Tyson Foods(TSN) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Sales increased by 2.5% year-over-year, with record first-quarter revenue in Chicken, Prepared Foods, and International Other segments [74] - Adjusted operating income declined by $979 million compared to the prior year, driven by underperformance in Chicken, Pork, and Beef segments [81] - Chicken revenue increased by 9.6% year-over-year, driven by volume growth and pricing initiatives [30] - Beef revenue decreased by 5.6% year-over-year, with lower average sales prices offsetting increased volume [49] - Pork revenue decreased by 6% year-over-year, with volume declines offsetting higher average sales prices [50] - Prepared Foods revenue increased by 8.8% year-over-year, driven by volume growth and pricing actions [42] Business Line Data and Key Metrics - Chicken segment sales reached a record$ 4.3 billion, up 9.6% year-over-year, with volume up 2.5% and pricing up 7.1% [51] - Beef segment sales were $4.7 billion, down 5.6% year-over-year, with volume up 2.9% but average sales price down 8.5% [49] - Pork segment sales were$ 1.5 billion, down 6% year-over-year, with volume down 7.4% and average sales price up 1.4% [50] - Prepared Foods segment sales were $2.5 billion, up 8.8% year-over-year, with volume up 1.2% and pricing up 7.6% [85] Market Data and Key Metrics - USDA projects Q2 chicken availability to be around 2%, significantly lower than the 77% increase in Q1 [2] - Beef availability is expected to decline by 4% to 5%, with cattle supplies tightening [2] - International business showed volume and sales growth, with expectations of improved profitability in fiscal 2023 [56] Company Strategy and Industry Competition - The company is focused on transforming team member experience, growing with customers, investing in digital and automation, restoring competitiveness in Chicken, and leveraging financial strength [28] - The company is modernizing operations with a productivity program aimed at delivering$ 1 billion in recurring savings [45] - The company is investing heavily in automation, including automated sandwich hand wrap and burrito assembly capabilities [33] - The company is optimizing its plant network and portfolio mix to maximize profitability, particularly in the Chicken segment [84] Management Commentary on Operating Environment and Future Outlook - The company expects Q2 to be softer but anticipates a recovery in Q3 and Q4 [3] - The company is optimistic about the long-term outlook for Beef, supported by strategic supplier relationships and growing global demand [82] - The company expects total company volume, revenue, and operating income to be stronger in the second half of the year compared to the first half [57] Other Important Information - The company returned nearly $500 million in cash to shareholders through dividends and share repurchases [55] - The company expects full-year margins for the Poultry business to be between 2% and 4%, with momentum building through the year [56] - The company is maintaining its total company sales guidance of$ 55 billion to $57 billion for fiscal 2023 [88] Q&A Session Summary Question: What caused the underperformance in the Chicken segment in Q1? - The underperformance was due to a combination of market dynamics, operational inefficiencies, and a miss in fresh chicken demand at retail [120] - The company had to resell excess fresh chicken at lower prices, impacting margins [120] Question: What is the outlook for the Beef segment? - The company expects Beef segment margins to be between 2% and 4% for the fiscal year, with long-term normalized margins expected to be between 5% and 7% [88] - The company is monitoring beef cutout value and balancing supply with customer demand during a period of margin compression [82] Question: How is the company managing risk with derivatives? - The company uses derivatives as a margin management tool rather than for speculative purposes, with coverage coordinated with sales forecasts [117] Question: What is the strategy for the International business? - The company is investing in international markets, particularly in Asia, with a focus on branded products and smart factories [100] - The company expects the International business to deliver improved profitability in fiscal 2023 [56]