Tyson Foods, Inc. (NYSE:TSN) Q4 2017 Earnings Conference Call Transcript

Nov 13, 2017 • 09:00 am ET

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Tyson Foods, Inc. (NYSE:TSN) Q4 2017 Earnings Conference Call Transcript

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Presentation
Executive
Tom Hayes

absolutely know that you'll make.

Executive
Stewart Glendenning

Thanks, Tom, and good morning, everyone. I'm really happy I could be here today and very excited about starting officially in December.

Executive
Tom Hayes

So, we have some work to do so let's get to it. So, we delivered our overall goal of at least 4% operating income growth, EPS growth in the high single digits, and 3% volume growth in value-added products. Fiscal 2017 was a year of great change and despite some challenges, our team remained focused on delivering for the long term for our shareowners and driving demand for consumer relevant products through innovation, customer growth, and through category leadership initiating to transformation to a more agile and efficient organization structure to accelerate growth and sustainability. Not only did we deliver exceptional results, we also strengthened our ability to lead change and grow in a dynamic marketplace while delivering ongoing financial fitness. In the fourth quarter, adjusted EPS was up 49% over last year and full-year adjusted EPS was up 21% to $5.31.

Turning the page on a significant Company milestone, we successfully completed the integration of synergy capture related to Hillshire with three-year synergies totaling $670 million. We now pivot to our ongoing Financial Fitness program in which we expect to achieve $200 million in savings in fiscal 2018 through a combination of synergies from the integration of AdvancePierre and other cost savings. As I've stated before, while the majority of the Hillshire synergies were reinvested to grow the company, Financial Fitness savings will fall directly to the bottom line. Looking at the Top 10 CPG retail food manufacturers in our fiscal 2017, our Core 9 product lines and total Tyson outperformed total food and beverage in dollar growth and outperformed all but one company in volume growth. As expected, we saw volume decline related to pricing we decided to take in a few categories and I'll talk more about that later.

So, now let's move on to the operating segments and take a look back at Q4 and fiscal 2017. All operating income and operating margin references I will make are on an adjusted basis. In the Beef segment, in the fourth quarter we produced operating income of $313 million with an 8.2% operating margin. Sales volume was up 3.3% on 6% higher average price. For the fiscal year, operating income was a record $885 million with a 6% operating margin. Sales volume was up 1.8% on 0.4% higher average price. The Beef segment benefited from cattle availability, strong domestic demand, and increased exports. As we begin fiscal 2018, industry cattle supplies are projected to increase 1% to 2% this year and we expect ample supplies in the regions where our plants are located. With strong export demand expected to continue due to increased global protein demand, we believe the Beef segment's operating margin should be above 5%.

In the Pork segment, fourth quarter operating income was $124 million with a 9.1% operating margin. Sales volume declined 1.2% as average price increased