Tyson Foods reveals third quarter 2022 results

Tyson Foods, Inc., including brands such as Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair, today reported the following results for the third quarter of 2022.

First nine months highlights

GAAP EPS of $7.42, up 60% from prior year; Adjusted EPS of $7.10, up 19% from prior year
GAAP operating income of $3,644 million, up 47% from prior year; Adjusted operating income of $3,591 million, up 15% from prior year
Total Company GAAP operating margin of 9.2%; Adjusted operating margin of 9.1%
Repurchased 8.1 million shares for $693 million
Reduced total debt by approximately $1 billion

Third quarter highlights

GAAP EPS of $2.07, up 1% from prior year; Adjusted EPS of $1.94, down 28% from prior year
GAAP operating income of $1,033 million, down 3% from prior year; Adjusted operating income of $998 million, down 27% from prior year
Total Company GAAP operating margin of 7.7%; Adjusted operating margin of 7.4%
Liquidity of $3.3 billion at July 2, 2022

“We delivered solid results during the third quarter, focusing on operational excellence and aggressive cost management," said Donnie King, president and CEO of Tyson Foods. "The turnaround of our chicken business continues, and we continue to be the market share leader in many of our retail business lines, which include our Tyson, Jimmy Dean, Hillshire Farm, and Ball Park iconic brands.”

"We maintained double-digit sales and earnings growth year to date as well as progressing toward our goal of delivering more than $1 billion in recurring productivity savings by the end of fiscal 2024."

"I'm optimistic about our ability to win with our team members, win with our customers and consumers and win with excellence in execution."

Summary of segment results

Beef

Sales volume decreased for the first nine months of fiscal 2022 despite strong global demand, due to the impacts associated with a challenging labor environment and supply chain constraints. Sales volume increased in the third quarter of fiscal 2022 driven by a strong global demand environment, partially offset by a challenging labor environment and continued supply chain constraints. Average sales price increased in the first nine months of fiscal 2022 as input costs such as live cattle, labor, freight, and transportation costs increased and demand for Tyson's beef products remained strong. Average sales price decreased slightly in the third quarter of fiscal 2022 driven by reduced demand for premium cuts of beef as compared to exceptionally high demand in the third quarter of fiscal 2021. Operating income increased slightly during the first nine months of fiscal 2022 due to strong demand as it continued to optimize revenues relative to live cattle supply and a reduction in direct incremental expenses related to COVID-19, partially offset by production inefficiencies due to the impacts associated with a challenging labor environment and continued supply chain constraints. Additionally, operating income in fiscal 2021 was impacted by a $55 million gain from the recovery of cattle inventory related to a cattle supplier's misappropriation of Company funds. Operating income decreased in the third quarter of fiscal 2022 as margins began to reduce from historically high levels paired with continued increased operating costs. Additionally, operating income in the third quarter of fiscal 2022 benefited from $27 million of insurance proceeds related to a fire at a production facility in the fourth quarter of fiscal 2019.

Pork

Sales volume decreased in the third quarter and first nine months of fiscal 2022 due to reduced global demand. Average sales price decreased in the third quarter due to reduced export and retail demand. Average sales price increased in the first nine months of fiscal 2022 as input costs such as live hogs, labor, freight and transportation costs increased, partially offset by unfavorable mix associated with labor shortages. Operating income decreased in the third quarter of fiscal 2022 due to periods of compressed pork margins. Operating income for the first nine months of fiscal 2022 was relatively flat as reduced direct incremental expenses related to COVID-19 were offset by higher inputs costs and the impacts associated with a challenging labor environment.

Chicken

Sales volume decreased in the third quarter of fiscal 2022 primarily due to a reduction in volumes related to a fire at a production facility in the fourth quarter of fiscal 2021 and a reduction in outside meat purchases. Sales volume increased slightly in the first nine months of fiscal 2022 primarily due to strong global demand partially offset by a reduction in volumes related to a fire at a production facility in the fourth quarter of fiscal 2021. Average sales price increased in the third quarter and first nine months of fiscal 2022 due to the effects of pricing initiatives in an inflationary cost environment. Operating income increased in the third quarter and first nine months of fiscal 2022 primarily due to higher average sales prices, partially offset by the impacts of inflationary market conditions including increased supply chain and labor costs. In the third quarter of fiscal 2022, the company experienced $145 million of higher feed ingredient costs and $23 million of net derivative losses as compared to $56 million of net derivative gains in the third quarter of fiscal 2021. In the first nine months of fiscal 2022, Tyson experienced $430 million of higher feed ingredient costs. Additionally, operating income in the first nine months of fiscal 2022 benefited from $26 million of insurance proceeds, net of costs incurred related to a fire at a production facility and was impacted in the third quarter and first nine months of fiscal 2021 by $306 million and $626 million of losses, respectively, from the recognition of legal contingency accruals.

Prepared foods

Sales volume decreased in the third quarter and first nine months of fiscal 2022 due to the impacts of increased pricing, uneven foodservice recovery, the divestiture of Tyson's pet treats business in the fourth quarter of fiscal 2021 and a challenging supply environment impacting the first half of fiscal 2022. Average sales price increased in the third quarter and first nine months of fiscal 2022 primarily due to the effects of revenue management in an inflationary cost environment. Operating income increased in the third quarter of fiscal 2022 due to higher average sales prices, partially offset by the impacts of inflationary market conditions, including $135 million of increased raw materials and other input costs in addition to increased supply chain and labor costs. Operating income was relatively flat in the first nine months of fiscal 2022 as higher average sales prices were offset by the impacts of inflationary market conditions, including $560 million of increased raw materials and other input costs in addition to increased supply chain and labor costs.

Outlook

For fiscal 2022, the United States Department of Agriculture (USDA) indicates domestic protein production (beef, pork, chicken and turkey) should be relatively flat compared to fiscal 2021 levels. The following is a summary of the outlook for each of Tyson's segments, as well as an outlook for revenues, capital expenditures, net interest expense, liquidity and tax rate for fiscal 2022. Beginning in fiscal 2022, we launched a new productivity program, which is designed to drive a better, faster, and more agile organization that is supported by a culture of continuous improvement and faster decision making. The company is targeting $1 billion in productivity savings by the end of fiscal 2024 and more than $400 million in fiscal 2022, relative to a fiscal 2021 cost baseline. The company is currently on track to achieve its planned productivity savings for fiscal 2022.

Beef

USDA projects domestic production will increase approximately 1% in fiscal 2022 as compared to fiscal 2021. The company anticipates another strong year with adjusted operating margin between 11% and 13% in fiscal 2022.

Pork

USDA projects domestic production will decrease approximately 3% in fiscal 2022 as compared to fiscal 2021. Tyson believe its Pork segment's adjusted operating margin will be 3% to 5% in fiscal 2022.

Chicken

USDA projects chicken production will increase approximately 1% in fiscal 2022 as compared to fiscal 2021. The company anticipates an adjusted operating margin of 5% to 7% for fiscal 2022.

Prepared Foods

Tyson believes its adjusted operating margin will be between 8% and 10% in fiscal 2022. It will remain disciplined in its revenue management to ensure that additional inflationary pressures are mitigated by sales price increases, while also working diligently to deliver productivity savings to reduce costs.

International/other

Tyson anticipates lower results from its foreign operations in fiscal 2022 due to supply chain disruptions and other impacts related to COVID-19.

Revenue

The company expects sales to be $52 billion to $54 billion in fiscal 2022.

Capital expenditures

The company expects capital expenditures of approximately $1.9 billion for fiscal 2022. Capital expenditures include spending for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovation.

Net interest expense

The company expects net interest expense to approximate $350 million for fiscal 2022.

Liquidity

The company expects total liquidity, which was approximately $3.3 billion at July 2, 2022, to remain above Tyson's minimum liquidity target of $1.0 billion.

Tax rate

The company currently expects its adjusted effective tax rate to approximate 22.5% in fiscal 2022.

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Source: Tyson Foods

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