Tyson Foods, Inc. (NYSE:TSN) Q2 2015 Earnings Conference Call Transcript

May 04, 2015 • 09:00 am ET

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Tyson Foods, Inc. (NYSE:TSN) Q2 2015 Earnings Conference Call Transcript

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Presentation
Executive
Donald Smith

fed cattle supply to be down 5% to 6% from last year. And we think we've experienced the bottom of the beef supply cycle. After this year, we believe we'll see slow incremental improvement in supply. Our Beef segment results should improve in the back half of the year, and while profitable for the year, fiscal '15 results are expected to be below fiscal 2014. It is important to remember that we'll continue to run our Beef business for margin not market share.

In the Pork segment, volume was down 4.4% and sales price was down over 15%, operating margin was 8.2%. Our volume decrease was due to the sale of our Heinold business, and excluding the impact of the divestiture, our sales volume grew 3.2%. Demand for pork has been a little softer than expected as wholesale price declines have not been realized in the retail channel. We expect future activity to improve soon, which should improve pork consumption because a higher percentage of pork is exported than beef, the West Coast port issue had a greater effect on domestic pork supplies.

In addition, there are more hogs coming on to the market and coupled with increased weight, pork supply could be up 8% to 10% in the near term. However, we don't think it'll stay at those levels for long because that scenario isn't sustainable. For the rest of the year, we'll continue to maximize revenue relative to the live hog markets through operational efficiencies and mix optimization, and we think the Pork segment will be in the range for the year. In the International segment, volume was down just over 30% due to the sale of our operations in Brazil and continued weak demand in China. Pricing was down 2.7% also due to demand in China as well as currency devaluation in Mexico.

Operating margin was a negative 6.8%. Segment operating losses improved following the sale of our Brazilian operations and improved market conditions in Mexico. The sale of our Mexico operations is pending the necessary government approvals and we expect to receive a decision during fiscal '15. Chicken pricing weakness in China persists although we're starting to see some improvement based on stronger pork pricing. We expect the International segment's adjusted operating loss to improve by about $25 million for the fiscal year.

Now, let's take a look at the sales channel information. At retail, Tyson was up 3% in the latest 52 weeks, which is on track with all food and beverage retail sales through the end of March. Not only did eight out of our nine core businesses have positive dollar sales growth in both the latest year and the latest quarter, six of nine had positive dollar share growth.

In the total fresh meat and deli universe, dollar sales were up 6% for all fresh meats for the 52 weeks ended March 28. Retail prices were up 19% for ground beef and 16% for whole-muscle cuts, while pork retails were up 14%, and