Tyson makes big bucks on beef
Robust demand, African swine fever contribute to record sales
By Lydia Mulvany, Bloomberg
via BEEF Magazine - Aug 08, 2019
Tyson Foods Inc. is raking it in on a tried-and-true staple: old-fashioned burgers and steaks made of actual beef.
The top U.S. meat producer made a notable exit from Beyond Meat Inc.’s shareholder register right before the start-up’s stellar initial public offering in May. Soon after, Tyson announced its own faux-meat products, which are starting to flow into retail stores. But the Springdale, Arkansas-based company posted record sales and beat earnings expectations in its third quarter largely because Americans are gobbling up beef.
The robust demand sent operating margins for the red meat to a record. Moreover, the hog-killing African swine fever that’s raging in China is set to boost all parts of Tyson’s operations in 2020, including chicken, pork, beef and prepared foods. Seeing all its units, which provide diversification for the company, improve in unison is a rarity, Chief Executive Officer Noel White said on a call with analysts.
China, the biggest pork consumer, is pulling protein from around the world to make up for the supply gap. The increased exports will probably start to materialize later in the year, White said, and the company has been in talks with Chinese buyers in recent months.
“All of the proteins will benefit,” White said on the call. “Somewhere around 5% of global protein has disappeared, so whether it’s a direct benefit or an indirect benefit, regardless, it will be beneficial to us.”
Admittedly, Tyson has yet to see any real boost from the disease, and its pork business was negatively impacted in the quarter, due to rising live hog costs. Volatility is rising as trade flows shift, and no one really knows when any business boosts from the disease will come.
But the company says it expects to see the positive impacts next year. U.S. domestic protein production will rise 2%, and Tyson said export markets will absorb it. The company’s operating margins for chicken -- the cheapest substitute for pork -- will improve over this year’s 6%, while beef and pork margins will be the same or better, it said.
Meanwhile, revenues are at a record for Tyson at almost $11 billion last quarter. There’s more cattle available in the U.S., and stronger demand for beef, which lifted prices for the red meat. The company’s prepared-foods segment also saw robust demand in the first nine months of the fiscal year...