What’s behind the higher beef sales?
Tyson Foods’ (TSN) beef sales rose 5.6% YoY (year-over-year) to $3.7 billion in fiscal 2Q18, reflecting higher volumes (+1.8%) due to strong demand in local and international markets and cattle availability. Its average selling price improved 3.7% as demand exceeded supply.
However, its operating income was impacted as leverage from improved volumes and pricing were more than offset by higher labor and freight costs. The segment’s adjusted operating profit margin narrowed by 30 basis points to 3.3% in fiscal 2Q18.
Pork sales remain weak
The company’s pork sales fell 2.8% to $1.3 billion in fiscal 2Q18, reflecting a lower average selling price (-1.8%) and volumes (-1.1%). The segment’s operating income fell YoY, while its adjusted operating margin narrowed by 460 basis points to 6.2%, reflecting lower volumes and pricing and a tough YoY comparison. Higher freight and labor costs and weather-related disruptions at certain plants were also a drag.
Chicken sales continue to grow
Chicken sales grew 5.8% to ~$3.0 billion, driven by healthy volumes (+2.0%) and higher pricing (+3.6%). The segment’s sales benefited from incremental volumes from the company’s AdvancePierre acquisition and a favorable mix.
The chicken segment’s operating profit improved YoY, while its adjusted operating margin expanded 140 basis points to 9.7%, reflecting sales leverage, lower feed costs, a favorable mix, and cost-saving initiatives. However, higher labor and freight costs dragged down its performance.
Prepared foods see stellar growth
Prepared food sales rose 22.6% due to strong volumes and pricing in fiscal 2Q18. Volumes rose 10.9%, reflecting benefits from the AdvancePierre acquisition. The segment’s average selling price rose 10.6%, reflecting pricing action taken in response to input cost inflation and a favorable mix. The segment’s adjusted operating margin expanded 240 basis points to 10.3%, reflecting strong pricing, higher volumes, and cost savings from the company’s restructuring program.