Tyson Foods continues to release red ink

SPRINGDALE, Ark. — “Controlling the controllables” was a phrase used frequently during Tyson Foods, Inc.’s latest conference call. with securities analysts. The company’s full-year and fourth-quarter earnings show that there were many things during the period that may have been outside of the company’s control, which hampered both earnings and sales.

The meat and poultry processor posted a loss of $648 million for the fiscal year ended Sept. 30, a sharp difference from fiscal 2022, when the company earned $3.25 billion, or $9.18 per share of common stock .

Annual sales fell to $52.9 billion from $53.3 billion a year earlier.

For the fourth quarter, Tyson Foods posted a loss of $450 million, significantly less than a year earlier, when the company earned $538 million, or $1.54 per share. The fourth-quarter loss follows a $417 million loss in the third quarter ended July 1.

Fourth-quarter sales were $13.3 billion, down from $13.7 billion in the fourth quarter of fiscal 2022.

Items impacting profitability in the quarter ranged from a $333 million impairment charge in the Beef business unit, fewer beef cattle coming to market, high input costs and a strong U.S. dollar that impacted exports.

In the beef segment, the company’s largest business unit, fourth-quarter sales rose to $5 billion from $4.9 billion a year earlier. The unit posted a loss of $323 million, compared with operating income of $375 million in fiscal 2022.

“Entering fiscal ’23, we expected beef to be under pressure due to tight cattle supply,” said Donnie D. King, president and CEO, on Nov. 13. compared to the wholesale price of boxed beef, undermining export opportunities due to the strong US dollar and the low price of competing exporters and ultimately creating a very tight spread scenario.

“We also expected to see signs of herd recovery as cattle prices picked up. However, this did not materialize. Until significant heifer retention and subsequent herd recovery takes place, we expect challenging supply conditions to remain.”

Tyson Foods’ Chicken business unit posted a loss of $267 million in the quarter, which compares unfavorably to fiscal 2022, when the business unit’s operating income was $340 million in the fourth quarter. The segment’s quarterly sales fell to $4.2 billion from $4.6 billion a year earlier.

The chicken business has been a challenge for Tyson Foods, prompting the company to restructure throughout the year, closing processing plants in Van Buren and North Little Rock, Arkansas; Dexter and Noel, Missouri; Glen Allen, Virginia; and Corydon, Ind.

“Not only did we stick with the operational improvements we made in Q3, we made incremental improvements in production and in our live operations,” Mr. King said. “This allowed us to take advantage of improving market conditions, including lower grain costs, which resulted in a positive margin by the end of the year. As we head into the new fiscal year, we look forward to a better outlook for spending while seeing the benefits of some of the bold actions we’ve taken this year.”

Prepared Foods’ operating income was $118 million in the quarter, up from $111 million a year earlier. Segment sales remained flat at approximately $2.5 billion.

“Our brands continued to outpace the broader food and beverage category in terms of volume growth in the retail channel in Q4,” said Mr. King. “Our volume grew while the vast majority of food and beverage manufacturers saw volume decline. Our core business lines, including iconic retail brands Tyson, Jimmy Dean, Hillshire Farm and Ball Park, saw Q4 volume growth of 3.2% over last year, far ahead of our competition.”

Tyson’s pork business posted a loss of $11 million in the quarter, an improvement from a year earlier when the unit posted a loss of $55 million. Sales fell to $1.5 billion from $1.6 billion in 2022.

“As you know, in FY23 the industry suffered from supply and demand imbalances, which negatively impacted spreads,” Mr. King said. “While we are seeing some signs of improving spreads and lower grain costs, there is still an imbalance between pork demand and supply. Our team is focused on running the business as efficiently as possible while continuing to review all options.”

In fiscal 2024, Tyson Foods expects adjusted operating income of $1 billion to $1.5 billion, with sales flat from fiscal 2023.

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