Tyson Foods, Inc. (NYSE:TSN) Q3 2018 Earnings Conference Call Transcript
Aug 06, 2018 • 09:00 am ET
Good morning, and welcome to the Tyson Foods' Third Quarter Earnings Conference Call.
(Operator Instructions) Please note this event is being recorded.
I would now like to turn the conference over to Jon Kathol, VP of IR. Please go ahead, sir.
Good morning, and welcome to the Tyson Foods Incorporated third quarter earnings conference call of the 2018 fiscal year. On today's call are Tom Hayes, President and CEO and Stewart Glendinning, CFO.
Slides accompanying today's prepared remarks are available as a quarterly supplemental report on the IR website at ir.tyson.com. Tyson Foods issued an earnings release this morning, which has been furnished to the SEC on Form 8-K and is available on our website at ir.tyson.com.
(Forward-Looking Cautionary Statements)
I would like to remind everyone that this call is being recorded on Monday, August 6, at 9:00 AM Eastern time. A replay of today's call will be available on Tyson's website approximately one hour after the conclusion of this call. This broadcast is the property of Tyson Foods and any re-distribution, re-transmission or rebroadcast of this call in any form without the expressed written consent of Tyson Foods is strictly prohibited.
Please note that our references to earnings per share, operating income and operating margin in today's remarks are on an adjusted basis, unless otherwise noted. For reconciliations to our GAAP results, please refer to this morning's press release.
I'll now turn the call over to Tom Hayes.
Okay. Thanks Jon and good morning everybody. Thanks for joining us today. While our business continued to grow in the third quarter, we are clearly not satisfied with our results, particularly in our chicken segment, intertwined with uncertainty in trade policies and tariffs, our increasing supplies of relatively low-priced beef and pork competing with chicken.
Typically in Q3 and Q4, we expect strong chicken demand, driven by grilling season and normal summer feature activity. Instead, cold Memorial Day weekend weather curbed demand, while competing proteins displaced chicken in retail and food service promotions. To recover, we are aggressively addressing costs and capturing new feature activity. And by keeping our inventories low, we can quickly react to market changes.
Rising freight costs have been a challenge for all of our businesses. We now expect freight to be about $270 million more this year compared to last year with a net effect for FY 2018 estimated to be around $0.33 per share. On a run rate basis, we recovered about 85% and we plan to reach a 100% once our longer-term contracts expire and new pricing terms take effect. Our efforts to recover price are likely curbing short-term growth. We are growing, but not as fast as we could be and not as fast as we want to be.
Despite the current trade issues, global protein demand continues to grow. Our products are moving in the export markets albeit at lower values. We're working to strengthen our existing relationships in certain markets and build inroads into new markets. In Q3, we demonstrated the value