Tyson Foods recovers from slaughterhouse fire and African swine fever setbacks to report “record sales”

14 Nov 2019 --- Tyson Foods has issued its fourth quarter and fiscal 2019 results, outlining sales growth of 6 percent to US$42.4 billion, driven mostly by chicken-related acquisitions and increased pricing in the beef and prepared food segments. In a recent earnings call, CEO Noel White commented on the food giant’s recent grappling with a Kansas slaughterhouse fire and African swine fever (ASF) in China. In spite of setbacks, the executive notes significant expansion for the company’s meats business following the inauguration of a new processing facility, with significant export opportunities on the horizon.

“Fiscal 2019 was highlighted by significant progress in our strategy to grow our business through differentiated capabilities. We expanded our global footprint, launched innovation in our new alternative protein brand, and prepared for future growth by investing in technology and infrastructure,” says White.

Despite sustaining heavy damage at its Kansas slaughterhouse due to a fire last August that weighted the company with net incremental costs of US$31 million, White comments, “We achieved record beef operating income. Tyson’s retail core business lines outpaced the top ten retail food manufacturers in the 52-week period. Core volume was up 4.1 percent and total Tyson retail volume was up 2.7 percent.”

Tyson Foods expresses optimism about the recent US-Japan trade deal that will benefit US beef and pork exports.Meanwhile, an outbreak of a fatal pig disease has slashed pork production in China. US pork producers have been hampered due to tariffs imposed by Beijing as part of the countries’ ongoing trade dispute.

“As African swine fever reduces global pork supplies, we could see increased raw material costs, but keep in mind a large portion of our business is price list and direct pass-through pricing. This allows us to act quickly to recover costs when we see a sustained raw material price movement,” says White.

In its global developments, Tyson Foods’ acquisitions of Keystone and new Thai and European operations were reported to have boosted sales. “Our international operations along with exports are an important part of our growth strategy. That’s why we continue to advocate for trade agreements that will benefit our industry and farmers. For example, we’re working with lawmakers on both sides of the aisle to ratify the US-Mexico-Canada agreement,” says White.

“The US and Japan recently signed a trade deal that will benefit our beef and pork businesses by putting them on an equal basis with other export countries. Two weeks ago, it was reported that China is planning to lift its four-year ban on US poultry. We welcome these positive developments and the more stable operating environment they provide,” he adds.

Turning to food service, Tyson reports that its product lines continue to double the broad line sector with a 2.5 percent volume increase over the prior year. “In addition, we see growth opportunities in other areas of food service beyond broad line. Digital marketing and mobile ordering accelerated growth in major QSR [quick service restaurants] and convenience store chains with [foodservice] traffic from digital ordering up 25 percent,” says White.

“Tyson is leveraging new digital and social platforms within the K-12 [school meals], convenience and broad line distribution channels and we’re investing in building new digital capabilities in fiscal 2020. We’re also continuing to move forward with plans to grow our value-added fresh meats business to better meet consumer demands in the western US,” he explains.

Two weeks ago, Tyson Foods broke ground at its new facility in Utah, US. The plant will convert fresh beef and pork into steaks, chops, roasts and ground beef for grocery meat cases. “This additional production will allow us to increase our already growing value-added fresh meat sales,” says White.

Outlook for the upcoming fiscal yearRaised and Rooted nuggets made with pea protein, egg whites, bamboo and golden flaxseed.
For fiscal 2020, USDA indicates domestic protein production (beef, pork, chicken and turkey) should increase approximately 2 to 3 percent from fiscal 2019 levels. Tyson Foods expects that export markets should absorb the increased production.

In its pork segment, Tyson Foods notes that exports to Mexico, Japan and China are picking up and the company has started to see the improved pricing because of supply shortages in China and other Asian countries affected by ASF. “We’ll be in a better position to compete for these export opportunities as we move to buying only ractopamine-free hogs. Overall, we expect industry hog supplies to increase about 3 percent year-over-year. We also expect increased livestock costs, record export volumes and pricing improvement,” remarks White.

Looking ahead to 2020 for its prepared foods, Tyson Foods expects continued growth in retail consumption as well as food service channels like convenience, K-12 and non-commercial.

Since its last earnings call, Tyson Foods notes that it has nearly doubled its retail distribution of Raised & Rooted plant-based nuggets and expanded into foodservice. This month, the company began shipping its new Raised & Rooted blended burger made with Angus beef and plant protein.

“Alternative protein projections remain strong and we’re well positioned to lead in this growing space. Last year, sale of our non-protein food service businesses improved our product mix and pricing while reducing sales volume for the prepared foods segment. In 2020, we continue to expand with new products in both the retail frozen and fresh space as well as in food service,” concludes White.

By Benjamin Ferrer