Tyson Foods recorded record earnings during the third quarter of fiscal year 2014, reaching $260 million or 73 cents per share. That represents a 4.4 increase from the $249 million or 69 cents per share achieved in the third quarter of fiscal year 2013.
Its adjusted earnings per share (EPS) for the quarter was 75 cents.
The meat, poultry and food processor also reported that its quarterly sales reached $9.7 billion, an 11 percent increase over its third quarter results in 2013.
"With $0.75 adjusted EPS, this was a record third quarter," said Donnie Smith, Tyson Foods' president and CEO. "Overall, our results were in line with our expectations. The Chicken segment could have performed better had it not been for isolated issues at a couple of plants. The Beef segment finished the quarter remarkably well after a difficult start. The Pork segment had a record third quarter despite tight hog supplies due to the PED (porcine epidemic diarrhea) virus.The Prepared Foods segment had a disappointing quarter primarily due to the continued run up in pork raw material inputs.
Tyson Chicken segment
Sales for Tyson’s Chicken segment jumped $9 million to $2.829 billion for the third quarter of 2014. The segment’s operating margin dropped $10 million to $195 million.
Sales volumes for the third quarter of fiscal 2014 grew as a result of stronger demand for chicken products and mix of rendered product sales. The average sales price decreased as feed ingredient costs declined, partially offset by mix changes. Operating income for the third quarter of fiscal 2014 was negatively impacted by rapidly rising costs of outside meat purchases as well as operational disruptions at two facilities.
For the nine months of fiscal 2014, operating income increased due to higher sales volume and lower feed ingredient costs, partially offset by decreased average sales price. Feed costs decreased $120 million$460 million for the third quarter and nine months of fiscal 2014, respectively.
Tyson Pork segment
The Tyson Pork segment saw its sales jump from $1.3 billion to $1.77 billion and its operating income jump from $67 million to $128 million during the third quarter of fiscal year 2014.
Sales volumes increased as a result of better domestic demand for pork products. The average sales price increased due to lower total hog supplies, which additionally resulted in higher input costs. Operating income increased as Tyson maximized its revenues relative to live hog markets, partially attributable to operational and mix performance.
Tyson Beef segment
Sales for the Tyson Beef segment increased from $3.7 billion to $4.2 billion for the third quarter of FY 2014. Its operating income dropped from $114 million to $101 million.
Sales volumes decreased for the third quarter of fiscal 2014 due to a reduction in live cattle processed.
Operating income decreased for the third quarter of fiscal 2014 due to higher fed cattle costs and periods of reduced demand for beef products, which made it difficult to pass along increased input costs, as well as lower sales volumes and increased operating costs.
Tyson Prepared Foods
Sales volumes for Tyson Foods’ Prepared Foods segment increased from as a result of improved demand for the company’s prepared foods products and incremental volumes from the purchase of three businesses. Average sales price increased due to better product mix and price increases associated with higher input costs. Operating income for the quarter decreased from $24 million to a loss of $50 million for the quarter as a result of higher raw material and other input costs of approximately $95 million, and additional costs incurred as the company invested in Tyson’s growth platforms.
“Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through pricing. However, there is a lag time for price increases to take effect. Additionally, in the third quarter of fiscal 2014, we incurred a $49 million impairment charge related to the planned closure of three plants, which are expected to cease operation by mid-fiscal 2015,” the company stated.
Tyson International segment
Tyson’s International segment increased its sales from $343 million to $365 million during the third quarter, but its operating income suffered a $15 million loss, compared to a $5 million gain during the third quarter of 2013.
The company stated that it expected its International segment to struggle during the third quarter of 2014, but it does expect it to perform well in fiscal year 2015. Its optimism for 2015 is partly because the company has a pending transaction in which JBS SA and subsidiary Pilgrim’s Pride are to purchase Tyson’s poultry businesses in Brazil and Mexico for a price of $575 million.