The US meat processing giant, in its Q4 results released yesterday, reported sales of $10.5bn for the quarter and $41.37bn for the 12-month period. The quarter’s net income was $259m, up from $136m in Q4 2015, said the company.
The financial performance demonstrated the group can maintain sales momentum in a challenging environment, said Donnie Smith, Tyson Foods CEO.
"Fiscal 2015 was an important year for Tyson Foods, because it proved that our house of brands gives us the ability to produce record sales and earnings in less than optimum conditions,” he said.
The chicken segment had an outstanding year, said Smith.” Pork produced solid results. Beef experienced a tough operating environment most of fiscal 2015, but the other segments more than made up for it,” he continued.
Additionally, he said the company is predicting another positive year in fiscal 2016.
Tyson’s chicken segment saw operating income rise to $344m in Q4, up from the $206m in the quarter in 2014.
Chicken sales volumes grew 10.8% for the quarter, although average price dropped by 2.2%, it reported.
“Adjusted average sales price decreased as feed ingredient costs declined, partially offset by mix changes. Adjusted operating income increased due to higher sales volume and lower feed ingredient costs, partially offset by disruptions caused by export bans. Adjusted feed costs decreased $130m and $440m during the fourth quarter and 12 months of fiscal 2015, respectively,” said Tyson.
However, it noted significant challenges for its chicken operations in China due, in part, to worsening economic conditions there.
The company posted a significantQ4 operating loss – $33m —in its beef business compared to the $153m operating income earned in the year ago period. It cited export market disruptions, price competition in other meat sectors and futures market dynamics in Q4 as the primary reasons.
“Adjusted operating income decreased due to unfavorable market conditions associated with a decrease in supply which drove up fed cattle costs, export market disruptions, the relative value of competing proteins and increased operating costs.
Additionally, we incurred $70 million of losses in the fourth quarter of fiscal 2015 from mark-to-market open derivative positions and lower-of-cost-or-market inventory adjustments as a result of a large and rapid decline in live cattle futures during September,” said Tyson.
But management said demand began to rebound over the past month.
"We think the worst is behind us in beef," said Smith on a conference call with analysts.
Adjusted sales volume decreased in the pork division due to the sale of its Heinold Hog Markets business in the first quarter of the 2015 financial year, said Tyson.
“Excluding the impact of the divestiture, our adjusted sales volume grew 6.5% and 3.5% for the fourth quarter and 12 months of fiscal 2015, respectively, driven by better demand for our pork products.
Live hog supplies increased, which drove down livestock cost and adjusted average sales price. While reduced compared to prior year, adjusted operating income remained strong as we maximized our revenues relative to live hog markets,” it reported.
For fiscal 2016, Tyson expects domestic protein production — chicken, beef, pork and turkey — to increase around 3% from fiscal 2015 levels. However, it expects disruptions related to export bans to continue.