SPRINGDALE, ARK. – Tyson Foods Inc. said efforts to optimize its chicken business paid off in its latest quarter as the company reported record sales and earnings for its fiscal year-end results. However, in the fiscal fourth quarter ended Oct. 1, 2022, the company’s operating income declined 60% to $766 million, or $1.63 per share on the common stock, compared to $1.91 billion, or $2.30 per share of the common stock in Q4 of 2021.
Tyson reported lower operating margin of 5.6% for the quarter compared to 14.9% during the same period last year. Sales for the fiscal fourth quarter increased by 7% to $13.74 billion, compared to $12.81 billion in 2021. Prices increased significantly for the quarter, the company said, led by chicken at 18.2% higher and by 5% overall. Annual prices increased 12.3% overall, led by chicken, at 18% and the company’s prepared foods segment, at 13.5%.
Sales for the fiscal year were 11.7% higher than the previous year, totaling $53.28 billion compared to $47.05 billion in fiscal year 2021. Net income for the year also increased 5.5% to $3.25 billion over the previous year’s $3.05 billion, despite quarterly net income decline of 60%, to $537 million compared to $1.36 billion during the same period last year. The company said full-year sales projections for 2023 are between $55 billion and $57 billion.
Tyson’s quarterly beef segment’s operating income dipped by 67% from last year, to $375 million. Average beef prices decreased 8.2% and the company said continued widespread drought contributed to it paying more for cattle as producers’ herds decreased in size in response. For the year, operating income for beef dropped from $3.24 billion to $2.50 billion, a 23% decrease. Yearly sales volume was flat at 0.1% while quarterly volume increased by 5.1%. Sales for the quarter declined to $4.86 billion compared to $5.01 billion in 2021, however, for the year increased to $19.85 billion over 2021’s $17.99 billion.
“Sales in the quarter remained strong, supported by higher volume but offset by lower average sales price. Global consumer demand for beef products remains strong,” said John R. Tyson, vice president and chief financial officer in a Nov. 14 conference call with analysts. “We expect volumes to remain stable next year amid tightening supply of cattle, offset by improved labor participation, supporting higher plant productivity.”
He added that the company’s costs affected the segment negatively as live cattle prices increased by about $2 billion.
“But we have sufficient livestock available to finish the year, and we continue to have ample supply to support our operations,” he said.
Operating income also declined in Tyson’s pork segment, with a reported loss of $55 million versus a positive $78 million in the same quarter of fiscal 2021. The company attributed the decrease largely to herd health issues, including the impact of African swine fever across the globe. Sales of $1.60 billion for the quarter and $6.41 billion for the year reflected a decrease of 3% and an increase of 2% respectively. Sales volume dropped for the quarter (by 1.1%) and the year (by 1.9%) as the quarterly price change decreased while increasing for the year.
“Global demand remains challenged by high domestic retail prices and the strong US dollar,” said Tyson, “making US pork relatively expensive as compared to alternative sources globally. For the year, the average sales price increased 4.1%, offsetting the decrease in volume of 1.9%. We expect these headwinds to impact pork volumes next year to a lesser extent than the past year.”
Tyson’s chicken business segment realized a quarterly profit, with sales volume increasing 1.1% on sales of $4.62 billion, a 19.4% increase for the quarter and up 23.7% for the year, to $16.96 billion compared to $13.73 billion in 2021. Chicken volumes increased 1.1% in the quarter compared to the prior year, driven by increased domestic production.
“In chicken, our operational turnaround progressed as forecasted, and we are now increasing our focus on optimizing our mix to maximize profitability of our value-added portfolio,” Tyson said.
He added that in the fourth quarter the company surpassed its goal of processing 40 million birds per week by the end of the fiscal year.
In the prepared foods segment, higher average sales prices of 13.5% pushed sales up by 12% to $2.52 billion for the quarter compared to $2.25 billion in the same quarter last year. For the year, sales bumped to $9.69 billion in fiscal 2022 compared to $8.85 billion in 2021, an increase of 9.5%. Operating income for the quarter and the year dropped to $111 million and $746 million respectively. Compared to the previous year, quarterly operating margins declined to 4.4% in 2022 from 36.4% in 2021 and for the year, to 7.7% in 2022 compared to 16.4% in 2021.
“Prepared foods is expected to deliver margins during fiscal 2023 between 8% and 10%, driven by volume growth, productivity, and disciplined revenue management,” Tyson said. “We expect volume, sales revenue, and operating income to all increase through the fiscal year, with stronger quarters in the second half of the year compared to the first half of the year.”
The company’s international segment also reflected higher sales for the quarter and year but lower operating income. Quarterly sales were $638 million in 2022, an increase of 16.8% over 2021’s $546 million, while annual sales increased 18%, to $2.35 billion in fiscal 2022 compared to $1.99 billion the previous year.
“Volumes improved both for the quarter and fiscal year as we gained momentum in the improvement of our live operations,” Tyson said. “We expect this operational improvement to continue driving sequential quarterly volume growth into next fiscal year.
“Average sales price increased by approximately 18% for both the quarter and the fiscal year compared to last year. Our shift in pricing mechanisms to more variable structures, allowing us to be more agile in response to market conditions, was a key decision by our management team,” he said.
Tyson added that to grow volumes in its chicken, prepared foods and international business segments the company is in the process of constructing six new plants, which will be operating in the coming year.
“We’re building a value-added chicken plant in Danville, Virginia, and we’re growing our bacon business with a new location in Bowling Green, Kentucky,” he said. “And we’re also expanding our footprint and increasing volumes outside the US with three plants going live in China and one in Malaysia during 2023.”
Tyson CFO offers apology
During his closing comments, John Tyson expressed his regret over the incident that led to his Nov. 6 arrest for public intoxication and criminal trespassing.
“I’m embarrassed, and I want to let you know that I take full responsibility for my actions,” Tyson said. “I also want to apologize to our investors as I have to our employees. This was an incident inconsistent with our company values, as well as my personal values. I just wanted you guys to hear this directly from me and to know that I’m committed to making sure this never happens again.”
Donnie King, president and chief executive officer of Tyson Foods added that the company takes the matter seriously.
“Our independent board of directors are overseeing a thorough review of this matter, and I’m confident in this independent process,” King said.