Tyson Foods has reported sales of $10.443 billion for the second quarter ending March 30, up from $9.773 billion during the like period in fiscal 2018. Operating income and margin amounted to $635 million and 6.1%, respectively, compared with $494 million and 5.1% the year before.
“I’m pleased with our direction as we begin the back half of the year,” said Noel White, president and chief executive officer of the Springdale, Arkansas, USA-headquartered company. “The prepared foods segment produced its second consecutive quarter of record return on sales [$245 million vs. $119 million during Q2 2018]. Both the beef [$156 million vs. $92 million] and pork [$100 million vs. $67 million] segments were solid performers, while the chicken segment is poised for improvement following what we believe are its margin lows for the year [$141 million Q2 operating income in 2019, down significantly from $231 million the year before].”
AFS Impact Could be Huge
Looking ahead, White said that African Swine Fever (AFS) outbreak in China and elsewhere in East Asia as well as South Africa and parts of Europe has the potential to impact the global protein industry on a level not seen before. Fallout from the disease is already boosting US pork and beef exports, while tightening domestic supplies.
“It is an event that will underscore the power of the Tyson business model,” he stated. “While Tyson’s diversity across segments provides stability and puts us in a position to capitalize when opportunities arise, all proteins could see a benefit. A worldwide decrease in pork supply would offer significant upside to our pork business, while also lifting the chicken and beef businesses as substitutes and increasing raw material costs in our prepared foods business.”
Tyson’s forecasts for the current fiscal year do not include any potential effects from ASF, as it is not clear when the impact might occur or what the magnitude could be.
To date, pork pricing hasn’t kept pace with increased hog costs, leading the company to believe any positive ASF impact would occur in late fiscal 2019 into fiscal 2020 and beyond. For these reasons, Tyson is maintaining guidance for fiscal 2019 in the range of $5.75-6.10 adjusted earnings per share, and the intention is to stay focused on the long term by growing its business on the strength of leading brands and a diversified business model.
Chicken Strips Recall
Meanwhile, the company has expanded a voluntary recall from 69,000 pounds to almost 12 million pounds of frozen, ready-to-eat chicken strip products made at one location in the United States between October 1, 2018 and March 8, 2019. Each package bears the establishment code P7221.
The action was prompted after the company received more reports from consumers who reported finding fragments of metal in a small number of products. In addition to Tyson brand products, the recall includes products sold under Ahold, Kirkwood, Best Choice, Food Lion, Giant Eagle, Great Value, Hannaford, Meijer, Publix and Sparetime private labels.
“Consumers expect that the food they eat is safe. In their best interest and in an abundance of caution, we’re taking quick and decisive action to expand this recall,” said Barbara Masters, vice president of regulatory food policy, food and agriculture for Tyson Foods.
Furthermore, the company has discontinued use of the specific equipment believed to be associated with the metal fragments, and it will be installing metal-detecting X-ray machinery to replace the plant’s existing metal-detection system.
“We will also be using a third-party video auditing system for metal-detection verification,” said Masters.
