SPRINGDALE, Ark. — Tyson Foods Inc. has reported its fourth quarter and fiscal year 2019 financial results.
Highlights for FY 2019 include: GAAP (generally accepted accounting principles) earnings per share of $5.52, down 33 percent from record prior year (prior year included a one-time tax benefit of $2.71); adjusted EPS of $5.46, down 11 percent from record prior year; GAAP operating income of $2.8 billion; adjusted operating income of $2.97 billion; GAAP operating margin of 6.7 percent; adjusted operating margin of 7 percent; record beef GAAP operating margin of 7 percent and adjusted operating margin of 7.2 percent.
Fourth quarter 2019 highlights include: GAAP EPS of $1.01, down 31 percent from prior year; adjusted EPS of $1.21, down 23 percent from prior year; GAAP operating income of $604 million; adjusted operating income of $686 million; total company GAAP operating margin of 5.5 percent; and adjusted operating margin of 6.3 percent.
“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,” said Noel White, Tyson Foods’ president and CEO. “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.”
On Nov. 30, 2018, the company acquired Keystone Foods. The post-acquisition results from operations of this business are included in the Chicken segment for Keystone's domestic operations. In fiscal 2018, Tyson acquired Tecumseh Poultry LLC and American Proteins Inc. The post-acquisition results from operations of these businesses are also included in the Chicken segment.
Summary of segments:
Sales volume increased primarily due to incremental volume from business acquisitions. Average sales price decreased due to market conditions and sales mix primarily associated with the acquisition of a poultry rendering and blending business in the fourth quarter of fiscal 2018. 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 12 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 12 months and fourth quarter of fiscal 2018, respectively, of net feed ingredient costs and realized and mark-to-market derivative losses.
Sales volume decreased due to a reduction in live cattle processing capacity from the temporary closure of a production facility as a result of a fire. Average sales price increased as demand for our beef products remained strong. Operating income increased as we continued to maximize our 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.
Sales volume increased due to increased domestic availability of live hogs and strong demand for the company's pork products. Average sales price increased associated with higher livestock costs. 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.
- Prepared Foods
Sales volume decreased primarily from business divestitures. Average sales price increased due to product mix, which was positively impacted by business divestitures, as well as pricing increases in our ongoing business from the pass through of raw material costs. Operating income decreased in the fourth quarter of fiscal 2019 and was relatively flat in fiscal 2019 compared to fiscal 2018 as strong demand for our 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.
For fiscal 2020, USDA indicates domestic protein production (beef, pork, chicken and turkey) should increase approximately 2 percent to 3 percent from fiscal 2019 levels, but Tyson Foods expects export markets should absorb the increased production.
For fiscal 2020, Tyson notes that it expects capital expenditures to be approximately $1.3 billion. Capital expenditures will include spending for production growth, safety, animal well-being, infrastructure replacements and upgrades, and operational improvements that are expected to result in production and labor efficiencies, yield improvements and sales channel flexibility. The company also expects net interest expense to be approximately $450 million for fiscal 2020.
More information can be obtained at www.tysonfoods.com.