Tyson Foods Reports a Rise in Operating Profit for Fiscal 4Q15



Improved operating profit

Tyson Foods (TSN) reported an operating profit of $550 million in fiscal 4Q15, a rise over fiscal 4Q14. Its adjusted operating income also rose by 21% to $568 million. The adjusted results exclude the impact of the additional week in the fourth quarter and 12 months of fiscal 2015. For fiscal 2015, adjusted operating income rose by 37%, compared to fiscal 2014, to report at $2.4 billion. This marked the third consecutive year of growth.

Article continues below advertisement

Other key results of fiscal 4Q15

Net income rose to $258 million compared to fiscal 4Q14. Gross profit also rose by $256 million in fiscal 4Q15. Tyson Foods showed improved margins in fiscal 4Q15 compared to fiscal 4Q14. The company recorded an operating cash flow of $898 million in fiscal 4Q15 and $2.6 billion in fiscal 2015. This allowed Tyson to invest in its business by reducing net debt by $1.7 billion and repurchasing its own shares. The company spent $218 million on capital expenditures for fiscal 4Q15 and $854 million for full fiscal 2015.

Management’s remarks

Donnie Smith, Tyson Foods’ president and CEO, said, “Fiscal 2015 was an important year for Tyson Foods because it proved that our house of brands gives us the ability to produce record sales and earnings in less than optimum conditions, all while successfully merging two large companies. We’re expecting another record year in fiscal 2016. The team has been performing at a high level since the merger, but I still see so much potential as the power of Tyson 2.0 is just beginning to emerge.”

Article continues below advertisement

Closure of Prepared Foods plant

On November 19, Tyson Foods announced that it plans to discontinue operations at two plants to improve the overall performance of its prepared foods business. The pepperoni plant in Jefferson, Wisconsin, as well as the facility in Chicago, Illinois, are expected to be discontinued during the second half of the company’s fiscal 2016, ending October 1, 2016. Various factors contributed to this decision, like changing product needs, the age of both the plants, the cost of renovation, along with the Chicago plant’s distance from its supply base for raw material.

Peers’ performance

The company’s peers in the industry include Campbell Soup (CPB), ConAgra Foods (CAG), and Mead Johnson (MJN). They reported operating margins of 7.6%, 10.6%, and 23.1%, respectively, for their last reported quarters. The Fidelity MSCI Consumer Staples Index ETF (FSTA) and the iShares Morningstar Mid Value ETF (JKI) invest 0.71% and 0.93%, respectively, of their portfolios in Tyson stock as of November 24.


More From Market Realist