Tyson Foods saw its operating income from three of its five business segments decline during the fourth quarter of fiscal year 2019. Meanwhile the Arkansas-based protein company’s net income for the quarter declined to $372 million, compared to $537 million for the fourth quarter of fiscal year 2018.
The company reported its financial results on November 12. The fiscal year ended on September 28.
Tyson Foods’ chicken, pork and prepared foods business segments all saw declines in operating income for the quarter, while the beef segment saw its operating income improve. The international/other segment went from a $10 million loss to an income of $8 million.
Chicken segment performance
According to a press release from Tyson Foods, the chicken segment’s sales volume increased primarily due to incremental volume from business acquisitions, including the domestic operations of Keystone Foods, which Tyson Foods acquired on November 30, 2018.
The average sales price decreased due to market conditions and sales mix primarily associated with the acquisition of American Proteins, a poultry rendering and blending business in the fourth quarter of fiscal 2018.
The chicken segment’s operating income decreased due to increased operating costs and challenging pricing conditions. Additionally, operating income was impacted by approximately $40 million and $55 million for the twelve months and fourth quarter of fiscal 2019, respectively, of net feed ingredient costs and realized and mark-to-market derivative losses. Operating income was impacted by approximately $100 million and $60 million for the twelve months and fourth quarter of fiscal 2018, respectively, of net feed ingredient costs and realized and mark-to-market derivative losses.
Pork segment performance
Sales volume for pork operations increased due to increased domestic availability of live hogs and strong demand for our pork products. The average sales price increased associated with higher livestock costs.
The pork segment’s operating income decreased due to periods of compressed pork margins caused primarily by the combination of increased livestock supplies, excess domestic availability of pork and export constraints, which drove livestock costs up faster than sales prices.
Beef segment
Sales volume for the beef segment decreased due to a reduction in live cattle processing capacity from the temporary closure of its beef plant in Finney County, Kansas, as a result of a fire. The average sales price increased as demand for our beef products remained strong. The operating income increased as Tyson continued to maximize its revenues relative to live fed cattle costs, partially offset by increased operating costs and $31 million of net incremental costs from the production facility fire.
Prepared Foods segment
Sales volume for the prepared foods business decreased primarily from business divestitures. The average sales price increased due to product mix, which was positively impacted by business divestitures, as well as pricing increases in Tyson’s ongoing business from the pass through of raw material costs.
Operating income for the segment decreased in the fourth quarter of fiscal 2019 and was relatively flat in fiscal 2019 compared to fiscal 2018 as strong demand for Tyson products and improved product mix was partially offset by increased operating costs, including a $60 million increase in raw material costs. Additionally, operating income in the fourth quarter of fiscal 2019 was impacted by a $41 million impairment from a planned divestiture of a business. Operating income was impacted in fiscal 2018 by a $68 million impairment, net of realized gains, associated with the divestiture of non-protein businesses.
Executive commentary
“Fiscal 2019 was highlighted by significant progress in our strategy to grow our business through differentiated capabilities, deliver service and value to our customers, and sustain our company and our world for future generations,” Noel White, Tyson Foods’ president and CEO, said in a press release. “We expanded our global footprint, launched innovation in our iconic brands and our new alternative protein brand, and prepared for future growth by investing in technology and infrastructure.
“We’re very optimistic about fiscal 2020, and we currently expect to meet or exceed our long-term earnings algorithm of high single-digit adjusted earnings per share growth as we’re well positioned to take advantage of opportunities in the global marketplace.”
