Sunday, February 25, 2024

Tyson Foods reports strong fourth quarter and FY 2020 results

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SPRINGDALE, Ark. —Tyson Foods Inc. has reported the following results for the fourth quarter and fiscal year 2020:

Fourth quarter:

  • GAAP (generally accepted accounting principles) EPS (earnings per share) of $1.90, up 88 percent from prior year; adjusted EPS of $1.81 (13-week basis), up 50 percent from prior year.
  • GAAP operating income of $1.012 billion, up 68 percent from prior year; Adjusted operating income of $961 million (13-week basis), up 40 percent from prior year.
  • Total company GAAP operating margin of 8.8 percent; adjusted operating margin of 9 percent (13-week basis).
  • Liquidity of $3.2 billion on Oct. 3, 2020.
  • Reduced total debt by $690 million.
  • Results negatively impacted by approximately $200 million of direct incremental expenses related to COVID-19.

Fiscal year:

  • GAAP EPS of $5.86, up 6 percent from prior year; adjusted EPS of $5.64 (52-week basis), up 3 percent from prior year.
  • GAAP operating income of $3.114 billion, up 10 percent from prior year; adjusted operating income of $3.116 billion (52-week basis), up 5 percent from prior year.
  • Total company GAAP operating margin of 7.2 percent; adjusted operating margin of 7.4 percent (52-week basis).
  • Generated approximately $3.9 billion of operating cash flows.
  • Results negatively impacted by approximately $540 million of direct incremental expenses related to COVID-19.

“Our business performed well and delivered strong fourth quarter and full-year results,” said Dean Banks, president and CEO of Tyson Foods. “Our team members, agricultural partners, and customers have shown resilience. This has enabled us to maintain and accelerate our efforts to provide global consumers with a safe and accessible food supply.”

“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 added. “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.”

In regard to COVID-19 expenses, the company notes that it incurred direct incremental expenses associated with the impact of COVID-19 totaling approximately $200 million and $540 million for the fourth quarter and 12 months of fiscal year 2020, respectively.

These direct incremental expenses primarily included team member costs associated with worker health and availability and production facility downtime, including direct costs for personal protection equipment, production facility sanitization, COVID-19 testing, donations, product downgrades and rendered product, partially offset by CARES Act credits. Other indirect costs associated with COVID-19 are not reflected in this amount, including costs associated with raw materials, distribution and transportation, plant underutilization and reconfiguration, premiums paid to cattle producers and pricing discounts.

Chicken segment

Sales volume increased 1.9 percent, or decreased 5.4 percent after removing the impact of an additional week, for fourth quarter of fiscal 2020, and increased slightly, or decreased 1.7 percent 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.

Average sales price decreased primarily due to weaker chicken pricing as a result of market conditions. Operating income decreased primarily from market conditions, unfavorable product mix, as well as production inefficiencies and direct incremental expenses related to COVID-19.

Operating income was also impacted by approximately $45 million of net derivative gains in the fourth quarter of fiscal 2020 and approximately $70 million of net losses in the fourth quarter of 2019, in addition to approximately $50 million of decreased feed ingredient costs in the fourth quarter of fiscal 2020 as compared to the fourth quarter of fiscal 2019.

For fiscal 2020, net derivative results and feed ingredient costs were relatively flat as compared to fiscal 2019. Operating income was further impacted by $34 million and $21 million in restructuring costs incurred in fiscal 2020 and fiscal 2019, respectively.

Outlook

For fiscal 2021, USDA indicates domestic protein production (beef, pork, chicken and turkey) should increase approximately 1 percent from fiscal 2020 levels. On an adjusted basis, Tyson notes that it anticipates the Beef and Pork segments will remain strong, although not at fiscal 2020 levels, and the company notes that it believes the Chicken and Prepared Foods segments will likely strengthen in fiscal 2021 as compared to fiscal 2020.

“We continue to proactively manage the company and its operations through this global pandemic,” the company stated. “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. 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.”

Tyson Foods added that USDA projects a relatively flat to slightly increased outlook for chicken production in fiscal 2021 as compared to fiscal 2020.

For more information, visit www.tysonfoods.com.

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