Dive Brief:
- Meat processor Tyson Foods saw a slump in its chicken, pork and beef segments — particularly in beef, with softer consumer demand, increasing live cattle costs and continued tightening of cattle supply, CFO John Randal Tyson said Monday during the company’s fiscal first quarter earnings call.
- “This is the first time I've seen all markets work against us all at the same time. It's the first time I remember market impacts being greater than those controls that we have,” said CEO Donnie King on the call. “There are some places where we need to make decisions faster and in some cases, better decisions,” he said.
- Tyson Foods reported adjusted net income per share of $0.85 for the quarter ended Dec. 31 compared to $2.87 in the year-earlier period.
Dive Insight:
Executives on the call did not address Tyson, the company’s CFO, pleading guilty to public intoxication and trespassing charges on Jan. 24. Since his November arrest, Tyson has made headlines, with some corporate governance experts questioning whether the company should have taken more aggressive action to address the matter.
The Springdale, Arkansas-based company, however, previously backed the finance chief after reviewing his arrest. The Tyson board said in December that it had “continued confidence” in its CFO John R. Tyson after conducting what it characterized as two separate reviews of Tyson’s Nov. 6 arrest.
Tyson’s CFO originally pleaded not guilty to the charges on Dec. 1, with a trial date set for Feb. 15, according to the Fayetteville District Court. He then reached a plea deal two weeks ago.
In an interview ahead of the earnings call, Adam Samuelson, vice president and agribusiness equity research analyst at Goldman Sachs, said he was looking to the earnings call for information on the company’s performance rather than the CFO’s personal issues.
“Not reflecting on John Randal as an individual, but John Randal in his role as CFO and the company strategy … what we are looking for is a clear, updated view on cyclical fundamentals and their core businesses, specifically, given the beef business where the cattle herd is shrinking, and that being a headwind,” Samuelson said.
During the call Tyson told analysts that the second quarter will be even weaker than this quarter which ended on Dec. 31.
Despite significantly growing the prepared foods segment for the quarter, “under performance in chicken, pork and beef led to $979 million lower operating income compared to the prior year,” said Tyson.
The finance chief pointed to inflationary impacts on raw materials and supply chain costs, higher labor costs, higher cattle prices as beef herd numbers continue to decline, and softer customer demand as factors for the disappointing results.
Consumers are showing "unusual, erratic" behavior swapping between proteins, King said.
"We got hit in the mouth in Q1 because of all the protein on the market,” King told analysts on the call. The company reported an operating income of $467 million, down 68% from the year prior and an adjusted operating income of $453 million, also down 68% from the year prior.
