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Dive Briefing:
Tyson Foods Corporation, reported one of the strongest quarters. As of Monday, the company's CEO said there had been a “notable turnaround” in chicken and pork after difficult market conditions led to layoffs and plant closures.
Q3 chicken profits reach highest level in eight years, overall earnings strongest in seven quarters, CEO Donnie King said in a call with analysts:Adjusted operating income for the three months ended June 29 was $491 million, up 174% from a year ago.
““We are definitely benefiting from better market conditions,” King said. In addition to lower feed costs, the meat giant is also benefiting from operational improvements. Close or sell several factories To maximize production.
Dive Insight:
High labor, input and operating costs led to a global grain surplus after a downturn in meatpacking companies. Weakened feed prices It benefits Tyson, Pilgrim's Pride and other competitors.
In addition to cost savings, King said Tyson's chicken operations are continuing to see improved livelihoods as it optimizes smaller production spaces, with hatchability and survival rates up from last year.
The Arkansas-based company has closed nine processing plants (six chicken and three raw meat) over the past year or so, including a pork plant in Perry, Iowa, in late June. The closures have resulted in profits in the chicken and pork divisions being much higher than executives had anticipated, according to King.
“Our disciplined approach to capital allocation continues to drive cash flow improvement,” King said. “In fact, all of our businesses are more agile, collaborative and disciplined than they were a while ago.”
Tyson is currently reinvesting some of its chicken profits to meet the growing demand for value-added products such as frozen tenders and nuggets. King said Tyson has used the profits to accelerate its fully cooked plant in Danville, Va., to produce new products including honey bites and restaurant-quality wings.
“Our focus on fundamentals has allowed us to build a fundamentally stronger chicken business as we look to the future,” King said. Adjusted chicken revenue jumped to $307 million for the quarter, up from a loss of $63 million a year earlier.
The pork business also contributed to Tyson's recovery, as herd health and productivity remained strong and lean meat supplies were sufficient. King said operational efficiencies combined with strong demand led to better-than-expected results.
Adjusted pork imports for the quarter totaled $22 million, compared to a loss of $70 million last year.
Meanwhile, King said Tyson's processed foods business, which includes Jimmy Dean, Ball Park and Hillshire Farm brands, was in line with the company's expectations. Beef also grew as expected, but there was little or no sign of a U.S. cattle herd rebuilding, adding to market uncertainty and price cuts at grocery stores.
Looking ahead, Tyson is bullish on earnings for the remainder of the year and has updated its adjusted operating income outlook for fiscal 2024 to $1.6 billion to $1.8 billion. Revenue expectations were unchanged.
