TYSON FOODS, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Segment Highlights: Prepared Foods was a solid profitability driver, with AOI results in line with expectations. Chicken AOI came in above guidance range due to lower grain costs and operational efficiencies. Beef continued to face compressed spreads. Pork saw improved spreads and AOI growth.
• Strategic Priorities: Operational excellence through modernizing operations and driving performance to standards. Building on iconic brands to value up core proteins. Investing in digital capabilities using big data, predictive analytics, and AI. Disciplined capital allocation to drive free cash flow. Focus on team member development.
• Segment Priorities 2025: Prepared Foods to drive profitability through operational discipline, increased throughput, and innovation. Chicken to sustain and improve live and plant operations and build on value-added portfolio. Beef to build a best-in-class operation. Pork to continue operational improvement and scale data use.

Segment Performance

• Prepared Foods: Q4 revenue declined 1.2% year-over-year, driven by lower retail volume. However, AOI in Q4 increased noticeably year-over-year, benefiting from lower raw material costs, operational efficiencies, and reduced MAP spending. Full-year AOI grew 2% year-over-year and was the best performance since fiscal year '18, overcoming startup costs at the new Bowling Green plant. Q4 revenue declined 1.2% vs last year, but AOI increased, and full-year AOI was the best in six years.
• Chicken: Sales in Q4 increased 2.3% inclusive of a legal contingency accrual recorded in Q4 last year. While volume declined modestly year-over-year, it grew ~1% vs Q4 of fiscal '22. AOI increased $281 million vs last year to $356 million. For the year, chicken AOI improved by nearly $1.1 billion, leading to the strongest AOI performance since fiscal '17. Q4 AOI grew $281M to $356M, full-year AOI improved nearly $1.1B.
• Beef: Revenue is up 4.6% year-over-year in Q4, primarily due to volume, driven by higher average carcass weights and higher head throughput. While revenue increased, AOI decreased, primarily reflecting compressed spreads.
• Pork: Q4 revenue decreased 3.7%, driven by lower pricing on dropped credit items, partially offset by increased volume. AOI increased $27 million year-over-year, benefiting from improved operational execution. For the full year, AOI increased $270 million, highlighting improved spread. Q4 revenue down 3.7%, AOI up $27M; full-year AOI up $270M

Guidance

• Total company AOI expected to be between $1.8 billion and $2.2 billion in fiscal 2025, reflecting ~10% growth at midpoint.
• Prepared foods AOI expected in range of $900 million to $1.1 billion, double-digit growth at midpoint.
• Chicken AOI expected in range of $1 billion to $1.2 billion, high single-digit growth at midpoint.
• Beef expected to have a loss of $400 million to $200 million.
• Pork expected to have AOI in range of $100 million to $200 million.
• International business expected to continue improving operations.

Risks

• Beef business challenged by current cattle cycle with no clear signs of sustained herd rebuilding intentions.
• Uncertainty around industry supply changes, such as potential higher chicken supply and its impact.
• Policy uncertainties including labor tariffs, regulations, etc., which may impact the business.

Question and Answer

Q: Ben Theurer asked about unpacking the outlook for 2025 and what gives confidence in growth.

A: Donnie King mentioned the benefits of the multi-protein portfolio, enterprise priorities delivering results, shift to branded value-added, increasing household penetration, protein being a winner in food, improving invested capital returns, and executing with excellence. Also discussed mix of volume changes across segments.

Q: Ben Theurer followed up on chicken outlook.

A: Donnie King said chicken business is fundamentally better, guidance for 2025 is 1-1.2 billion, with investment in new ad campaign and product innovation. Wes Morris added about step change in operations, strong pipeline of new products, and good positioning for 2025 and beyond.

Q: Heather Jones asked about chicken year-on-year growth and beef retail price gap.

A: Donnie King and Wes Morris discussed continuous improvement mindset in chicken, with $500-700 million step change from 2023 baseline. Brady Stewart talked about beef demand, good demand even with higher prices, and retailers' promotional strategies.

Q: Ken Goldman asked about chicken supply and White House administration impact.

A: Wes Morris said industry has challenges in hatch and livability, Tyson well-positioned. Donnie King said will control what can be controlled with new administration, assess new policies accordingly.

Q: Pooran Sharma asked about beef heifer retention and network optimization.

A: Donnie King and Brady Stewart discussed beef heifer retention challenges, Tyson's control of costs, and network optimization initiatives for better capacity utilization.

Q: Thomas Palmer asked about prepared foods drivers and cadence of growth.

A: Kyle Narron talked about prepared foods' key drivers including operational performance, commercial execution, and innovation. Curt Calaway added that growth might be more balanced across 2025.

Q: Michael Lavery asked about chicken supply and prepared foods plant startup costs.

A: Wes Morris discussed industry chicken supply challenges and disconnect between egg sets/chick hatched and processing. Kyle Narron mentioned lapping plant startup costs with lower depreciation in overhead.

Q: Andrew Strelzik asked about beef operational improvements and capital deployment.

A: Brady Stewart talked about beef operational improvement opportunities. Curt Calaway discussed disciplined capital allocation, CapEx plans for 2025, and commitment to returning cash to shareholders while maintaining financial strength.