May 11, 2021
Tyson Foods announces results and recent developments in Q2
Tyson Foods, Inc. has recently announced its results for the second quarter of 2021, as well as recent developments in the US food company.
For Tyson's beef segment, sales volume decreased during the second quarter of fiscal 2021 due to a reduction in live cattle processed partially associated with the impacts of severe winter weather and a challenging labor environment.
Sales volume was relatively flat for the first six months of fiscal 2021 as the impacts in the second quarter were partially offset by strong domestic and export demand as well as the prior year impact of a fire which caused the temporary closure of a production facility for the majority of the first quarter of fiscal 2020.
Average sales price increased in the second quarter and first six months of fiscal 2021 as demand for Tyson's beef products remained strong.
Operating income increased in the second quarter and first six months of fiscal 2021 due to strong demand as Tyson continued to optimise revenues relative to live cattle supply, partially offset by production inefficiencies and direct incremental expenses related to COVID-19.
Additionally, operating income was impacted by approximately US$60 million and US$50 million of incremental net derivative gains in the second quarter and first six months of fiscal 2021, respectively, as compared to the second quarter and first six months of fiscal 2020. Additionally, operating income in the first six months of fiscal 2021 was impacted by a cattle supplier's misappropriation of company funds, which resulted in a US$55 million gain related to the recovery of cattle inventory as compared to a US$54 million loss recognised in the first six months of fiscal 2020.
For Tyson's pork segment, sales volume decreased during the second quarter and first six months of fiscal 2021 due to a reduction in live hogs processed primarily associated with severe winter weather, which was partially offset by strong demand.
Average sales price increased in the second quarter and first six months of fiscal 2021 due to strong demand. Operating income decreased in the second quarter and first six months of fiscal 2021 primarily due to production inefficiencies and direct incremental expenses related to COVID-19.
Additionally, operating income in the second quarter and first six months of fiscal 2021 was impacted by approximately US$50 million and US$70 million, respectively, of incremental net derivative losses as compared to the second quarter and first six months of fiscal 2020.
As for Tyson's chicken segment, sales volume decreased during the second quarter and first six months of fiscal 2021 due to lower production throughput associated with COVID-19, disruptions due to severe winter weather, decline in hatch rate and a challenging labor environment.
Average sales price increased in the second quarter and first six months of fiscal 2021 due to favorable sales mix and overall market conditions. Operating income decreased in the second quarter and first six months of fiscal 2021 primarily due to a US$320 million loss from the recognition of a legal contingency accrual in the first quarter as well as US$125 million and US$140 million of higher feed ingredient costs in the second quarter and first six months of fiscal 2021, respectively.
Operating income was further impacted in the second quarter and first six months of fiscal 2021 by production inefficiencies and direct incremental expenses related to COVID-19 and disruptions due to severe winter weather.
Additionally, operating income in the second quarter and first six months of fiscal 2021 was impacted by US$40 million and US$110 million, respectively, of incremental net derivative gains as compared to the second quarter and first six months of fiscal 2020.
According to Tyson, for fiscal 2021, the United States Department of Agriculture (USDA) has indicated domestic protein production (beef, pork, chicken and turkey) to increase less than 1% compared to fiscal 2020 levels.
For beef, the USDA projected US production will increase nearly 3% in fiscal 2021 as compared to fiscal 2020. For pork, US production will increase less than 1% in fiscal 2021 as compared to fiscal 2020. For chicken, the USDA projected slightly lower chicken production in fiscal 2021 as compared to fiscal 2020.
Based on current futures prices, Tyson expects feed costs to increase in fiscal 2021 as compared to fiscal 2020.
On an adjusted basis, Tyson anticipates its pork results will likely be lower in fiscal 2021 as compared to fiscal 2020. At current grain prices, the company believes its chicken results will likely be lower in fiscal 2021 as compared to fiscal 2020. Due to stronger than expected performance in beef and current market conditions, Tyson expects beef to deliver improved fiscal 2021 results as compared to fiscal 2020.
According to Tyson, over 42,000 of its US team members were vaccinated against COVID-19.
"We're grateful for our team members' continuing efforts and resilience, and for the collaboration and support we've received from our customers as we navigate these challenging times," said Tyson Foods president and chief executive officer Dean Banks. "We delivered a very strong performance in a complex operating environment with continued success in retail and improvements in foodservice as the industry is recovering. We generated adjusted operating income growth of 32% for the first half of fiscal 2021, driven by solid results in beef and prepared foods.
"We're seeing substantial inflation across our supply chain, which will likely create margin pressure during the back half of the year. We will remain focused on the factors we can control and will continue to work diligently for a full recovery of our chicken business, while delivering strong results in other areas of our company."
Banks added: "Our long-term outlook is bright as global protein consumption continues to grow, and we expect our investments in capacity expansion, product innovation and technology to create sustainable shareholder value."
- Tyson Foods
