A diversified portfolio drove a record year for Tyson as fiscal year 2015 adjusted operating income rose 37% to $2.25 billion. The company also reported record adjusted sales of $40.6 billion, an increase of 9% over prior year, and record cash flows from operations of $2.6 billion.
"Fiscal 2015 was an important year for Tyson Foods, because it proved that our house of brands gives us the ability to produce record sales and earnings in less than optimum conditions, all while successfully merging two large companies," said Donnie Smith, president and chief executive officer of Tyson Foods, Inc.
"We achieved adjusted sales of more than $40 billion and adjusted EPS of $3.15, generated free cash flow of more than $1.5 billion, reduced net debt by $1.7 billion, repurchased $250 million of our stock in the fourth quarter and launched Ball Park® Jerky and Hillshire® Snacking – two entirely new platforms for the company," Smith said.
"We achieved $322 million in synergies for the fiscal year, and we continue to see more synergy opportunities," he added. "We're raising our synergy estimates for fiscal 2016 to more than $500 million, and we're raising our estimate for fiscal 2017 to more than $700 million. The additional synergies will allow for more investment in innovation, new product launches and the strengthening of our brands.
"Our business model is working. The Prepared Foods segment had a very strong performance in the first full year of Tyson and Hillshire coming together. The Chicken segment had an outstanding year. Pork produced solid results. Beef experienced a tough operating environment most of fiscal 2015, but the other segments more than made up for it.
"We're expecting another record year in fiscal 2016. Our projections indicate adjusted EPS of $3.50 to $3.65, consistent with our goal of averaging at least 10% annual EPS growth over time. We plan to continue repurchasing our shares; in fact, we've already bought back $200 million of our stock so far in the first quarter of fiscal 2016.
"The team has been performing at a high level since the merger, but I still see so much potential as the power of Tyson 2.0 is just beginning to emerge."
Summary of Segment Results
- Chicken - Adjusted sales volume grew as a result of stronger demand for chicken products and mix of rendered product sales. Adjusted average sales price decreased as feed ingredient costs declined, partially offset by mix changes. Adjusted operating income increased due to higher sales volume and lower feed ingredient costs, partially offset by disruptions caused by export bans. Adjusted feed costs decreased $130 million and $440 million during the fourth quarter and 12 months of fiscal 2015, respectively.
- Beef - Adjusted sales volume decreased due to a reduction in live cattle processed. Adjusted average sales price decreased in the fourth quarter of fiscal 2015 due to higher domestic availability of fed cattle supplies, which drove down livestock costs. For the 12 months of fiscal 2015, adjusted average sales price increased due to lower domestic availability of beef products. Adjusted operating income decreased due to unfavorable market conditions associated with a decrease in supply which drove up fed cattle costs, export market disruptions, the relative value of competing proteins and increased operating costs. Additionally, Tyson incurred $70 million of losses in the fourth quarter of fiscal 2015 from mark-to-market open derivative positions and lower-of-cost-or-market inventory adjustments as a result of a large and rapid decline in live cattle futures during September.
- Pork - Adjusted sales volume decreased due to the divestiture of its Heinold Hog Markets business in the first quarter of fiscal 2015. Excluding the impact of the divestiture, adjusted sales volume grew 6.5% and 3.5% for the fourth quarter and 12 months of fiscal 2015, respectively, driven by better demand for our pork products. Live hog supplies increased, which drove down livestock cost and adjusted average sales price. While reduced compared to prior year, adjusted operating income remained strong as the company maximized its revenues relative to live hog markets, partially attributable to operational and mix performance.
- Prepared Foods - Adjusted sales volume increased due to incremental volumes from the acquisition of Hillshire Brands. Adjusted average sales price increased primarily due to better product mix which was positively impacted by the acquisition of Hillshire Brands. Adjusted operating income improved due to an increase in sales volume and average sales price mainly attributed to Hillshire Brands, as well as lower adjusted raw material costs of approximately $85 million and $285 million for the fourth quarter and 12 months of fiscal 2015, respectively, related to its legacy Prepared Foods business. Additionally, profit improvement initiatives and Hillshire Brands synergies positively impacted Prepared Foods operating income by $81 million and $285 million for the fourth quarter and 12 months of fiscal 2015, respectively.
“In fiscal 2016, we expect domestic protein production (chicken, beef, pork and turkey) to increase approximately 3% from fiscal 2015 levels. Additionally, we expect disruptions related to export bans to continue in fiscal 2016,” the company said in a statement. “As we proceed with the integration of Hillshire Brands, we expect to realize synergies of more than $500 million in fiscal 2016 and more than $700 million in fiscal 2017 from the acquisition as well as our profit improvement plan for our legacy Prepared Foods business. The majority of these benefits will be realized in our Prepared Foods segment.
“We expect sales to approximate $41 billion for fiscal 2016 as we grow our current businesses to offset the impact of fiscal 2015 divestitures,” it added.
Source: Tyson Foods Inc.