Tyson Foods, Inc. (NYSE:TSN) Q3 2019 Earnings Conference Call - Final Transcript

Aug 05, 2019 • 09:00 am ET

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Tyson Foods, Inc. (NYSE:TSN) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And today's first question comes from Ben Theurer of Barclays. Please go ahead.

Analyst
Benjamin Theurer

Yes, good morning, Noel, Stewart. Thank you very much for taking my question. I have -- my question is around your assumptions for next year, and in my view, relatively cautious 2020 outlook, considering all the potential benefits from African swine fever. Could you lay out a little bit, what do you think the direct benefit to pork could be in your segment reporting considering that maybe trade restrictions might be lifted, and how does this compare to the indirect opportunity from markets tightening in general and the backfills, just to understand a little bit the drivers pork specific and then obviously like the second, third derivatives on your other businesses in the US, as it comes to ASF? That would be my question. Thank you.

Executive
Noel White

Yeah, sure, Ben. I think it's not only going to be pork that's benefited. It's -- I think that all of the proteins will benefit. In total, that's somewhere around 5% of global proteins disappeared. So whether it's a direct benefit or indirect benefit, regardless, it will be beneficiary to us. So I think that's both pork, beef, chicken, all three primary proteins could benefit from that. The degree, Ben, it really depends on the timing of when the shipments might begin, whether it's from the United States or from other countries in a much more significant way. So I mean, the guidance that we've provided is that we think that the earnings that we've generated so far in 2019 that there is upward potential, and in some cases, I believe sizable upward potential in some of our segments.

The other thing that I'd like to point out is that if we assume that ASF, if we completely discount ASF, with the 6% to 7% top line growth that we are projecting for next year, which will take us from the $43 billion to the $46 billion or $47 billion, with current return on sales, that generates an incremental $200 million. Additionally, I've talked about the fact that we are not happy with where our poultry group is at and we think that they're are somewhere around 200 basis points yet to improve. So there is another $200 million. So some of that, we will give up by a higher tax rate, but we still are in position to gain significantly.

Analyst
Benjamin Theurer

All right. Very clear. And then just as a follow-up and you have it nicely actually laid out in your supplementary information. We have all the opportunities now to not only source from the US to basically ship, but you also having no access to South America, Australia, Europe to the different markets. Any way you could quantify or try or at least have some qualitative commentary on what do you think that could give you as an advantage compared to where you've been prior to the acquisitions, just considering