Despite a “challenging year,” in which labor challenges, supply chain constraints, and rapidly rising inflation all threatened to squeeze production, volume output and ultimately margins, CEO Donnie King told investors yesterday that he was “pleased with both a strong quarter and a full-year,” in which sales and earnings growth improved double digits and earnings reached $1.36bn for the quarter and full-year revenue is now predicted to reach between $49bn and $51bn.
Sales increased 20% in the fourth quarter and 11% during the full year, driven largely by higher average sales prices, which King said reflect Tyson’s “successful pricing strategies during the ongoing inflationary environment.”
Like many in the food industry, Tyson saw cost of goods rise quickly over the past year, including a record 20% surge in cattle prices during the fourth quarter, and notably higher grains, labor, meat and transportation costs.
But, King said, the company worked closely with customers to pass along that inflation through price increases, ultimately “achieving a 13% price improvement for the fiscal year and a 24% increase for the fourth quarter.”
Acknowledging that inflation is still rising, he noted that “in this dynamic environment, we will be aggressive in monitoring inflation and driving price recovery activities.”
‘Improving our volumes will be key” in fiscal 2022
Tyson’s success in the quarter can also be attributed to a 3% increase in volume for the second half of the year to nearly 350 million pounds – a notable achievement even though volume was slightly down for the full year given industry-wide labor challenges that negatively impacted the company’s volumes and ability to achieve an optimal mix across its processing footprint, King said.
“As we look toward fiscal ’22, improving our volumes will be key to delivering against our commitments,” King added. “We expect to grow our total company volumes by 2-3% next year, outpacing overall protein consumption growth.”
He explained that growth will be possible in part because of the actions Tyson’ has taken to become a “sought-after place to work,” which has worked towards by fully vaccinating its US team, investing in diversity, equity and inclusion efforts, increasing its wages to an average of $24 per hour, including full medical, vision, dental and other benefits, and continuing to explore “other innovative benefit offerings that remove barriers and make our team members’ lives easier.”
Tyson also is investing in 12 new plants, including nine chicken plants, two case-ready beef and pork plants and one new bacon plant, which will help it overcome capacity constraints to meet demand.
Tyson lays out 3-prong productivity plan
Tyson also unveiled a three-prong productivity plan to reinforce its efforts so far to bolster employee engagement and volume output, and ultimately “drive a better, faster and more agile organization that is supported by a culture of continuous improvement and faster decision-making,” King said.
With a goal of saving $1b by the end of fiscal 2024 compared to fiscal 2021, the plan will hing on three key “imperatives,” King said.
The first is to deliver $300m in recuring savings through operational and functional improvements related to finance, HR and procurement, King said.
The second is to deliver $250m in recuring savings through digital solutions, like artificial intelligence and predictive analytics to ease supply chain planning, logistics and warehousing.
“For example,” King said, “we are using technology to ensure that our shipments are optimally loaded to save freight costs and enhance customer service levels.”
The third is to automate difficult and higher turnover positions, such as the deboning process in the poultry harvest facilities. Additional simplification efforts at the plant level, as well as reduced transportation, handing and waste, should help the company boost harvest capacity 10% with its existing facilities
Taken together, King said these initiatives illustrate that Tyson is willing to take “bold actions” to support its ambitious goals while continuing to protect and foster employees.