In the three months to 30 March 2019, the business reported sales of US$10.4bn, up from US$9.7bn in the same period of the previous year. Its net income rose from US$315m in 2018 to US$430m in the second quarter of 2019.
Its beef sales volume increased due to improved availability of cattle supply and stronger demand for Tyson’s beef products. The average sales price increased for the quarter while operating income increased albeit partially offset by increased operating and labour costs.
On the pork side, sales volume increased for the second quarter the year due to increased domestic availability of live hogs. The average sales price decreased due to lower livestock costs.
Tyson’s chicken sales volume increased for the second quarter of fiscal 2019 primarily due to incremental volume from business acquisitions. However, average sales price decreased due to sales mix primarily associated with the acquisition of a poultry rendering and blending business in the fourth quarter of fiscal 2018. Its operating income decreased due to increased operating costs, in addition to higher feed ingredient costs and current market conditions.
In its prepared foods division, sales volume decreased for the second quarter of the year primarily from business divestitures. Average sales price increased due to product mix which was positively impacted by business divestitures while operating income increased due to strong demand for products, improved product mix and lower raw material costs, partially offset by increased operating and labour costs.
“I’m pleased with our direction as we begin the back half of the year,” said Noel White, Tyson’s president and CEO. “The Prepared Foods segment produced its second consecutive quarter of record return on sales. Both the Beef and Pork segments were solid performers, while the Chicken segment is poised for improvement following what we believe are its margin lows for the year.”
African Swine Fever
With African Swine Fever (ASF) running rife through Asia and Europe, White expects the situation to benefit Tyson.
“Looking ahead, ASF has the potential to impact the global protein industry on a level that we have never experienced, and it is an event that will underscore the power of the Tyson business model,” he said. “While Tyson’s diversity across segments provides stability and puts us in a position to capitalize when opportunities arise, all proteins could see a benefit. A worldwide decrease in pork supply would offer significant upside to our pork business, while also lifting the chicken and beef businesses as substitutes and increasing raw material costs in our prepared foods business.”
He added that the business is not depending on ASF to help its financial results instead relying on “on the strength of leading brands and diversified business model”.
“Our forecasts for the current fiscal year do not include any potential effects from ASF as we do not have clarity on when the impact might occur or what the magnitude could be,” said White. “To date, pork pricing hasn’t kept pace with increased hog costs, leading us to believe any positive ASF impact would occur in late fiscal 2019 into fiscal 2020 and beyond.”