Tyson sales up, in­come down

Firm on record pace for fis­cal year prof­its

Northwest Arkansas Democrat-Gazette - - FRONT PAGE - NATHAN OWENS

Ris­ing ex­ports and the ad­di­tion of pre­pared-foods com­pany Ad­vancePierre kept Tyson Foods Inc. on course for record earn­ings in fis­cal 2017, com­pany of­fi­cials said Mon­day.

The na­tion’s largest meat com­pany re­leased a third-quar­ter earn­ings re­port that showed mixed re­sults, with stronger sales across all busi­ness seg­ments along with lower earn­ings per share and lower net in­come com­pared with the same quar­ter last year. Tyson shares rose al­most 6 per­cent Mon­day.

For the quar­ter that ended July 1, Tyson re­ported a profit of $447 mil­lion, down from $484 mil­lion a year be­fore. Rev­enue was $9.85 bil­lion, up 4.7 per­cent from the same quar­ter in 2016. The Spring­dale-based com­pany beat an­a­lysts’ sales pro­jec­tions of roughly $9.48 bil­lion, ac­cord­ing to Zacks Con­sen­sus Re­view.

With strong sales and fi­nan­cial sup­port from ac­quired com­pa­nies — Hill­shire Brands Co. and Ad­vancePierre Foods — Tyson’s third quar­ter po­si­tions the com­pany for a year of record earn­ings per share and op­er­at­ing in­come, said Tom Hayes, Tyson’s pres­i­dent and chief ex­ec­u­tive of­fi­cer.

“Every seg­ment de­liv­ered vol­ume growth be­hind a strong start to grilling sea­son and new prod­uct in­no­va­tion,” Hayes said.

The com­pany re­ported higher ad­justed earn­ings com­pared with the same quar­ter last year in all di­vi­sions — beef, pork, chicken and pre­pared foods.

Tyson jumped from $91 mil­lion in op­er­at­ing in­come in its beef seg­ment in last year’s third quar­ter

to $147 mil­lion in the same quar­ter this year. The com­pany earned $136 mil­lion in op­er­at­ing in­come for its pork seg­ment, up from $122 mil­lion in the same quar­ter last year.

Tyson at­trib­uted its im­proved beef and pork per­for­mance to in­creased do­mes­tic and over­seas de­mand and fa­vor­able mar­ket con­di­tions world­wide.

The com­pany’s chicken and pre­pared- foods seg­ments showed stronger sales but lower op­er­at­ing in­come. Poul­try in­come fell 22.6 per­cent in the third quar­ter.

Bob Wil­liams, se­nior vice pres­i­dent and manag­ing direc­tor of Sim­mons First In­vest­ment Group, said Tyson is in a po­si­tion where de­mand is ex­ceed­ing avail­able chicken prod­ucts.

To com­pen­sate for low sup­ply, Tyson has pur­chased chicken prod­ucts from com­peti­tors and in­creased re­tail prices, which is hav­ing lit­tle to no ef­fect on de­mand.

“Con­sumer de­mand keeps grow­ing. More and more con­sumers are buy­ing up chick­ens strips at higher prices, and it’s hav­ing no ma­te­rial im­pact on de­mand,” Wil­liams said, ad­ding later that “With the buy ver­sus grow model, it can be more ex­pen­sive.”

Ac­cord­ing to the earn­ings re­port, high chicken de­mand was off­set by fires at two Tyson plants this spring, as well as de­creased sales of ren­dered prod­ucts. The com­pany also cited ad­ver­tis­ing and mar­ket­ing ex­penses as a cat­a­lyst for lower op­er­at­ing in­come in the chicken seg­ment.

Tyson said it ex­pects next year to be a lit­tle dif­fer­ent. The U.S. Depart­ment of Agri­cul­ture pre­dicts chicken pro­duc­tion will in­crease roughly 2 per­cent.

“For fis­cal 2018, we be­lieve our chicken seg­ment sales will grow and op­er­at­ing mar­gin should re­main sim­i­lar to fis­cal 2017 re­sults,” Hayes said. Tyson es­ti­mated that its pre­pared foods, beef and pork seg­ments will also per­form well next year. Tyson es­ti­mated that strong ex­port mar­kets and in­creased USDA meat pro­duc­tion for 2018 will in­crease sales across the board.

The com­pany is also bet­ting on di­vesti­tures and funds from re­cently ac­quired com­pa­nies to cush­ion fu­ture op­er­a­tions.

Tyson es­ti­mates the Ad­vancePierre ac­qui­si­tion will ben­e­fit the com­pany by more than $200 mil­lion by the end of fis­cal 2020, with funds mainly go­ing to­ward the pre­pared-foods seg­ment. Tyson ex­pects the Hill­shire Brands ac­qui­si­tion will ben­e­fit the com­pany by $675 mil­lion by the end of this fis­cal year.

Tyson is plan­ning to close on the sale of three non-pro­tein busi­nesses — Sara Lee Frozen Bak­ery, Ket­tle and Van’s — by the end of 2017. The com­pany is ex­pect­ing to record a net pre­tax gain from the sales of those busi­nesses, for­merly owned by Ad­vancePierre. Tyson ex­cluded the pro­jected re­sults from the fis­cal 2018 out­look.

Tyson’s third-quar­ter earn­ings beat an­a­lysts’ pro­jec­tions lead­ing up to to Mon­day’s an­nounce­ment, but fell short of earn­ings per-share pre­dic­tions. Tyson’s earn­ings per share fell to $1.21, from $1.25 in the same quar­ter last year.

Tyson shares rose $3.60, or 5.7 per­cent, to close Mon­day at $66.90.

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