Food Business News - May 15, 2018 - 16
SPRINGDALE, ARK. - Inflationary pressures
associated with higher-than-expected
freight costs and costs associated with
egg production issues in Tyson Foods'
chicken supply chain affected earnings
during the second quarter of fiscal 2018,
ended March 31.
Net income for the quarter fell to $315
million, equal to 88c per share on the common stock, compared to the same period
of the previous year when the company
earned $340 million, equal to 95c per share.
Sales for the quarter rose to $9,773
million from $9,083 million the year prior.
In a conference call with securities
analysts on May 7, Thomas P. Hayes, president and chief executive officer of Tyson
Foods, said the company felt the impact of
rising freight costs in all four of its business
segments and it had a net impact on the
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Egg production and
created chicken supply
problems for Tyson
Foods during the quarter.
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Freight, egg production costs
pressure Tyson Foods earnings
company of approximately 14c per share
during the quarter. Tyson Foods management initially forecast the full-year impact
of rising freight costs to be approximately
$200 million. On May 7, the company
raised the impact to about $250 million.
"We'll be working to recover the
increase for the remainder of the year
through pricing and additional cost-reduction programs such as improving
truck weights, lead time and continuous
improvement projects," Mr. Hayes said.
"We're expecting the cost impact in Q3 to
decline, and in Q4, we should be closer to
Tyson Foods' Chicken business unit
saw sales rise 2% during the quarter to
$2,959 million. Operating income was
$231 million, a slight dip compared to the
previous year when the Chicken business' operating income was $233 million.
Management noted the business
unit faced supply challenges during the
quarter due to egg production and hatchability issues.
" ... Demand for our chicken was so
strong that it created supply inefficiencies,"
Mr. Hayes said. "Nevertheless, we're committed to getting customers and consumers the chicken they want, which, in some
cases, meant adding staff, moving products
and running plants on weekends."
The company also announced it has
introduced innovation around the frozen
"In April, we launched Tyson Dinner
Kits that consist of frozen raw chicken,
precut vegetables, a starch and a sauce,"
Mr. Hayes said. "And they are found in
a case where raw frozen chicken is sold.
We've also launched fully-cooked dinner
kits positioned in the freezer case alongside our fully-cooked Tyson chicken
products and snacks. These products are
on trend, and because they're frozen, the
shelf life is extended substantially for
both the retailer and the consumer."
Tyson Foods' Beef business unit is
hitting its stride, and management sees
the market being favorable into 2020.
Sales for the quarter rose 1.8% to $3,681
million. Operating income fell to $92
million from $126 million the year prior.
"Our beef exports were up 22% versus the same quarter last year," Mr. Hayes
May 15, 2018