SPRINGDALE, ARK. — The acquisition of Hillshire Brands in 2014 had a dramatic impact on Tyson Food’s earnings during fiscal 2015, ended Oct. 3. Despite such hurdles as the West coast port slowdown that disrupted beef and pork exports, an outbreak of avian influenza that limited poultry exports and an unprecedented decline in live cattle futures, the company generated record results.
|Donnie Smith, president and c.e.o. of Tyson Foods|
“We did not adjust our earnings for the nearly $300 million these challenges caused and we still produced record adjusted sales, earnings, operating income, and cash flows,” said Donnie Smith, president and chief executive officer of Tyson Foods, during a Nov. 23 call with financial analysts. “Meanwhile, we paid down debt, bought back $250 million of our stock and successfully integrated two companies into Tyson 2.0 while capturing $322 million in total synergies. We have a great team at every level of the organization and I want to thank them for staying focused and delivering despite all of the challenges and distractions.”
For fiscal 2015, Tyson Foods earned $1,220 million, equal to $3.06 per share on the common stock, and an increase when compared with the previous year when the company earned $864 million, or $2.48 per share.
Sales for the year totaled $41,373 million, compared with sales of $37,580 million during fiscal 2014.
Tyson’s chicken business had a strong year, generating $1.3 billion in operating income, according to the company.
“We’ve proven that by purchasing up to 10% of our chicken needs on the open market and further processing it into value-added convenience foods we can produce strong stable returns even in times of falling commodity chicken pricing,” Mr. Smith said. “Our chicken business model is primarily value-added as a large branded component and is anchored in consumer insights and demand, and has only a small amount of commodity exposure.”
Breaking down Tyson’s chicken business, Mr. Smith said 52% of sales are in retail, 17% are in value-added food service sales, 16% are to food service national accounts, and 15% are such commodity products as leg quarters.
“Our chicken business is balanced and diversified and we have the flexibility to move where the consumer is going,” Mr. Smith said. “We’ve created a model that’s about 90% customer and consumer pull, with only about 10% of our sales being pushed out into the market. Our customers value our innovation, consumer insight, broad product portfolio and category leadership, all of which help them grow their business. This is how we’re building long-term growth and stability and why we believe our chicken segment will produce returns exceeding 10% in F.Y.16.”
Operating income for Tyson’s newly revamped Prepared Foods business was $636 million and volume was up 78% compared to the previous year.
“In F.Y.16, we’ll ramp up our MAP (marketing and promotion) spend even more behind the Hillshire Snacking and Ballpark jerky launches and the new Jimmy Dean’s Shine On Marketing campaign,” Mr. Smith said. “Also in the fiscal year we’ll continue to work on optimizing our prepared foods operations. And we expect return on sales for the segment to be near the low end of the 10% to 12% range in F.Y.16.”
During the year, the company’s Pork business unit generated an operating income of $373 million, and the Beef business recorded an operating loss of $53 million.
During fiscal 2016, Mr. Smith said Tyson Foods will be extending the Jimmy Dean brand into the bacon category and positioning the product as a premium option.
“Our business model is working,” Mr. Smith said. “The Prepared Foods segment had a very strong performance in the first full year of Tyson and Hillshire coming together. The Chicken segment had an outstanding year. Pork produced solid results. Beef experienced a tough operating environment most of fiscal 2015, but the other segments more than made up for it.
“We’re expecting another record year in fiscal 2016. Our projections indicate adjusted e.p.s. of $3.50 to $3.65, consistent with our goal of averaging at least 10% annual e.p.s. growth over time.”
For the fourth quarter, Tyson’s net income was $258 million, or 65c per share, and an increase compared with the previous year when net income totaled $137 million, or 37c per share.
Sales for the quarter were $10,506 million compared with sales of $10,105 million the previous year.