Price Hikes Lead Tyson's Major Sales Gains Despite Flat Volume

Beef led the way, as sales jumped 25% from a year earlier despite 6% lower volume.

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AP File

Meat manufacturing giant Tyson Foods reported its 2022 first quarter financial results on Feb. 7 for the October-December period, showing that price hikes enacted during the past year drove major sales gains despite volume that was essentially flat year-over-year.

The Springdale, AR-based company reported total Q1 sales of $12.33 billion, up 23.6 percent year-over-year. The company's gross margin of 15.6 percent for the quarter far outpaced the 11.3 percent of a year earlier; operating profit of $1.46 billion more than doubled the $705 million of a year earlier as margin of 11.3 percent likewise jumped 460 basis points; while net profit of $1.13 billion dwarfed the $472 million of a year earlier.

"We’re pleased with the results of the first quarter and of the steps that we are taking to improve productivity,” said Donnie King, Tyson president and CEO. β€œOur performance reflects the resilience of our multi-protein portfolio even with continued volatility in the marketplace.."

The company's earnings report shows that pricing actions were the driving factor behind the sales gains, as volume increased only 0.3 percent year-over-year.

By product line in Q1:

  • Beef sales of $5.00 billion jumped 25.4 percent year-over-year despite 6.2 percent lower volume, as average price was 31.7 percent higher. Operating profit of $956 million surged 81.1 percent as margin of 19.1 percent was up 590 basis points. Tyson said sales volume decreased due to impacts of a challenging labor environment and increased supply chain constraints, partially offset by strong global demand. Tyson: "Average sales price increased as input costs such as live cattle, labor, freight and transportation costs increased and demand for our beef products remained strong."
  • Chicken sales of $3.89 billion surged 37.4 percent year-over-year while volume increased 3.6 percent, as average price was up 19.9 percent. Operating profit of $140 million was a reversal of a $216 million loss a year earlier, with margin of 3.6 percent likewise a reversal of a -7.6 percent margin a year earlier. Tyson said sales volume increased primarily due to higher live production and strong demand. Tyson: "Average sales price increased due to the effects of an inflationary cost environment."
  • Prepared Foods sales of $2.33 billion increased 10.4 percent year-over-year despite a volume decrease of 2.6 percent, as average price was up 13.0 percent. Operating profit of $186 million was down 30.1 percent as margin of 8.0 percent was down 460 basis points. Tyson said sales volume decreased due to the divestiture of the company's pet treats business during its July-September 2021 fourth quarter, as well as lower production throughput mainly associated with a challenging labor and supply environment. Tyson: "Average sales price increased primarily due to the effects of revenue management in an inflationary cost environment."
  • Pork sales of $1.63 billion increased 13.0 percent year-over-year while volume increased only 0.2 percent, as average price was up 12.8 percent. Operating profit of $164 million was up 41.4 percent as margin of 10.1 percent was up 200 basis points. Tyson said sales volume was up slightly as strong demand was offset by impacts of a challenging labor environment. Tyson: "Average sales price increased as input costs such as live hogs, labor, freight and transportation costs increased and demand for our pork products remained strong, partially offset by unfavorable mix associated with labor shortages."

Looking forward, Tyson noted that the USDA indicates that domestic protein production should be relatively flat vs. 2021 levels. Tyson's provided the following USDA outlook for each product line and the projected adjusted operating margin for each:

  • Beef: USDA projected domestic production to decrease about 1 percent. Adjusted operating margin at the upper end of 9 to 11 percent, with the first half stronger than the second half.
  • Pork: USDA projected domestic production to decrease about 2 percent. Adjusted operating margin of 5 to 7 percent.
  • Chicken: USDA projected production to increase about 2 percent. Adjusted operating margin of 5 to 7 percent, with stronger performance in the second half.
  • Prepared Foods: Adjusted operating margin at the upper end of 7 to 9 percent.

Tyson is forecasting full-year 2022 sales of $49 billion to $51 billion. The company expects capital expenditures of about $2 billion, accounting for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovation.

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