SPRINGDALE, ARK. – Despite incurring more than $200 million in direct incremental expenses related to the pandemic, Tyson Foods Inc.’s fiscal fourth quarter included some notable highlights for its fiscal fourth quarter and its 2020 fiscal year.
Net income for the fourth quarter ended Oct. 3, totaled $692 million, equal to $1.90 per share on the common stock, up substantially from the previous year when the company’s net income was $369 million, equal to $1.01 per share. Sales for the quarter rose to $11.46 billion from $10.88 billion the previous year.
For fiscal 2020, net income for the company was $2.14 billion, or $5.86 per share of common stock, up from $2.02 billion and $5.52 per share in the prior year. The company’s 12-month sales increased to $43.2 billion over fiscal 2019 sales of $42.41 billion.
Dean Banks, president and chief executive officer, said that the company continues facing challenges posed by the coronavirus (COVID-19) pandemic and will in the future. Its employees, supplier partners and customers’ resilience have allowed it to perform on its strategy of global growth and producing safe food safely that is accessible to consumers.
“While we will continue to face pandemic-related challenges in fiscal 2021, we’re settling the business down to be focused on executing our long-term strategy while generating strong returns for shareholders,” Banks said. “I’m excited for the opportunities ahead for this great company, and am certain we have the people, products, and strategies in place to drive future growth.”
The company’s Beef business unit generated an adjusted operating income of $516 million with a 12.1% operating margin. For the year, operating income in the segment was $1.687 billion with a 10.7% margin compared to $1.11 billion and a 7% margin in fiscal 2019.
Tyson said, “Operating income increased primarily due to market conditions, including COVID-19 disruptions, which increased the spread between preexisting contractual agreements and the cost of fed cattle, and the impact of an additional week in fiscal 2020, partially offset by price reductions offered to customers, as well as production inefficiencies and direct incremental expenses related to COVID-19.”
Prepared Foods’ operating income was $249 million during the quarter, and operating margin was 10.9%. For the 12-month period, the segment’s operating income topped $743 million with operating margin of 8.7%, down from the previous year’s $843 million in operating income and 10% operating margin.
“Operating income increased in the fourth quarter of fiscal 2020 due to favorable product mix associated with strong demand for retail products and the impact of an additional week, partially offset by the impacts of reduced foodservice sales,” Tyson said. “Operating income decreased in fiscal 2020 primarily due to increased operating costs, including a $105 million increase in net raw material costs and derivative losses, as well as production inefficiencies and direct incremental expenses related to COVID-19, partially offset by reduced promotional spend.”
Tyson’s Pork segment reported operating income of $174 million and operating margin of 12.7% for the fourth quarter and $565 million for the year with 11% margin for the year. Pork segment operating income and margins for the quarter were nearly six times that of the previous year’s. For the fiscal year, operating income dipped by $100 million to $743 million from the previous year and margins dropped to 8.7% form 10% in fiscal 2019.
According to the company, average sales price in fiscal 2020 increased as pork demand remained strong amid supply disruptions related to the impact of COVID-19, partially offset by lower livestock costs.
Chicken operating income for the quarter was $86 million with a 2.5% operating margin, flat compared to the previous year’s quarter. For the 12-month period, operating income dipped significantly to $122 million with 0.9% operating margin compared to $621 million and 4.7% in fiscal 2019.
Commenting on the Chicken segment, Tyson said, “Sales volume increased 1.9%, or decreased 5.4% after removing the impact of an additional week, for fourth quarter of fiscal 2020, and increased slightly, or decreased 1.7% after removing the impact of an additional week, for fiscal 2020 primarily due to lower production throughput associated with the impact of COVID-19 during portions of fiscal 2020 and lower foodservice demand, partially offset by increased retail demand.”
International operating income for the quarter was negative $11 million for the quarter compared to $8 million in the fourth quarter of 2019. For fiscal 2020, the international segment operating margin was $2 million compared to $17 million in 2019.
Because of the uncertainty of the pandemic in 2021, Tyson cannot forecast accurately the impact on demand, but demand is expected to increase.
“We continue to proactively manage the company and its operations through this global pandemic. Given the nature of our business, demand for food and protein may shift amongst sales channels and experience disruptions, but over time we expect worldwide demand to continue to increase,” the company said. “We are experiencing multiple challenges related to the pandemic. These challenges are anticipated to increase our operating costs and negatively impact our volumes into fiscal 2021. We cannot currently predict the ultimate impact that COVID-19 will have on our short- and long-term demand, as it will depend on, among other things, the severity and duration of the COVID-19 crisis. Our liquidity is expected to be adequate to continue to run our operations and meet our obligations as they become due.”