Tyson Foods price hikes drive Q1 earnings sparking fears of greater scrutiny from White House
USA – American multinational animal protein company Tyson Foods has seen its net income surge to US$1.13 billion from US$472 million in the previous year’s first quarter.
Net sales for the world’s second-largest processor and marketer of chicken, beef, and pork, also jumped 24% to US$12.93 billion from US$10.46 billion.
Beef was the major driver of growth with operating income surging 81% to US$956 million. Sales rose 25% to US$5 billion from US$3.99 billion.
Pork delivered an impressive 41% growth in operating income to stand at US$164 million with sales surging 13% to US$1.63 billion.
Chicken earnings rebounded to US$140 million compared to an operating loss of $216 million in the previous year’s first quarter while sales for the division rose 37% to US$3.89 billion from US$2.83 billion.
Prepared Foods performance was not as impressive with operating income plunging 30% to US$186 million. Sales of US$2.33 billion were, however, up 10% from US$2.11 billion.
Tyson says Pricing actions were not enough to fully offset increases in raw material and other input costs.
Sales volume decreased after Tyson divested its pet treat business in the previous fiscal year’s fourth quarter.
Company executives attributed the impressive double-digit growth in earnings to higher prices implemented in response to rising input costs.
“In the quarter, our cost of goods sold was up 18% relative to the same period last year,” said Donnie King, president and chief executive officer, in a Feb. 7 earnings call.
“As a result, our average sales price for the quarter increased 19.6% relative to the same period last year. This helped us capture some of the unrecovered costs due to the timing lag between inflation and price.”
Vaccine mandates were also said to play a factor as well and should continue to help Tyson tackle a labor shortage in the current fiscal year.
Tyson gains, a double edge sword
Tyson Foods’ strong double-digit sales and profit could however intensify the Biden Administration’s scrutiny and criticism of what he calls the meat-packing industry’s anti-competitiveness.
Earlier this month, President Biden called out the meat and poultry processing sector as a “textbook” example of large companies dominating industries, allowing them to raise prices unchecked by squeezing out competition from smaller businesses which might help lower prices.
To address this, Biden earmarked US$1bn in American Rescue Plan funds for independent processors in the meat and poultry packing industry and announced a four-prong Action Plan for a Fairer, More Competitive and More Resilient Meat and Poultry Supply Chain.
Tyson has pushed back against this framework, noting that its decision to raise prices is not rooted in a lack of competition, but rather because of a variety of factors contributing to higher costs.
It also has aggressively pursued strategies to restore its chicken business’ competitiveness, including increased automation, operational performance improvements, enhanced marketing and innovation, and efforts to reposition itself as a sought-after workplace.
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