Tyson Foods posts record earnings

By Oscar Rousseau

- Last updated on GMT

Tyson Foods CEO Donnie Smith said the business will 'continue to innovate'
Tyson Foods CEO Donnie Smith said the business will 'continue to innovate'

Related tags Generally accepted accounting principles Tyson foods Beef Pork Poultry

Meat supplier Tyson Foods has grown ahead of expectations after posting record third-quarter earnings as a focus on prepared foods and value-added chicken helped operating income surge.

Strong consumer demand and lower raw material costs have seen the company post record revenues for the third quarter of 2016. CEO Donnie Smith said the “outstanding quarter​” meant the business would raise its profit forecast for the fiscal year, with record growth expected to continue into 2017.

The great thing about our business is how much organic growth we have,​” said Smith. “Protein is very important to consumers and it’s great to be a protein-centric company. Fresh and value-added protein remains our core interest and we continue to build momentum and secure higher, and more stable, margins.​”

Operating income increased by 36% to $767m, with record earnings per share rising by 51% to $1.25 compared to the third quarter of 2015.

For the third quarter, ending 2 July, Tyson Foods posted a pre-tax profit of $484m, rising from $343m in the same period last year.

The meat business posted record operating margins of 13.9% for chicken​, with a strong performance for both prepared foods and pork.

Brazilian and Mexican exits

Recently-appointed president Tom Hayes​ said the strong growth of the chicken category was down to several components: an optimised cost structure; the removal of $1bn worth of cost inefficiencies; and a diversified pricing strategy, all underpinned by industry-leading customer service. Chicken operation divestments in Mexico and Brazil helped streamline the business.

It was a good, but not record-breaking, year for Tyson Foods pork

Hayes said there was “a lot to be excited about​” with a string of new product launches in the pipeline, including a frozen value-added chicken range for the autumn, as well plans to cut antibiotic use. “By the end of 2017 our entire chicken system will be antibiotic-free. We are ahead of our strategy and we will continue to go where the consumer wants us to be,​” said Hayes.

Smith added the business would “continue to innovate​”. In a prepared statement, he said: “We expect our high-level performance to continue and [we] are raising full year fiscal 2016 earnings guidance. Following record earnings this year, we intend to build on our momentum to generate more growth in fiscal 2017.​”

Protein growth for 2017

In a call, Smith added it was a “great quarter​” for pork as sales volumes decreased for the nine months of the year thanks to the divestment of Heinold Hog Markets in Q1 2015. Average sales prices increased as demand outpaced a jump in live hog supplies.

Volume sales of beef increased in the third quarter as the average price dropped, with a high number of available cattle negatively impacting livestock costs.

The business expects all category segments – chicken, beef, pork and turkey – to record growth of between 2-3% in 2017.

In the nine months ending 2 July the business achieved $27.7bn in sales, with adjusted operating income rising 35% compared to Q3 2015.

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