Tyson Foods beat expectations amid the lingering challenges of COVID-19, posting strong fourth quarter earnings per share of $ 1.81 on an adjusted basis, compared to the $ 1.18 Wall Street predicted. Revenue topped $ 10.641 billion, below the $ 10.8 billion forecast by analysts. Profits increased by 50% compared to the same period last year.
For the full year, Tyson reported earnings per share of $ 5.64 on revenue of $ 42.365 billion. That compares to $ 5.52 per share and revenues of $ 42.405 billion. Tyson said the results include $ 540 million in direct additional costs related to COVID-19. The company also increased its e-commerce sales to $ 1 billion due to the increase in online grocery orders in fiscal 2020, which ended on October 3.
Net income was $ 692 million in the fourth quarter, up from $ 369 million a year ago. For the full year, net profit was $ 2.14 billion from $ 2.022 billion a year ago.
Tyson CEO Dean Banks said the business was moving in as the challenges of COVID-19 remained. He said the company continues to manage baseline expenses and expects additional operational costs in FY2021 related to the pandemic and possibly higher costs for grains and increased costs. transport and labor costs.
He said resilience within the company and external partners has enabled Tyson to deliver strong results and execute its long-term strategy while driving strong results for shareholders.
“I’m excited about the opportunities ahead for this great company, and I’m sure we have the people, products and strategies in place to drive future growth,” Banks said in prepared remarks.
He said the pandemic has resulted in higher demand in retail and lower demand across the restaurant business, which continues to impact parts of the business units that serve those segments. Banks said the company’s chicken segment is still far enough away from achieving desired results and improved efficiencies, which includes $ 200 million in additional savings across the segment.
Tyson reported annual chicken sales of $ 13.234 billion, up from $ 13.3 billion the year before. Volume sales remained stable, but prices declined an average of 0.6% throughout the year, compared to 2019. The segment achieved operating profit of $ 148 million for the year, up from $ 655 million a year ago. Tyson’s operating margin in the chicken segment was a dismal 1.1%, well below 4.9% in 2019.
For fiscal 2020, feed ingredient costs remained relatively stable compared to fiscal 2019. Operating profit was also impacted by restructuring costs of $ 34 million incurred during the fiscal year. ‘fiscal year 2020.
Banks said the chicken segment was affected by a number of factors, including higher absenteeism in some markets and low prices that hampered Tyson’s ability to sell higher margin products. He said when chicken prices were higher, the company made an effort to reduce certain cuts at specific factories in order to achieve higher results. He said the emphasis in the past on increasing value-added production was a compromise with lower plant efficiency. Now that prices are low and demand for foodservice is lukewarm, Banks said those factories are getting back to basics.
Beef was a shining star in Tyson’s portfolio in fiscal 2020 with sales of $ 15.436 billion. While sales were down from $ 15.828 billion last year, operating profit reached $ 1.659 billion, up 45% from the previous year. The segment’s operating margin increased to 10.7% for the year, better than the 7.2% recorded in fiscal 2019.
Tyson said COVID-19 negatively impacted production with 6.5% lower volume compared to the same 52-week period last year. The company said the average selling price increased in fiscal 2020 as demand for beef remained strong amid supply disruptions linked to the impact of COVID-19.
Banks said this segment also had issues with COVID-19 forcing temporary plant closures last summer as the pandemic outbreak hit some communities.
Tyson reported annual pork sales of $ 5.030 billion, up from $ 4.932 billion a year ago. Operating profit doubled to $ 555 million, from $ 264 million a year ago. Pork prices rose 2.2% for the year, but the company managed to improve its operating margin to 11%, from 5.4% the year before.
The company said demand was strong for pork and the increased availability of live pigs was offset by a drop in overall production associated with COVID-19 during part of 2020. Banks said there was still growth opportunities as the rise of African swine fever in Europe is now redistributing pig suppliers around the world. He said there would be more opportunities for pork exports and growth for this segment in the future.
This diverse segment achieved annual sales of $ 8.369 billion, up from $ 8.418 billion last year. Volume declined 3.7%, partially offset by a 3.1% price increase. Operating profit was $ 752 million, down from the $ 902 million reported last year. This decrease is linked to $ 105 million in additional raw material costs and additional expenses related to COVID-19. The segment also underwent restructuring with a cost of $ 28 million in 2020.
Tyson said volume growth in the retail channel was offset by a reduction in the foodservice channel linked to reduced demand and lower production throughput due to the impact of COVID-19 over the course of parts of FY2020. The average selling price increased in FY2020 due to favorable product mix conditions coupled with the strong increase in retail demand and, for FY2020, the repercussion of increased raw material costs.
Tyson reported international sales of $ 1.856 billion for the year, up from $ 1.289 billion in fiscal 2019. Much of the additional sales resulted from the acquisition of BRF SA’s Thai and European operations in June 2019.
This segment posted operating income of $ 2 billion, down sharply from the $ 17 billion reported a year ago, the statement said. Tyson did not provide any details on the international segment other than to say that there are ongoing cost reduction initiatives that should lead to better synergies and future growth behind more investments.
While Banks has said there are bright prospects for Tyson Foods, there is still work to be done. He said the company would be proactive on the COVID-19 front. Tyson expects the associated annual costs to be around $ 300 million based on what is currently known.
Tyson expects annual revenue of between $ 42 billion and $ 44 billion for fiscal 2021. Capital spending is estimated to be around $ 1.2 billion to $ 1.4 billion. This includes expenditures for capacity expansion, growth, safety, animal welfare, replacement and upgrading of infrastructure, and operational improvements which are expected to result in production and labor efficiency. implementation, performance improvements and flexibility of sales channels.
Ben Bienvenu, analyst at Stephens Inc., said Tyson’s results were well above expectations for the fourth quarter and while there are still challenges in the chicken segment, the company expects growth. of the beef and pork segment continues until 2021.
“We are delighted to see the progress the company is making in this challenging environment and will continue to seek an entry point. We have an equal (neutral) weight rating, while our earnings estimates and price target are under review, ”Bienvenu said on Monday. Stephens provides investment banking services with Tyson Foods and is remunerated accordingly.
Tyson Foods also increased its dividend at an annual rate of $ 1.78 in fiscal 2021, up 6% from the previous year.
Shares of Tyson Foods (NYSE: TSN) hit $ 64.20 in the morning session, up nearly 3% in significant volume. Over the past 52 weeks, the shares have traded between $ 45.57 and $ 94.24.