SPRINGDALE, ARK. — It has become almost commonplace to refer to Tyson Foods’ quarterly earnings as positive. The effects of the Hillshire Brands acquisition combined with a strong poultry business have been driving forces behind the company’s most recent financial performance. For the second quarter ended March 28 it was no different.
“This was another great quarter and better than we initially expected,” said Donnie Smith, president and chief executive officer of Tyson Foods. “Our fiscal second quarter is seasonally challenging, but we came in above our projections due to strong performances by our Prepared Foods and Chicken segments.”
Net income for the quarter totaled $311 million, equal to 75c per share on the common stock, and an increase compared with the same period of the previous year when the company earned $213 million, or 60c per share.
Sales for the quarter rose sharply to $9,979 million compared with $9,032 million.
“Our branded, value-added portfolio of complementary products has allowed us to achieve the balance needed to produce consistent, sustainable growth,”
Mr. Smith said. “We have structured our company to capitalize on the tailwinds and to manage through the headwinds in the parts of our business that are subject to commodity markets. By producing innovative, protein-centric foods, we are uniquely positioned to meet consumers’ needs for all meal occasions and all day parts, at home and away from home.”
Mr. Smith added that Tyson Foods achieved $77 million in synergies during the quarter due to the Hillshire Brands acquisition.
“Because we are ahead of pace in reaching our stated target of more than $225 million in fiscal 2015, we are raising our synergy target to more than $250 million for this year, $400 million in 2016 and $600 million in annual synergies by the end of fiscal 2017,” he said. “In addition, we are reiterating our annual guidance of $3.30 to $3.40 adjusted earnings per share.”
Tyson Foods’ Chicken business unit led the way with an operating income of $332 million during the second quarter on $2,829 million in sales.
“The (Chicken business) operating margin was 11.7%, and I’d like to point out that segment operating income for the last 12 months exceeded $1 billion,” Mr. Smith said in a conference call with financial analysts. “We feel really good about how we’ve managed our chicken business, and I think we’ve positioned ourselves well.
“We’ve put our retail value-added poultry business back on track, and maintained our position as the No. 1 brand in the country. In fact, our I.R.I. four-week data indicate that our market share for frozen breaded chicken is 53.7%, which is only a point or two below where we were when the operational challenges occurred last year.”
Despite all of the positive news, Mr. Smith did say the emergence of highly pathogen avian influenza in the United States is affecting some of Tyson Foods’ export prospects.
“At this point, the primary impact on our business is not from bird health concerns, but rather from the loss of export markets for certain states, and the resulting excess leg quarters in the domestic market,” he said. “We’ve positioned ourselves well over the past several years by reducing our dependency on export leg quarters, which now represent only a small percentage of our total portfolio.
“We have a very good whole bird mix, especially beneficial in times of depressed leg quarter pricing, and our buy versus grow strategy means that we’re not producing leg quarters that aren’t sold. We’re also fast-tracking innovation to get more dark meat into value-added form at both retail and food service, so we’ve got plenty of positives to offset the negatives.”