Tyson Foods, Inc. (NYSE:TSN) Q2 2019 Earnings Conference Call - Final Transcript
May 06, 2019 • 09:00 am ET
Thank you, sir. We will now begin the question-and-answer session.
The first question we have will come from Ben Bienvenu of Stephens Inc. Please go ahead, sir.
Thanks, good morning.
Noel, I wanted to follow up on your concluding comments that you made on African Swine Fever. So you've decided not to update your guidance this morning with respect to ASF, which is understandable giving that timing is -- the impact is tough to gauge. But the comments you did provide were pretty constructive. So I'd love to hear any comments that you can make about what you guys are doing operationally and strategically to position yourself for the event.
And then if you could provide any more detailed thoughts on each of the major segments with respect to ASF, that'd be helpful for us.
Okay. Ben, it is a matter of timing and how that impacts both 2019 as well as 2020. And I do think that Tyson Foods is uniquely positioned in all of our proteins, in our beef business, pork business, our chicken business, because you don't have an incident like this where there is some place in the vicinity of 150 million to 200 million hogs that have died in China that there's not a significant impact. That correlates to about 10 million metric tons of product that has come out of the marketplace from a total protein global supply that's something in the area of 5%. But it's an event that I've never seen happen before. But we are well positioned to deal with that in all three proteins. There's a couple of things that we're doing, Ben, in reaction to that. First and foremost, we want to make sure that this disease doesn't reach the United States. So there has been activity with the industry and the US government to ensure that we're doing everything possible to keep the disease out of the United States and then react to that if in fact, it does hit the United States. So, it is an opportunity. I would tell you for not just our pork business, but all three species.
Great, that's helpful commentary. And my second question is related to the prepared foods business. Obviously a strong first half with respect to operating margins. But you've maintained your full-year guidance range of 10% to 12%. In light of the strong results that we've seen in the first half of the year, I think to get to the bottom end of that range, we would have to see in the ballpark of 8% margins. So I'm curious particularly given that the full-year guidance doesn't yet reflect ASF, which you noted pressure profitability, just any commentary you can provide on the prepared foods business as we move through the rest of the year would be helpful.
Ben, I'll go back to my original comment on timing. Really, we have seen pork prices start to move in reaction to ASF, but hog prices have risen