SPRINGDALE, ARK. — While the financial performance for Tyson Foods Inc. in fiscal 2024 has improved significantly compared to the previous year, there is room for improvement in most of its business segments as the company grapples with aligning supply with consumers’ value-driven demand. Tyson’s beef business segment, which reflects the headwinds of limited cattle supply and spread compression during the first half of the year, has been offset by improved performance in its chicken and pork businesses. Meanwhile, the company’s prepared food segment performance was challenged by unrelenting inflation, as consumers’ laser focus on value hindered Tyson’s retail volume.

During a May 6 conference call to detail the company’s second-quarter results, Donnie King, president and chief executive officer addressed the progress Tyson has made to move the financial needle out of the red and into the black across its operations. Over the past year, the company shuttered six older poultry processing plants in addition to a pork plant in Iowa as part of companywide efforts to increase operational efficiency and improve its adjusted operating income (AOI). 

The efforts have resulted in positive gains for the quarter and in the first half of the year. For the 2024 fiscal second quarter, ended March 30, 2024, Tyson reported net income of $148 million, or 42¢ per share on the common stock for the quarter, up 249% from the prior year’s loss of $97 million and loss of 28¢ per share. For the first six months of the fiscal year, the company’s net income was $252 million, or 73¢ per share on the common stock, 15% higher than the $219 million, or 63¢ per share reported for the first half of fiscal 2023. 

Sales for the quarter were down 0.5% to $13.07 billion, compared to $13.13 billion during the same quarter the prior year. While in the first six months, sales were flat at $26.39 billion compared to the same period last year. Quarterly operating income of $312 million was 736% higher than the loss of $49 million during the same period last year. Operating income for the first six months of 2024 was $543 million compared to $418 million in the first half of 2023, a 30% increase. The share price of Tyson Foods’ stock fell nearly 6% to $58.50 per share at the close of markets on May 6, down from $61.02 when the markets opened earlier in the day.

“I’m encouraged,” King said when asked about his satisfaction level with the state of the business today and the results of addressing challenges in many of its business segments over the past 12-18 months. “I would stop short of saying ‘satisfied’ in terms of the results. I’m proud of the results that we delivered in Q2 and we’re seeing the benefits of our diverse portfolio across protein, channels, categories and eating occasions.”

Hampered by a glut of chicken at this time last year, that business unit reported operating income in Q2 of $158 million, compared to a loss of $258 million during the same quarter of fiscal 2023, with an operating margin of 3.9% versus a negative 5.8% margin last year. Volume of chicken sold declined 6.1% for the quarter on sales of $4.07 billion, a dip of 8% from last year’s $4.43 billion.

King said Tyson’s momentum in the chicken segment that began in the second half of fiscal 2023 has continued through Q2 of 2024 and compared to the second quarter of last year, its AOI in the second quarter increased by $325 million.

“While we are benefiting from better market conditions, including lower grain costs, our bold actions and focus on the fundamentals are also evident in our results,” he said, adding that live operations have improved in terms of yield, labor efficiency and capacity utilization across its plants.

“Our focus on getting back to the basics in chicken is working,” he said.

In the beef segment, the quarterly volatility resulted in lackluster first half results that King said were expected, as the entire beef industry copes with fewer animals.

“Our goal remains to offset some of the challenges of a tight cattle supply environment by focusing on the controls, such as labor utilization and managing mix to meet customer and consumer demands,” King said.   

US beef production is expected to drop by 2% for fiscal 2024 compared to the prior year. Tyson expects an adjusted operating loss of between $100 million and $400 million. For the quarter, that loss totaled $34 million, compared to positive operating income of $8 million in Q2 of fiscal 2023, and a loss of $151 million for the fiscal first half compared to operating income of $137 million in the fiscal first half of 2023. Beef sales for the quarter increased 7% over the same period last year, to $4.94 billion, compared to $4.62 billion in 2023, with volume increasing nearly 3% due mostly to higher carcass weights and average price ticking up by 4.5%.  

“While revenue increased, AOI decreased versus last year, primarily reflecting compressed spread as expected,” said John R. Tyson, chief financial officer.

In the prepared foods business unit, Q2 operating margin of 9.6% on sales of $2.40 billion reflected a volume increase of nearly 1% with the average price declining 1.4%. Operating income was $230 million for the quarter ($473 million for the first half) of fiscal 2024, compared to $241 million during the same period last year ($499 million for the first half).

The company said it anticipates adjusted operating income in the prepared foods segment of $850 million to $950 million in fiscal 2024. Melanie Boulden, group president of prepared foods and chief growth officer said today’s consumers remain focused on value when it comes to retail and foodservice spending.

“The consumer is under pressure, especially the lower income households,” she said. “In retail, we’re seeing roughly 20% cumulative inflation over the last three years. Now, the inflation impact, coupled with historically low savings rates, has created a more cautious, price-sensitive consumer. And we’re also seeing a cautious consumer prioritized essential staples over discretionary categories.”

Quarterly sales and operating income sagged in Tyson’s international business, but King and Tyson pointed out that historical growth is promising for the segment.  

Volume grew by 3% for the quarter and average prices declined by 11.5% in the International business unit, on sales of $580 million compared to $634 million during the same period last year. The unit reported a quarterly loss of $40 million compared to operating income of $1 million during Q2 of last year. For the first half of fiscal 2024 sales totaled $1.16 billion compared to $1.25 billion in the first half of 2023, with volume increasing 2.7%.

“We're growing globally. Our international business grew revenue eight-fold to $2.5 billion over the five years through fiscal 23,” King said. “We expect to drive profitable growth over time by capturing expanding consumer markets, particularly in Asia, and we believe we’re well positioned to win.”  

Tyson echoed King’s comments: “Our international business continues to make progress towards stronger profitability,” he said. AOI Increased versus last year as we begin to LAP some of the startup cost of our newer facilities and continue to focus on operational execution.”

Better spreads and ongoing operational execution in Tyson’s pork business segment led to quarterly and first-half improved profitability compared to fiscal 2023. Pork sales for Q2 increased by 4.5% to $1.49 billion, compared to $1.42 billion at the same time last year, with volume increasing nearly 3% and average prices increasing 1.7%. According to John R. Tyson, volume growth was the result of more hog supply and pricing improvements were the result of growing global demand for pork.

Operating income improved by $32 million in the segment during Q2 and pushed first-half margin to $38 million, compared to a loss of $54 million in the first half of 2023.  

King also referenced the reasoning behind Tyson’s announcement earlier this year to shutter its pork plant in Perry, Iowa.  

“It’s just part of our efforts to optimize our footprint and improve performance by reallocating resources to nearby more efficient plants while improving mix and better serving our customers,” he said.

Tyson said the company remains disciplined with its capital expenditure spending, which has totaled $621 million for the first half. It expects capital expenditures of between $1.2 billion and $1.4 billion for fiscal 2024.

“The $267 million in CapEx for Q2 was the lowest quarterly spend in several years and represents the fifth quarter in a row of sequential decline as we LAP (lean against property) our elevated CapEx from the previous two fiscal years and focus on controlling where and when we deploy capital,” he said.

Looking ahead, Tyson said the company expects sales to be roughly flat, year over year.

“However, given our strong year-to-date results, we are raising our AOI guidance driven primarily by an improved outlook,” he said. “For the total company, we now expect between $1.4 billion and $1.8 billion of operating income.”

He added, “Uncertainties remain around consumer strength and behavior, the progression of the cattle cycle, and key commodity costs. When we factor in these variables with pork and prepared food seasonality, there are reasons to believe that Q3 could be weaker than Q4.”