Sales from Tyson Foods’ operations in the first quarter of the Company’s fiscal 2020 came in at US$10.8 billion, up 4.7% in volume and 1.4% in price. Generally Accepted Accounting Principles (GAAP) operating income was US$826 million in the quarter, up 2% from the prior year, while net income increased 2% to US$561 million. At US$3.8 billion, beef sales decreased 2%. According to Tyson, sales volume in the beef segment, which still holds the largest share of the processor’s business segments, decreased due to a reduction in live cattle harvest capacity as a result of a fire that caused the temporary closure of a production facility for the majority of the first quarter of fiscal 2020. Average sales price is reported to have increased as beef demand remained strong. Beef segment operating income increased “as we continued to maximise our revenues relative to live fed cattle costs, partially offset by increased operating costs and US$16 million of net incremental costs from a production facility fire”, said Tyson. Pork sales totalled US$1.37 billion (+7.3% in volume) and chicken sales came in at US$3.3 billion (+5.7%). At US$2.1 billion, processed foods sales were flat.
However, despite the contraction in sales, the beef segment posted a record 10.7% GAAP operating margin, confirming the high profitability that packers have enjoyed in 2019. Only pork witnessed a higher margin, at 13.9%, while the low marginality of chicken (1.7%) weighted negatively on the total, put at 7.6% for all segments.
As for the outlook in the current year, the industry fed cattle supplies are expected to increase approximately 1% as compared to fiscal 2019, with ample supplies in regions where the company has plants. It is also expected that for fiscal 2020, the beef segment’s adjusted operating margin will be toward the upper end of 6.5% to 7.5%, absent of additional impacts from African swine Fever.
“Our overall results in the first quarter of fiscal 2020 were in line with expectations. Our Beef and Pork segments performed well as the effects of African swine fever are beginning to materialise”, said Noel White, CEO, Tyson Foods. “With improved access to global markets resulting from recent trade developments, there are reasons to be optimistic about fiscal 2020 and beyond and we are well-positioned to capitalise on opportunities in the global marketplace. Although we anticipate the challenges and volatility typical in our second fiscal quarter, our long-term outlook remains positive”, he added.
