In the three months to 2 April 2016, the company reported a net income of $434 million, a 39% increase on the same quarter in 2015. Its revenue was $9.2bn, a decrease of 8% compared to the second quarter of 2015.
Donnie Smith, president and chief executive officer of Tyson Foods, said: “Our business continues to perform very well, delivering record second-quarter operating income and return on sales, in what is typically the most challenging quarter of our fiscal year.
“Sales are growing in key retail product lines. The pricing and marketing investments we’ve made are paying off in increased volumes in strategic products, including Hillshire Farm smoked sausage and lunchmeat, Jimmy Dean breakfast sausage and Ball Park hot dogs. With a focus on the longer term, we have a three-year pipeline of innovation across all segments, with exciting new product launches to keep our offerings in the retail, foodservice and international channels relevant to consumers.”
Diversification has helped Tyson Foods grow over the quarter.
Smith said: “We’ve differentiated our chicken business by being more consumer-driven, upgrading our mix, diversifying our pricing mechanisms, improving our cost structure, implementing our ‘Buy vs. Grow’ strategy and providing industry-leading quality and customer service. Because of the actions we’ve taken, and because those actions have proven to produce higher, more stable margins, we’re raising the annual normalised margin range for the chicken segment to 9-11%.”
Looking ahead, Smith believed there was momentum for the rest of the year. “We’re in a great position, and we’re generating momentum that will take us into 2017 and beyond. We’ve produced record results in the first half of the fiscal year, and we expect continued strong performance in the second half. To reflect what we’ve accomplished and to demonstrate our confidence, we’re raising adjusted earnings guidance for fiscal 2016 to $4.20-4.30 per share.”
Tyson Foods’ chicken sales volume increased over the quarter, which it attributed to stronger demand. “For the six months of fiscal 2016, sales volume was flat as demand for our chicken products was offset by optimising mix and our buy versus grow strategy. Average sales price decreased as feed ingredient costs declined, partially offset by mix changes. Operating income increased due to improved operational execution and lower feed ingredient costs.”
Beef also saw an increase in sales volumes during the quarter. This was down to an increase in live cattle processed as a result of higher fed cattle supplies. Tyson Foods expects industry-fed cattle supplies to increase around 1% in fiscal 2016 compared to fiscal 2015.
Pork sales volume increased in the second quarter of the year, driven by better demand for pork products. The company’s sales volume decreased for the six months of fiscal 2016 due to the divestiture of its Heinold Hog Markets business in the first quarter of 2015. Excluding this impact of the divestiture, sales volume grew 3.1%. Live hog supplies increased, which drove down livestock cost and average sales price.
It expected industry hog supplies to increase around 2% in fiscal 2016 compared to fiscal 2015. For fiscal 2016, the company said it believed its pork segment operating margin would be around 10%.
Sales volume in its prepared foods division was relatively flat in the second quarter of fiscal 2016, but decreased for the six months of fiscal 2016 due to a change in sales mix in addition to the carry-over effect of the 2015 turkey avian influenza occurrence into the first half of fiscal 2016. The average sales price decreased, primarily due to a decline in input costs, partially offset by a change in product mix.
In other areas, Tyson Foods predicted its operating loss would increase to $85m from its previous estimate of $70m. Overall it believed its sales would hit $37bn, down from the previous financial year and that this would be down to declines in beef, pork and chicken prices.