Tyson’s GAAP operating income for the second quarter amounted to US$1.3 million, up 26% year-on-year, with an adjusted operating income of US$720 million, up 40%. Total Company GAAP operating margin was 6.4%, with an adjusted operating margin of 6.5%. As of April 3, Tyson’s liquidity was US$2.6 billion. Tyson also reduced debt by approximately US$1 billion.
Tyson Foods President and CEO, Dean Banks, said: “We delivered a very strong performance in a complex operating environment with continued success in retail and improvements in foodservice as the industry is recovering. We generated adjusted operating income growth of 32% for the first half of fiscal 2021, driven by solid results in Beef and Prepared Foods.”
In the beef segment, sales volume is said to have decreased during the second quarter of fiscal 2021 due to a reduction in live cattle processed, partially associated with the impacts of severe winter weather and a challenging labour environment. Sales volume was relatively flat for the first six months of fiscal 2021 as the impacts in the second quarter were partially offset by strong domestic and export demand as well as the prior year impact of a fire which caused the temporary closure of a production facility for the majority of the first quarter of fiscal 2020.
Additionally, operating income was impacted by approximately US$60 million and US$50 million of incremental net derivative gains in the second quarter and first six months of fiscal 2021, respectively, as compared to the second quarter and first six months of fiscal 2020.
Further, operating income in the first six months of fiscal 2021 was impacted by a cattle supplier’s misappropriation of company funds, which resulted in a US$55 million gain related to the recovery of cattle inventory as compared to a US$54 million loss recognised in the first six months of fiscal 2020.
For fiscal 2021, USDA indicates domestic protein production (beef, pork, chicken and turkey) to increase less than 1% compared to fiscal 2020 levels. On an adjusted basis, Tyson anticipate Prepared Foods results in fiscal 2021 to be similar to fiscal 2020, and Pork results will likely be lower in fiscal 2021 as compared to fiscal 2020. At current grain prices, it expects Chicken results will be lower in fiscal 2021 compared to fiscal 2020. Due to stronger than expected performance in beef and current market conditions, Tyson expects Beef to deliver improved fiscal 2021 results compared to fiscal 2020.