Tyson Foods, Inc. (NYSE:TSN) Q2 2015 Earnings Conference Call Transcript
May 04, 2015 • 09:00 am ET
re-rating the cost structure of our Prepare Foods business and growing the top and the bottom lines. In the Chicken segment for the second quarter, volumes and price were roughly flat compared to Q2 of 2014.
The operating margin was 11.7%, and I'd like to point out that segment operating income for the last 12 months exceeded $1 billion. We feel really good about how we've managed our Chicken business, and I think we've positioned ourselves well. We've put our retail value-added poultry business back on track and maintained our position as the number one brand in the country. In fact, IRI four-week data indicate that our market share for frozen breaded chicken is 53.7% which is only a 1 point or 2 point below where we were when the operational challenges occurred last year.
Also within the Chicken segment, we've rightsized our small bird and the big bird business is running well. Tyson Fresh Chicken, which is still the number one brand, is outperforming its peers and the volume that will be coming from the plant in South Georgia that we're converting to tray pack is already fully committed. As you're aware, avian influenza in the upper Midwest has affected mostly turkey and table egg flocks. At this point, the primary impact on our business is not from bird health concerns but rather from the loss of export markets for certain states and the resulting excess leg quarters in the domestic market.
We've positioned ourselves well over the past several years by reducing our dependency on export leg quarters which now represent only a small percentage of our total portfolio.
We have a very good whole bird mix, especially beneficial in times of depressed leg quarter pricing and our buy-versus-growth strategy means that we're not producing leg quarters that aren't sold. We're also fast-tracking innovation to get more dark meat into value-added form at both retail and foodservice. So, we've got plenty of positives to offset the negatives. Our Chicken business is having a great year. Adjusted for the lower leg quarter prices, we're now expecting, in the back half, we expect operating income for the full fiscal year of approximately 11%.
In the Beef segment, volume was down slightly with pricing up 9%. Operating margin was negative 0.5%. We knew it'd be a tough quarter for Beef but it was more disappointing than expected. Higher fed cattle cost and lower export volumes due to the West Coast ports slow down made it difficult to pass along increased input cost. The product is moving again out of the West Coast, albeit slower than we hoped and it could take another two to three months to clear. Orders have continued to flow in, which is encouraging for export demand. And also on the second quarter, the start-up of our Dakota City, Nebraska plant following a significant renovation project increased operating cost, but we now have the largest most modern beef facility in the United States.
For fiscal '15, we expect