August 4, 2020

 

Tyson Foods reports third quarter 2020 results

 

 

Tyson Foods, Inc. has revealed its results for the third quarter of 2020 early this month.

 

First nine months highlights

 

- GAAP EPS of US$3.96, down 12% from prior year; adjusted EPS of US$3.83, down 10% from prior year;

 

- GAAP operating income of US$2,102 million; adjusted operating income of US$2,155 million;

 

- Total company GAAP operating margin of 6.6% and adjusted operating margin of 6.8%;

 

- Generated US$2.7 billion of operating cash flows;

 

- Results negatively impacted by approximately US$340 million of direct incremental expenses related to COVID-19.

 

Third quarter highlights

 

- GAAP EPS of US$1.44, down 22% from prior year; adjusted EPS of US$1.40, down 5% from prior year;

 

- GAAP operating income of US$775 million and adjusted operating income of US$760 million;

 

- Total company GAAP operating margin of 7.7% and adjusted operating margin of 7.6%;

 

- Liquidity of US$3.1 billion at June 27, 2020;

 

- Results negatively impacted by approximately US$340 million of direct incremental expenses related to COVID-19.

 

According to the company, its results have been negatively impacted by approximately US$340 million of direct incremental expenses related to COVID-19.

 

"Without a doubt, our third fiscal quarter was one of the most volatile and uncertain periods I've seen during my time in the industry," said Noel White, Tyson Foods' CEO. "However, our commitment to team member health and safety and investments in operations and portfolio strategy effectively positioned us to weather unprecedented COVID-19 marketplace volatility while allowing us to support our farmers, ranchers and producers and meet our customers' needs.

 

White added: "Within each of our segments, we absorbed higher-than-normal operating costs related to COVID-19. Nonetheless, Tyson delivered strong results during the third quarter led by strength in our Beef and Pork segments. Despite short-term challenges, we're maintaining a clear focus on the long term. Our fourth quarter is off to a solid start, and while COVID-19 has been disruptive, we have a strong long-term outlook for Tyson Foods."

 

During the third quarter of fiscal 2020, Tyson Foods incurred direct incremental expenses related to COVID-19 totalling approximately US$340 million. These COVID-19 direct incremental expenses primarily included team member costs associated with worker health and availability and production facility downtime, including direct costs for personal protection equipment, production facility sanitisation, COVID-19 testing, donations, product downgrades, rendered product, certain professional fees and US$114 million of 'thank you' bonuses to frontline employees, partially offset by CARES Act credits.

 

Other indirect costs associated with COVID-19 are not reflected in that amount, including costs associated with raw materials, distribution and transportation, plant underutilisation and reconfiguration, premiums paid to cattle producers, and pricing discounts.

 

For Tyson Foods' beef segment, sales volume decreased in the third quarter and the first nine months of fiscal 2020 primarily due to lower production throughput associated with the impact of COVID-19 in the third quarter of fiscal 2020 and a reduction in live cattle harvest capacity as a result of a fire that caused the temporary closure of a production facility for the majority of the first quarter of fiscal 2020.

 

Average sales price increased in the third quarter and first nine months of fiscal 2020 as beef demand remained strong amid supply disruptions related to the impact of COVID-19. Operating income in the third quarter and first nine months of fiscal 2020 increased primarily due to COVID-19 disruptions which increased the spread between preexisting contractual agreements and the cost of fed cattle, partially offset by price reductions offered to customers, as well as production inefficiencies and direct incremental expenses related to COVID-19. Additionally, operating income in the third quarter of fiscal 2020 was impacted by approximately US$45 million of net derivative gains and US$15 million of net insurance proceeds from a production facility fire.

 

For Tyson Foods' pork segment, sales volume decreased in the third quarter and first nine months of fiscal 2020 primarily due to lower production throughput associated with COVID-19 despite strong demand for the company's pork products and increased domestic availability of live hogs. Average sales price increased in the third quarter and first nine months of fiscal 2020 as pork demand remained strong amid supply disruptions related to the impact of COVID-19. Operating income increased in the third quarter and first nine months of 2020 primarily due to COVID-19 disruptions which increased the spread between pre-existing contractual agreements and the cost of live hogs, partially offset by production inefficiencies and direct incremental expenses related to COVID-19.

 

For Tyson Foods' chicken, sales volume decreased in the third quarter and first nine months of fiscal 2020 primarily due to lower production throughput associated with the impact of COVID-19 in the third quarter of fiscal 2020 and lower foodservice demand, partially offset by increased volumes in consumer products. Average sales price decreased in the third quarter of fiscal 2020 primarily due to weaker chicken pricing as a result of market conditions. Average sales price was relatively flat in the first nine months of fiscal 2020 as reduced sales volumes of lower priced rendering and blending products had the effect of increasing average sales price, which was largely offset by weaker chicken pricing as a result of market conditions. Operating income decreased in the third quarter and first nine months of fiscal 2020 primarily from market conditions, unfavorable product mix, as well as production inefficiencies and direct incremental expenses related to COVID-19. Operating income was further impacted by US$110 million of net derivatives losses in each of the third quarter and first nine months of fiscal 2020, and by approximately US$50 million in increased feed ingredient costs in first nine months of fiscal 2020, as compared to the same periods in fiscal 2019. Additionally, operating income was impacted by US$21 million in restructuring costs incurred in the first nine months of fiscal 2020.

 

For fiscal 2021, the USDA indicates domestic protein production (beef, pork, chicken and turkey) should increase approximately 1% from fiscal 2020 levels.

 

For beef, the USDA projects domestic production will increase approximately 3% in fiscal 2021 as compared to a COVID-19 impacted fiscal 2020. For fiscal 2021, Tyson Foods also expects ample supplies in regions where it operates its plants.


For pork, the USDA projects domestic production will increase approximately 1% in fiscal 2021 as compared to a COVID-19 impacted fiscal 2020.

 

For chicken, the USDA projects a relatively flat to slightly increased outlook for chicken production in fiscal 2021 as compared to fiscal 2020.

 

For fiscal 2020, Tyson Foods expects capital expenditures to be approximately US$1.2 billion with a similar amount expected in fiscal 2021. Capital expenditures include spending for production growth, safety, animal well-being, infrastructure replacements and upgrades, and operational improvements that are expected to result in production and labour efficiencies, yield improvements and sales channel flexibility.

 

Tyson Foods expects net interest expense to approximate US$470 million for fiscal 2020 and US$440 million for fiscal 2021.

 

Tyson Foods expects total liquidity, which was approximately US$3.1 billion at June 27, 2020, to remain above its minimum liquidity target of US$1.0 billion.

 

Full details of Tyson Foods third quarter 2020 results can be accessed at:

https://www.tysonfoods.com/news/news-releases/2020/8/tyson-foods-reports-third-quarter-2020-results-worker-health-and-safety

 

- Tyson Foods

Video >

Follow Us

FacebookTwitterLinkedIn