USA – Tyson Foods reported sales of US$9.77 billion for the period ended 31 March 2018, indicating a nearly 2% increase from last year’s US$9.08 billion as a result of measures to mitigate impact from high costs in transportation and labour.

Although the company recorded lower figures in net income of US$316 million as compared to the same period last year, it reaffirmed its guidance for the year that is, annual adjusted earnings guidance of between US$6.55 and US$6.70 EPS.

Group revenue was contributed majorly by Tyson’s Beef, Pork, Chicken and Prepared Foods segments which all saw volume increases.

Prepared Foods led this segment with an increase of nearly 11% to US$2.15 billion offset by Pork business unit, which reported a sales decline of 1.1% to US$1.27 billion.

Challenging market conditions were experienced especially in the first quarter with labour and transportation costs rising to the unexpected levels.

The company said the impact was expected to translate to a total of US$250 million in costs for the full fiscal year, about US$50 million more than the forecast made during the first quarter.

To offset the impact of transportation, Tyson is embarking on pricing and cost-reduction programmes while investing in employees by increasing their productivity, efficiency, safety and product yield.

“Going forward, product prices must reflect the true cost because we cannot subsidize the increased freight,” said Thomas Hayes, president and CEO.

“These initiatives are an added cost now, but we expect a return on our investment over time in addition to simply being the right thing to do for our team members.”

In the beef segment, adjusted operating income during Q2 dropped to US$120 million, sales volume was up 1.8% while beef exports increased 22% despite chatter trade tariffs and trade agreements during 2018, noted the company.

According to the company, while there is a slowing in expansion of the US cattle herd, there is enough positive momentum in the beef industry to continue into 2020.

The pork segment recorded a drop in sales from US$1.30 billion to US$1.23 million attributed to Tyson’s reducing volume in response to declining livestock prices to offset decreasing demand.

Decrease in industry-wide hatchability rates coupled with supply insufficiencies weighed down on sales recorded at US$2.95 billion but the company expect operating margin of 10 percent for 2018.

Tyson’s Prepared Foods segment reported adjusted operating income of $222 million and sales increased to US$2.14 billion in the Q2 attributed to the performance of its AdvancePierre Foods business unit.

According to Hayes, the segment reached the milestone of integration of AdvancePierre and Original Philly businesses during the quarter, allowing the company to realize synergies and savings.