Tyson Foods Inc. reported record sales of $8.7 billion for the third quarter, including record chicken segment earnings of $220 million, or 7% operating margin. The company’s beef segment rebounded with earnings of $114 million, or 3.1% operating margin.
"As expected, we are delivering robust results in the second half of our fiscal year." said Donnie Smith, Tyson's president and CEO. "We produced strong earnings of 69 cents per share while investing in our people, processes and new businesses and continuing to buy back stock. Our Chicken segment achieved record operating income, and our Beef segment rebounded to generate solid returns.
"We see a tremendous amount of opportunity in our business. I am very proud of the team because I'm seeing good long-term decision making to sustain us in the future, and that gives me confidence,” Smith added.
Chicken - Sales volume grew due to increased domestic and international production driven by stronger demand for chicken products. The increase in average sales price in the third quarter and nine months of fiscal 2013 was primarily due to mix changes and price increases associated with higher input costs. Since many of our sales contracts are formula based or shorter-term in nature, we were able to offset rising input costs through improved pricing and mix. Operating income was positively impacted by increased average sales price and volume, improved live performance and operational execution, as well as improved performance in our foreign-produced operations. These increases were partially offset by increased feed costs of $105 million and $440 million for the third quarter and nine months of fiscal 2013, respectively.
Beef - Fed cattle supplies decreased which drove up average sales price and livestock cost. Sales volumes increased in the third quarter due to increased demand for our beef products. Sales volumes decreased in the nine months of fiscal 2013 due to a reduction in outside trim and tallow purchases. Operating income increased in the third quarter and nine months of fiscal 2013 due to improved operational execution and less volatile live cattle markets.
Pork - For the third quarter of fiscal 2013, demand for pork products improved, which drove up average sales price and livestock cost despite a slight increase in live hog supplies. For the nine months of fiscal 2013, live hog supplies increased, which drove down average sales price and livestock cost. Sales volumes decreased as a result of balancing our supply with customer demand and reduced exports. While reduced compared to prior year, operating income remained strong in the nine months of fiscal 2013 despite brief periods of imbalance in industry supply and customer demand.
Prepared Foods - Operating income decreased, despite increased sales volumes, as the result of product mix, increased raw material costs and additional costs incurred as we invested in our lunchmeat business. Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through pricing. However, there is a lag time for price increases to take effect.
In fiscal 2014, Tyson said in a statement that it expects overall domestic protein production (chicken, beef, pork and turkey) to increase approximately 1% from fiscal 2013 levels. The recent favorable weather conditions and more ideal planting environment should increase 2014 grain supplies, which should result in lower input costs as well as decreased costs for cattle and hog producers.
Source: Tyson Foods Inc.