SPRINGDALE, ARK. — Tyson Foods’ diversified business model paid dividends during the first quarter of fiscal 2019, ended Dec. 29, 2018. The company’s Beef and Prepared Foods business units benefited from strong demand while the Chicken and Pork units struggled due to difficult market conditions.
Net income for the quarter was $551 million, equal to $1.54 per share on the common stock, lower when compared to the same period of the previous year when the company earned $1,631 million, or $4.54 per share. Items affecting earnings comparability included tax legislation passed at the end of 2017.
First-quarter sales dipped slightly to $10,193 million from $10,229 million the year prior.
“Strong organic growth in Prepared Foods, and strong Beef fundamentals led the performance, while Pork and Chicken performed well, given market conditions,” said Noel White, president and chief executive officer, during a Feb. 7 conference call with analysts. “The dynamics across the different businesses highlight the advantage of Tyson’s diversified business model as they work together to provide balance and opportunity for long-term growth.”
Tyson’s Beef business generated sales of $3,926 million during the quarter, up slightly from $3,886 million the year prior.
“Demand for beef remains strong globally,” Mr. White said. “With visibility in the cattle supplies for 2021, there appear to be plenty of cattle available for the next few years. And there are ample cattle supplies projected for the regions where we operate. This gives us confidence in our expectation and our operating margin near 7% for the year, which is somewhat higher than our previous guidance. “
Prepared Foods sales dipped to $2,149 million during the quarter after Tyson Foods divested its frozen bakery businesses in June 2018.
“In the Prepared Foods segment, it was a record first quarter with $268 million in operating income and a 12.5% return on sales, building on the momentum of a record year in 2018,” he said.
Reflecting on the evolution of Tysons’ Prepared Foods business unit following the acquisition of Hillshire Brands in 2014, Mr. White added, “We’ve grown the business from $4 billion in sales with basically a 1% return in 2014 to a business that, in fiscal 2019, is projected to produce over $8 billion in sales and 11% to 12% return and approximately $1 billion in operating income.”
Pricing was an issue for the company’s Chicken business. Sales volume rose 17% during the quarter and the average price was down 13%, according to the company. Part of the reason was the acquisition of the rendering business American Proteins in 2018. Chicken sales for the quarter rose to $3,115 million.
“We did face some pricing pressure in some categories, along with cost pressures from tight labor markets in some locations and more expensive feed ingredients,” Mr. White said. “Unfortunately, these pressures are offsetting the benefits from acquisitions and new product innovation.”
Pork business unit sales fell to $1,179 million during the quarter from $1,283 million the year prior. The company said sales volume decreased as a result of balancing supply with customer demand. Mr. White said the company is working to enhance revenue per head through the development of premium programs and growth of its export business.
An outbreak of African Swine Fever in China could offer export opportunities as well as the resolution of trade disputes with Canada and Mexico.
With the acquisitions of Keystone Foods and BRF S.A., Tyson Foods expects to see its sales rise to $43 billion in fiscal 2019 from $40 billion in fiscal 2018. The company reaffirmed its earnings guidance of $5.75 to $6.10 per share.