Tyson’s beef sales rise in Q4 but results below estimates

United States
Published:  14 November, 2018

The U.S. based food and protein processor has posted overall lower sales in its fourth fiscal quarter and says the Company has been hit by higher costs due to trade tariff issues.

Net income for Tyson Foods, the largest U.S. meat producer by sales, was US$537 million in its fourth fiscal quarter, or US$1.47 per share, up from US$394 million, or US$1.07 per share, in the previous year. Adjusted earnings per share (EPS) stood at US$1.58, while revenue totalled US$9.99 billion, down from US$10.1 billion last year. Reportedly, analysts expected an EPS of US$1.33 and revenue of US$10.3 billion. Hit by lower demand for chicken, shares were down by nearly -7% upon announcement of results on November 13. Reportedly, the U.S. trade disputes have resulted in lower exports of U.S. beef and pork to China and Mexico, boosting the domestic supply of the competing meats.

Sales in the chicken business increased +2.6% in the quarter but primarily due to acquisitions. Operating income in this segment fell nearly -34% year-on-year. However, sales volume in the beef category increased +3.4% due to “improved availability of cattle supply, stronger demand for its beef products and increased exports”. The average sales price decreased for the fourth quarter, associated with increased availability of live cattle supply and lower livestock costs. In full fiscal 2018, the average sales price increased as demand for its beef products and strong exports are said to have outpaced the increase in live cattle supplies in the first six months of fiscal 2018, partially offset by lower livestock costs in the back half of fiscal 2018.

Operating income in beef is reported to have increased +8.9% as the Company continued to maximise its revenues relative to live fed cattle costs, partially offset by increased labour and freight costs and one-time cash bonus to frontline employees of US$27 million incurred in the second quarter of fiscal 2018. The beef segment represents almost 40% of Tyson’s total sales. Currently, the Company is not exporting to China.

“Tyson Foods produced solid earnings in fiscal 2018, demonstrating the strength of our differentiated portfolio and diversified business model,” said Noel White, President and CEO, Tyson. “We exceeded our revised guidance due to a strong finish in the fourth quarter in the Beef and Pork segments. Prepared Foods drove margin expansion, while the Chicken segment closed the gap from earlier in the year with increased promotional activity.”

Tyson expects industry fed cattle supplies to increase approximately +2% in fiscal 2019 compared with fiscal 2018. “We expect ample supplies in regions where we operate our plants. We believe our Beef segment's adjusted operating margin will be above 6% in fiscal 2019.”