Content Spotlight
2024 Feedstuffs Feed Ingredient Analysis Table
It's back! Feedstuffs has updated its feed ingredient analysis values table of more than 100 commonly used feed ingredients.
Fiscal 2018 sales expected to rise approximately 6%.
Tyson Foods released its second-quarter and first-half financial results this week, posting what it said are solid results for the current challenging market environment. However, the results were lower than expectations.
Net income for the quarter was $316 million, down from $341 million during the same period last year. Adjusted earnings per share (EPS) were $1.27, up 26% from last year, while generally accepted accounting practices EPS was 85 cents, down 8% from last year.
Tyson reported net income for the first half of 2018 at $1.95 billion, a sharp rise from $935 million during the first half of 2017. For the period, the company posted a record adjusted EPS of $3.08 for the first half of 2018, which is up 18% from last year
"We are continuing to grow our business as we create a modern food company focused on protein,” Tyson president and chief executive officer Tom Hayes said. “Sales, volume, adjusted operating income and adjusted EPS all increased in the fiscal second quarter versus the same period last year. Up against challenging conditions, we delivered solid results in all four of our segments.”
Including the benefit of lower enacted tax rates, the company said the adjusted EPS guidance for fiscal 2018 is $6.55-6.70, which represents an approximately 23-26% increase from the fiscal 2017 adjusted EPS.
“We’ve built a strong foundation of sustainable growth that positions us well for the second half of the fiscal year and beyond,” Hayes said. “We’re outpacing the food and beverage industry today - and looking ahead, we'll keep challenging the status quo and drive growth across our iconic brands.”
Segment results
In the Beef segment, Tyson said sales volume increased for the six months and second quarter of 2018 due to an improved supply of available cattle, stronger demand for beef products and increased exports.
“Average sales price increased for the six months and second quarter of fiscal 2018 as demand for our beef products and strong exports outpaced the increase in live cattle supplies,” the company noted. “Operating income for the six months and second quarter of fiscal 2018 remained strong -- although below the prior year's record results -- as we continued to maximize our revenues relative to the higher live fed cattle costs, partially offset by increased labor and freight costs and one-time cash bonus to front-line employees of $27 million incurred in the second quarter of fiscal 2018.”
Sales volume in the Pork segment decreased for the six months and second quarter of fiscal 2018 as a result of the company balancing its supply with customer demand during a period of margin compression. The average sales price increased for the first six months of 2018 due to price increases in the first quarter associated with higher livestock costs, Tyson noted.
“In the second quarter of fiscal 2018, average sales price decreased as livestock costs fell. While reduced compared to the prior year record results, operating income for the six months and second quarter of fiscal 2018 remained strong as we maximized our revenues relative to the live hog markets due to operational and mix performance, which were partially offset by margin compression, higher labor and freight costs and one-time cash bonus to front-line employees of $12 million incurred in the second quarter of fiscal 2018,” Tyson reported.
Strong demand for its chicken products, along with the incremental volume from the AdvancePierre acquisition, boosted sales volume in the Chicken segment during the first six months and second quarter of 2018. The average sales price increased for the 2018 six months and second quarter due to sales mix changes. The company said operating income remained strong for the six months and second quarter, benefiting from $37 million and $23 million, respectively, in Financial Fitness Program cost savings, in addition to positive effects from incremental AdvancePierre results and slightly lower feed costs that were partially offset by increased labor, freight and growout expenses and a one-time cash bonus to front-line employees of $51 million incurred in the second quarter of 2018.
In the Prepared Foods segment, sales volume increased for the six months and second quarter of 2018 primarily due to incremental volume from the AdvancePierre acquisition. The average sales price increased for the six months and second quarter from higher input costs of $90 million and $45 million, respectively, and a product mix that was positively affected by the acquisition of AdvancePierre. Operating income increased for the six months and second quarter due to $62 million and $38 million, respectively, in Financial Fitness Program cost savings, in addition to positive impacts from an improved mix and incremental AdvancePierre results that were partially offset by higher input and freight costs and a one-time cash bonus to front-line employees of $19 million incurred in the second quarter of 2018. Additionally, second-quarter 2018 operating income was affected by a $75 million impairment related to the divestiture of non-protein business, and second-quarter 2017 was affected by a $52 million impairment in the San Diego Prepared Foods operation.
Outlook
Tyson reported that the U.S. Department of Agriculture indicates that fiscal 2018 domestic protein production (beef, pork, chicken and turkey) should increase approximately 3% from fiscal 2017 levels, but strong export markets should partially absorb the increase. As previously announced, in the fourth quarter of fiscal 2017, the company’s board of directors approved a multiyear restructuring program -- the Financial Fitness Program -- that is expected to contribute to Tyson’s overall strategy of financial fitness through increased operational effectiveness and overhead reduction. Through a combination of synergies from the integration of AdvancePierre and additional elimination of non-value-added costs, the program is estimated to result in net savings of $200 million in fiscal 2018, $400 million in fiscal 2019 (including new savings of $200 million) and $600 million in fiscal 2020 (including additional savings of $200 million).
The majority of the savings -- which are focused on supply chain, procurement and overhead improvements -- are expected to be realized in the Prepared Foods and Chicken segments, the company said.
Tyson said it believes its Beef segment's adjusted operating margin in fiscal 2018 should be above 6% and its Pork segment's adjusted operating margin around 8%.
Based on current futures prices, the company said it expects an increase of approximately $100 million in feed costs in fiscal 2018 compared to fiscal 2017. As such, it said it expects Chicken segment sales volume to grow approximately 3-4%, and adjusted operating margins should be similar to fiscal 2017, at around 10%.
The Prepared Foods segment sales are expected to grow in fiscal 2018, with an adjusted operating margin of around 11%.
Fiscal 2018 sales are expected to grow approximately 6% to between $40-41 billion, attributed to incremental AdvancePierre sales of $1.1 billion, an increase in sales volume in the legacy businesses and an improvement in mix predominantly in the Chicken segment.
You May Also Like