Tyson Foods Inc. on Thursday reported revenue of $ 472 million for the first quarter of 2021, or $ 1.28 per share, down from a year ago, although beating Wall Street expectations.
The results were offset by settlement costs related to chicken pricing litigation.
Sales amounted to $ 10.46 billion, a decrease of 3% from the same quarter last year.
Dean Banks, president and CEO of Tyson, said in a morning conference call with analysts that business segments are strong as the company continues to manage the effects of the covid-19 pandemic.
After months of worker infections, absenteeism and other problems, Tyson begins administering vaccines to workers. Last week, workers at the North Carolina plant began receiving vaccines as part of the state’s distribution plan, which includes residents over 65. In anticipation of when more vaccines will be available, Tyson polled workers to see who wants the vaccine.
“The health and safety of our team members remains our top priority,” said Banks. During the quarter, Tyson spent $ 120 million on personal protective equipment, increased sanitation, testing and other covid-19 measures.
Banks said he was proud of the company’s workers this quarter as they navigated continued market volatility and were optimistic about the future.
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For the three months ended Jan. 2, Tyson exceeded $ 1 billion in operating income on an adjusted basis.
Total sales were hampered primarily by the chicken industry, which suffered headwinds from covid-19. Tyson also pointed out a legal contingency that reduced the chicken’s bottom line.
Earnings per share, adjusted for legal fees, was $ 1.94, beating estimates of $ 1.52 from FactSet and $ 1.65 from Stephens Inc.
Stephens analyst Ben Bienvenu said in a research report that the gains were due to surprisingly higher gross profits and lower overhead costs, partially offset by lower sales and depreciation and expense expenses. amortization.
Chicken sales were $ 2.8 billion, down 14% from a year ago. Prices increased, but were offset by lower volumes.
Last month, Tyson agreed to settle all claims filed by the defendants regarding the broiler chicken pricing litigation in federal court in Chicago for $ 221.5 million. Combined with production expenses, the settlement cost the company $ 320 million.
Meanwhile, beef and pork sales increased to $ 4 billion and $ 1.4 billion, respectively. Sales of prepared foods remained relatively stable compared to a year ago.
Beef volumes increased, but were partially offset by lower prices due to the abundance of cattle ready to market. Beef revenues increased 54% to $ 528 million with margins of 13.2%. The segment achieved a gain of $ 55 million due to a recovery in cattle inventories.
Pork volumes declined due to the temporary shutdown of processing plants during the quarter, but were partially offset by higher prices as demand increased. Hog revenue fell 39% to $ 116 million with margins of 8.1%.
Prepared food sales were $ 2.1 billion in the quarter. Despite continued growth in retail, volumes declined due to limited restaurant and production activity during the pandemic. Higher raw material costs pushed up prices. Prepared food revenue increased 68% to $ 266 million with margins of 12.6%.
International and other sales were $ 469 million, down 6%. Segment income increased 10% to $ 11 million.
In Tyson’s outlook for fiscal 2021, the company expects prepared feed results to improve and pork results to remain strong, but not as strong as in 2020. It is also preparing for lower chicken results as grain prices continue to climb and beef results in line or slightly lower than last year.
Stewart Glendinning, executive vice president and chief financial officer, said on the call that the chicken industry would likely face headwinds over grain risk as prices continue to climb.
Tyson expects fiscal 2021 sales to be between $ 42 billion and $ 44 billion.
Capital expenditures used for production expansion, animal welfare, infrastructure replacement and other costs are expected to be between $ 1.3 billion and $ 1.5 billion in the fiscal year 2021. The company is set to spend $ 440 million on covid-19 spending alone.
Banks said the company always strives to cut unnecessary costs and invest in the right areas.
Tyson announced this week that he would buy a 49% stake in a Malaysian food maker. According to a file from shareholders of Malayan Flour Mills Berhad, the assets will cost more than $ 100 million.
Tyson had $ 2.4 billion in cash and cash equivalents at the start of the year and $ 4.2 billion in cash. It repaid $ 750 million of its $ 1.5 billion term loan this month and expects net interest expense to be $ 430 million this fiscal year.
The company did not report any restructuring, severance and other related charges during the quarter.
The expected tax rate is expected to be around 23%, according to the company’s latest earnings report.
Tyson shares fell more than 5%, or $ 3.94, to close Thursday at $ 65.34 on the New York Stock Exchange. The stock has traded at $ 81.70 and $ 42.57 in the past year.
The company held its annual meeting of shareholders via webcast later Thursday morning.
Shareholders approved a number of recommended proposals, including a new roster of directors appointed by the board, the selection of PricewaterhouseCoopers LLP as accountant and the reinstatement of the Tyson stock-based incentive plan.
They also rejected three shareholder proposals that called on Tyson to expand its lobbying disclosures, report on human rights due diligence, and revise the company’s shareholder voting structure to that each share is equivalent to one vote.
The current voting structure includes two types of shares: class A, which is worth one vote per share; and Class B, worth 10 votes per share and owned largely by the Tyson family, which holds the majority of the voting rights, according to the company’s latest proxy statement.
The vote count was not disclosed, unlike in previous years.
Shareholders elected Maria Claudia Borras, Chief Energy Technology Officer, Oilfield Services, to the Board of Directors, increasing Tyson’s Board of Directors to 15 members.