Tyson Foods net profit, third quarter sales decline

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Tyson Foods, in its first full quarter since the start of the COVID-19 pandemic, saw lower net income and sales for the period ending June 27.

The company released its financial report for the third quarter of fiscal 2020 on August 3.

Tyson Foods reported net income of $ 527 million for the quarter, down from $ 676 million reported for the third quarter of fiscal 2019. The company’s sales for the quarter were $ 10. 02 billion dollars, compared to 10.89 billion dollars for the same period of 2019..

“Without a doubt, our fiscal third quarter has been one of the most volatile and uncertain times I have seen during my time in the industry,” Noel White, CEO of Tyson Foods, said in a press release. . “However, our commitment to the health and safety of team members and investments in operations and portfolio strategy have effectively positioned us to deal with the unprecedented volatility of the COVID-19 market while allowing us to support our farmers, ranchers and producers and meet the needs of our customers. ”

“I want to thank our team members for their dedication and diligence as we continue to navigate the COVID-19 pandemic. At Tyson Foods, our goal remains to ensure the health and safety of our team members, their families and our communities. We take this responsibility very seriously and are proud that our team members have gone above and beyond to help us provide food to the nation.

Performance by segment

Beef – Sales volume decreased in the third quarter and in the first nine months of fiscal 2020, mainly due to lower production throughput associated with the impact of COVID-19 in the third quarter of fiscal 2020 and a reduction in harvesting capacity for live cattle due to a fire that caused the temporary closure of a production facility for most of the first quarter of fiscal 2020. The average selling price was increased in the third quarter and the first nine months of fiscal 2020, as demand for beef remained strong amid supply disruptions linked to the impact of COVID-19[FEMININE[FEMININE

Fiscal 2020 third quarter and first nine months operating profit increased primarily due to COVID-19 disruptions which widened the gap between pre-existing contractual agreements and the cost of feeder cattle , partially offset by price reductions offered to customers, as well as production inefficiencies and direct additional expenses related to COVID-19. In addition, operating income for the third quarter of fiscal 2020 was impacted by approximately $ 45 million in net derivative gains and $ 15 million in net insurance income from a fire at a facility in production.

Pork – Sales volume declined in the third quarter and first nine months of fiscal 2020, primarily due to lower production throughput associated with COVID-19 despite strong demand for Tyson pork products and the increase in national availability of live pigs. The average selling price increased in the third quarter and first nine months of fiscal 2020 as demand for pork remained strong amid supply disruptions linked to the impact of COVID-19.

Operating profit increased in the third quarter and first nine months of 2020, mainly due to disruptions related to COVID-19 which increased the gap between pre-existing contractual agreements and the cost of live pigs, partially offset by production inefficiencies and direct additional expenses related to COVID-19.

Chicken – Sales volume decreased in the third quarter and first nine months of fiscal 2020, primarily due to lower production throughput associated with the impact of COVID-19 in the third quarter of fiscal 2020 and lower demand for food services, partially offset by higher volumes of consumer products. The average selling price decreased in the third quarter of fiscal 2020 primarily due to lower chicken prices due to market conditions. The average selling price has been relatively stable in the first nine months of fiscal 2020 as lower sales volumes of low-priced rendering and mixing products resulted in higher selling prices. medium, which was more than offset by lower chicken prices due to market conditions.

Operating profit decreased in the third quarter and first nine months of fiscal 2020, mainly due to market conditions, an unfavorable product lineup, as well as production inefficiencies and direct incremental expenses related to COVID-19. Operating profit was also impacted by $ 110 million in net derivative losses in each of the third quarter and first nine months of fiscal 2020, and by an increase of approximately $ 50 million in costs. of food ingredients in the first nine months of fiscal 2020, compared to the same periods. during fiscal 2019. In addition, operating income was impacted by restructuring costs of $ 21 million incurred during the first nine months of fiscal 2020.

Prepared Foods – Sales volume decreased in the third quarter and the first nine months of fiscal 2020 as volume growth in the consumer products channel was offset by a reduction in the foodservice channel due to reduced demand and lower production throughput due to the impact of COVID-19 in the third quarter of fiscal 2020. The average selling price increased in the third quarter and the first nine months of fiscal 2020 in due to a favorable product mix associated with increased demand for consumer products, as well as the pass-through of increased raw material costs.

Operating profit decreased in the third quarter and first nine months of fiscal 2020 primarily due to higher operating costs, including a $ 135 million increase in net costs of raw materials and equipment. derivative losses in the first nine months of fiscal 2020, as well as production inefficiencies and additional expenses related to COVID-19 in the third quarter of fiscal 2020. Additionally, operating profit was impacted by restructuring costs of $ 22 million incurred in the first nine months of fiscal 2020.

“Within each of our segments, we have absorbed above-normal operating costs related to COVID-19,” White said. “Nonetheless, Tyson delivered strong third quarter results thanks to the strength of our Beef and Pork segments. Despite the short-term challenges, we are clearly staying the course for the long term. Our fourth quarter is off to a good start, and while COVID-19 has been disruptive, we have a strong long-term outlook for Tyson Foods. “

COVID-19 Expenses

During the third quarter of fiscal 2020, Tyson Foods incurred additional direct expenses related to COVID-19 totaling approximately $ 340 million. These direct COVID-19 additional expenses primarily included team member costs associated with worker health and availability and production facility downtime, including direct costs for personal protective equipment, disinfection of production facilities, COVID-19 tests, donations, product downgrades, returned products, some professional fees and $ 114 million in thank you bonuses to frontline employees, partially offset by credits from the CARES law.

Other indirect costs associated with COVID-19 are not reflected in this amount, including costs associated with raw materials, distribution and transportation, underutilization and reconfiguration of factories, bonuses paid to breeders of cattle and price discounts.

Check out our ongoing coverage of the coronavirus / COVID-19 pandemic.


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