Sales up, net income down in Tyson second quarter results
Tyson Foods Inc. has reported the results of its second quarter and first half of its fiscal year. Sales for Q2 were $10.888 billion, an increase of about $440 million compared to last year. Sales for te first six months of the fiscal year are $21.703 billion, up from $20.636 billion. Net income for the quarter was $367 million, down from $430 million from a year ago.
“During the quarter, we witnessed an unprecedented shift in demand from foodservice to retail, temporary plant closures, reduced team member attendance, and supply chain volatility as a result of the virus. Despite these challenges, we were able to adjust our product mix and redirect products to the appropriate channels,” said Noel White, Tyson Foods CEO. “While we cannot anticipate how long the challenges presented by COVID-19 will persist, we remain focused on driving long-term growth. Our solid balance sheet, ample liquidity, scale and diversity continue to give us confidence in our long-term outlook.”
The company provided its commentary for its individual market segments:
“Beef - Sales volume increased in the second quarter of fiscal 2020 due to stronger demand for our beef products but decreased for the first six months of fiscal 2020 due to a reduction in live cattle harvest capacity as a result of a fire that caused the temporary closure of a production facility for the majority of the first quarter of fiscal 2020. Average sales price was relatively flat in the second quarter of fiscal 2020 and increased in the first six months of fiscal 2020 as beef demand remained strong. Operating income in the second quarter of fiscal 2020 decreased as the result of volatile market conditions, increased operating costs and approximately $55 million of derivative losses. Operating income in the first six months of fiscal 2020 increased as we continued to maximize our revenues relative to live fed cattle costs, partially offset by increased operating costs, derivative losses and $16 million of net incremental costs from a production facility fire.”
“Pork - Sales volume increased in the second quarter and first six months of fiscal 2020 due to increased domestic availability of live hogs and strong demand for our pork products, especially in the consumer products and export sales channels during the second quarter. Average sales price increased in the second quarter and first six months of fiscal 2020 associated with higher livestock costs and stronger export markets. Operating income was relatively flat in the second quarter of fiscal 2020 and increased in the first six months of 2020 as we maximized our revenues relative to the live hog markets, partially attributable to favorable export markets and improved operational performance, which were slightly offset by higher operating costs.”
“Chicken - Sales volume decreased in the second quarter of fiscal 2020 due to lower volume from our rendering and blending business. Sales volume increased in the first six months of fiscal 2020 primarily due to incremental volume from a business acquisition in the first quarter of fiscal 2019, partially offset by lower volume from our rendering and blending business. Average sales price increased in the second quarter and first six months of fiscal 2020 due to lower rendering and blending sales, which carry a lower average sales price, largely offset by broadly weaker chicken pricing as a result of market conditions. Operating income decreased in the second quarter and first six months of fiscal 2020 primarily from challenging pricing conditions and an approximately $40 million increase in net feed ingredient costs and derivative losses in addition to $21 million in restructuring costs incurred in the first six months of fiscal 2020.”
“Prepared Foods - Sales volume was flat for the second quarter but decreased for the first six months of fiscal 2020 as growth in volume across the consumer products channel was offset by a reduction in the foodservice channel and other intrasegment sales channel shifts. Average sales price increased in the second quarter and first six months of fiscal 2020 due to favorable product mix and the pass through of increased raw material costs. Operating income decreased primarily due to increased operating costs, including $65 million and $125 million increases in net raw material costs and derivative losses in the second quarter and first six months of fiscal 2020, respectively. Additionally, operating income was impacted by $22 million restructuring costs incurred in the first six months of fiscal 2020.”
The company says it expects fallout from the COVID-19 pandemic to increase operating costs and decrease volume for the remainder of 2020. “Operationally, we have and expect to continue to face slowdowns and temporary idling of production facilities from team member shortages or choices we make to ensure operational safety. The lower levels of productivity and higher costs of production we have experienced will likely continue in the short term until the effects of COVID-19 diminish. Each of our segments has also experienced a shift in demand from foodservice to retail; however, the volume increases in retail have not been sufficient to offset the losses in foodservice and as a result, we expect decreases in volumes in the second half of fiscal 2020.”
Source: Tyson Foods Inc.