a U.S. cattle rebuild on the horizon, fueling uncertainty in the market and pricier grocery store cuts.
Looking ahead, Tyson is bullish on profits for the rest of the year, updating its adjusted operating income outlook between $1.6 to $1.8 billion for fiscal 2024. Sales expectations were unchanged.
