Tyson Foods is projecting flat sales for 2024 after another tough quarter, and company executives say they're continuing to take steps to increase efficiencies in a challenging meat market with especially tight cattle supplies.
Tyson reported Monday that sales dipped for the latest quarter from a year ago, from $13.7 billion to $13.3 billion. Adjusted operating income declined 77% to $236 million in the fourth quarter of fiscal 2023, mainly due to lower prices for beef and chicken, the company said.
Tyson President and CEO Donnie King said on an earnings call that the company, one of the biggest meat and poultry processors in the world, “expected beef to be under pressure due to limited cattle supply” in 2023.
“This trend held true, as cattle costs appreciated at a faster rate than the wholesale price of boxed beef, eroding export opportunities due to a strong U.S. dollar and low price of competing exporters, and ultimately creating a very tight spread scenario,” King said.
King also expected to see signs of herd rebuilding with the higher cattle prices, but “this did not materialize.”
Until, he said, “significant heifer retention and subsequent herd rebuilding takes place, we expect challenging supply conditions to remain.”
Chief Financial Officer John Tyson said the quarterly drop in sales was “driven by pork and chicken, where we saw a reduction in price per pound."
In 2024, the company projected adjusted operating income (AOI) for beef between a loss of $400 million and breakeven. For pork, the projection is “approximate breakeven,” while for chicken it’s between $400 million and $700 million.
Prepared foods, which was Tyson’s “profit engine” last year, delivered $889 million in adjusted operating income in fiscal 2023, and is a “key growth pillar for our future,” King said.
Tyson said although “profit in Q4 was down substantially versus last year. it's important to note it continued to improve on a sequential basis, and adjusted [earnings per share] more than doubled compared to Q3,” Tyson said. “Challenges remain, but we continue to drive efficiencies and improve our operations.”
Among those efficiencies: The company has completed shuttering of five of six poultry plants it targeted for closure in 2023.
“In a similar move to leverage efficiencies and reduce network redundancies, we also recently made the difficult decision to take two of our smaller fresh meats, case-ready value-added facilities offline,” King said.
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The CEO said his priorities this coming fiscal year include “improving our financial strength, with a focus on cash.” Noting that Tyson has increased its dividend for the 12th straight year, he said, “We will be disciplined and prudent with capital while remaining committed to our dividend as the primary way of returning cash to shareholders.”
He said he expects the company’s 2024 fiscal year to deliver better cash flow and profitability.
“2023 was a very unusual year, one that I have not seen, where all core protein categories were challenged at the same time,” King said. “At the same time, our brands continue to perform well, outperforming the broader food and beverage category.
“The demand for protein remains strong,” he said. “We're controlling the controllables, we're focused on efficiency modernization and cost structure.”
Tyson is lowering its projections for capital expenses to between $1 billion and $1.5 billion in 2024, versus $2.6 billion in fiscal 2022 and $1.9 billion in 2023.
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