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Company’s actions paying off by “controlling the controllables.”
February 12, 2024
Fiscal 2024 is off to a good start for Tyson Foods, but three quarters remaining leaves the company cautiously confident in its full-year outlook. Net income during Q1 2024 beat expectations at $107 million, although it was down from $320 million in Q1 2023.
The beef segment remains the biggest wild card for the company, executives said, but those headwinds are being offset by the chicken and pork segments.
“We are controlling the controllables and taking necessary action, including right-sizing and modernizing our footprint and network design to drive efficiencies,” said Tyson Foods President and Chief Executive Officer Donnie King. “We are pleased with the quarter and believe we're taking the right steps. We are excited about our future and are focused on creating value for our shareholders.”
Some of the necessary actions over the past year, he said, included closing six of the company’s older, less-efficient chicken plants and two smaller beef case-ready, value-added facilities. Those actions are proving beneficial, and the company said it will continue evaluate opportunities to drive efficiency.
King touted “a more agile, collaborative, and disciplined business than a year ago,” with a lot of opportunity ahead. “I'm proud of our team members' continued efforts to enhance operational performance and want to thank all of them for their high level of engagement and their part in delivering our results in this quarter.”
Still, there is more work ahead for the company, he added. “We're leaving no stone unturned to drive long-term value for our shareholders.”
As consumers are still facing high prices, compared to two years ago, the company is also focusing on balancing customer elasticity with its own cost, an approach King believes is working.
“We will continue to support our brands through innovation, marketing, and strong customer partnerships, while meeting consumers where they are. I remain highly confident in our long-term strategy based on a broad portfolio of core proteins and strong brands, and I'm optimistic about our future.”
The company reported operating income of $177 million in its chicken segment, up from $69 million during the same quarter last year. John R. Tyson, chief financial officer for Tyson Foods, said operational improvements, including plant closures, along with improvements in live operations, yield, labor efficiency, and customer service, as well as improving market conditions, were the primary drivers for the segment in Q1.
Regarding the pork segment, better supply drove lower hog cost, leading to improving spreads. Operating income during Q1 2024 was $39 million, compared to a loss of $21 million in Q1 2023.
“Our team's focus on operational execution allowed us to capture the benefits of these favorable market dynamics, which resulted in improved profits both on a year-over-year and sequential basis,” Tyson said.
The company’s beef segment remains the challenge as tight supplies led to spread compression during Q1. The company posted a $206 million loss in beef, a large reversal from a profit of $166 million in Q1 2023. With no sign of herd rebuilding on the horizon, the company said it is prepared for multiple outcomes during the current cattle cycle.
“While spreads are expected to remain tight, our goal remains to be best-in-class operators, so that we can manage the business as efficiently as possible,” Tyson said, adding that the company has identified opportunities to improve execution and help offset some of the challenges from the current cattle cycle."
The company’s prepared foods segment performed relatively close to the same period last year, posting an operating income of $243 million in Q1 2024, down from $258 million from Q1 2023.
Year-over-year outlook expected to improve
John R. Tyson said that the solid results of Q1 indicate that the company’s financial year will improve year over year. However, he mentioned that Q2 is “seasonally weaker” and that the quarter started off with several significant weather events. Additionally, it is still early in the new fiscal year and uncertainties remain, especially in the beef segment.
“Our focus for fiscal 2024 remains to manage the business for profit and cash dollar generation, reflected in our guidance presented in dollar terms, rather than margin percentages,” Tyson said, adding that the company’s overall sales guidance will remain roughly flat, year over year.
“Tyson is a leader in the global protein industry. We have strong brands, a broad portfolio of products and a great team, all of which uniquely position us to win in the market," he said.
Krissa Welshans grew up on a crop farm and cow-calf operation in Marlette, Michigan. Welshans earned a bachelor’s degree in animal science from Michigan State University and master’s degree in public policy from New England College. She and her husband Brock run a show cattle operation in Henrietta, Texas, where they reside with their son, Wynn.
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