In this file:

 

·         Tyson Foods net income up 74% in second quarter, revenue rises 16%

… net income of $829 million in the second fiscal quarter…

 

·         Tyson Foods Tops Q2 Earnings Forecast, Boosts 2022 Sales Outlook Amid Fastest Food Inflation Since 2010

"Although we continue to see inflationary pressures across the supply chain, we are working to drive costs down by continuing to increase our efficiency, productivity, and bringing more capacity on line," said CEO Donnie King.

 

·         Media Release: Tyson Foods Reports Second Quarter 2022 Results

Improving Operational Execution and Strong Consumer Demand Drive Operating Results

 

·         U.S. Tyson Foods raises annual sales forecast on higher meat prices

… expects annual sales between $52 billion and $54 billion, compared with its prior estimate for the upper end of a $49 billion to $51 billion range...

 

·         Tyson Foods: Avian flu’s impact on company ‘minimal’

CEO says the company’s strong biosecurity program gives him confidence

 

·         Tyson Gets Subpoena From N.Y. as Meat Pricing Pressure Mounts

... from the New York Attorney General’s Bureau of Consumer Frauds & Protection seeking information regarding our sales, prices and production costs of beef, pork and chicken products...

 

·         TYSON FOODS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

 

 

 

Tyson Foods net income up 74% in second quarter, revenue rises 16%

 

by Kim Souza, Talk Business & Politics (AR)

May 9, 2022

 

The Springdale-based meat giant reported net income of $829 million in the second fiscal quarter, up 74% from a year ago, and 22% more than the consensus estimate. For the first half of fiscal 2022, net income was $1.95 billion, more than double the $928 million earned a year ago.

 

“Our performance in the first half of the year reflects our improving operational execution and strong customer and consumer demand for our brands and products,” said Tyson Foods’ CEO Donnie King. “We continue to prioritize investment in our business in a number of ways, including increasing pay, expanding pilots of health and child care services, and providing skills and life services, such as free college education and legal services for immigration.”

 

He said inflation is real throughout the business with cost of goods rising between 20% to 30% that Tyson is mitigating with price increases. He also said the company is working to improve efficiency and add production capacity.

 

“We have never asked our customers to pay for our inefficiency but we do expect to sell our products at full market value that has been driving higher from inflationary pressures.” King said.

 

King said strong beef results and improving chicken business laid the ground for the better returns when coupled with $400 million in cost savings found within the business during the quarter ending March 31. The gains were offset by softness in the pork and prepared foods.

 

GAINING MOMENTUM ...

 

SEGMENT RESULTS ...

 

more

https://talkbusiness.net/2022/05/tyson-foods-net-income-up-74-in-second-quarter-revenue-rises-16/

 

 

Tyson Foods Tops Q2 Earnings Forecast, Boosts 2022 Sales Outlook Amid Fastest Food Inflation Since 2010

"Although we continue to see inflationary pressures across the supply chain, we are working to drive costs down by continuing to increase our efficiency, productivity, and bringing more capacity on line," said CEO Donnie King.

 

Martin Baccardax, TheStreet 

May 9, 2022

 

Tyson Foods Inc. posted stronger-than-expected second quarter earnings Monday, while boosting its full-year sales outlook, as the world's biggest food producer said solid global demand offset inflationary pressures across its supply chain.

 

Tyson Foods said adjusted earnings for the three months ending in March, the group's fiscal second quarter, were pegged at $2.29 per share, up 71% from the same period last year and firmly ahead of the Street consensus forecast of $1.88 per share. Group revenues, Tyson said, rose16% to $13.11 billion, again firmly ahead of analysts' forecast of an $12.85 billion tally.

 

Looking into the 2022 financial year, Tyson Foods said its sees revenues of between $52 billion and $54 billion, a $3 billion increase from the lower-end of its prior guidance, with capital expenditures of around $2 billion.

 

“Our performance in the first half of the year reflects our improving operational execution and strong customer and consumer demand for our brands and products,” said CEO Donnie King..

 

more

https://www.thestreet.com/markets/tyson-foods-tops-q2-earnings-forecast-boosts-2022-sales-outlook

 

 

Tyson Foods Reports Second Quarter 2022 Results

Improving Operational Execution and Strong Consumer Demand Drive Operating Results

 

Source: Tyson Foods, Inc.

via Globe Newswire - May 09, 2022  

 

SPRINGDALE, Ark., May 09, 2022 (GLOBE NEWSWIRE) -- Tyson Foods, Inc. (NYSE: TSN), one of the world’s largest food companies and a recognized leader in protein with leading brands including Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair, today reported the following results:

 

(in millions, except per share data)

Second Quarter

 

Six Months Ended

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Sales

$

13,117

 

 

$

11,300

 

 

$

26,050

 

 

$

21,760

 

Operating Income

 

1,156

 

 

 

720

 

 

 

2,611

 

 

 

1,425

 

 

 

 

 

 

 

 

 

Net Income

 

833

 

 

 

477

 

 

 

1,959

 

 

 

949

 

Less: Net Income Attributable to Noncontrolling Interests

 

4

 

 

 

1

 

 

 

9

 

 

 

6

 

Net Income Attributable to Tyson

$

829

 

 

$

476

 

 

$

1,950

 

 

$

943

 

 

 

 

 

 

 

 

 

Net Income Per Share Attributable to Tyson

$

2.28

 

 

$

1.30

 

 

$

5.35

 

 

$

2.58

 

 

 

 

 

 

 

 

 

Adjusted1 Operating Income

$

1,161

 

 

$

739

 

 

$

2,593

 

 

$

1,764

 

 

 

 

 

 

 

 

 

Adjusted1 Net Income Per Share Attributable to Tyson

$

2.29

 

 

$

1.34

 

 

$

5.16

 

 

$

3.28

 

1 The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Adjusted operating income and adjusted net income per share attributable to Tyson (Adjusted EPS) are non-GAAP financial measures. Refer to the end of this release for an explanation and reconciliation of these and other non-GAAP financial measures used in this release to comparable GAAP measures.

 

First Six Months Highlights

 

    GAAP EPS of $5.35, up 107% from prior year; Adjusted EPS of $5.16, up 57% from prior year

    GAAP operating income of $2,611 million, up 83% from prior year; Adjusted operating income of $2,593 million, up 47% from prior year

    Total Company GAAP and Adjusted operating margin of 10.0%

    Repurchased 6.2 million shares for $523 million

 

Second Quarter Highlights

 

    GAAP EPS of $2.28, up 75% from prior year; Adjusted EPS of $2.29, up 71% from prior year

    GAAP operating income of $1,156 million, up 61% from prior year; Adjusted operating income of $1,161 million, up 57% from prior year

    Total Company GAAP operating margin of 8.8%; Adjusted operating margin of 8.9%

    Liquidity of $3.4 billion at April 2, 2022

    Reduced total debt by approximately $1 billion

 

“Our performance in the first half of the year reflects our improving operational execution and strong customer and consumer demand for our brands and products,” said Donnie King, president and CEO of Tyson Foods. "We continue to prioritize investment in our team members and business in a number of ways, including increasing pay, expanding pilots of health and child care services, and providing skills and life services, such as free college education and legal services for immigration. Although we continue to see inflationary pressures across the supply chain, we are working to drive costs down by continuing to increase our efficiency, productivity, and bringing more capacity on line. This is all part of our strategy to win with customers and consumers, win with team members and win with excellence in execution.”

 

SEGMENT RESULTS (in millions)

Sales

(for the second quarter and six months ended April 2, 2022, and April 3, 2021)

 

Second Quarter

Six Months Ended

 

 

 

Volume

Avg. Price

 

 

Volume

Avg. Price

 

 

2022

 

 

2021

 

Change

Change

 

2022

 

 

2021

 

Change

Change 2

Beef

$

5,034

 

$

4,046

 

0.6

%

23.8

%

$

10,036

 

$

8,033

 

(2.9

)%

27.8

%

Pork

 

1,565

 

 

1,477

 

(4.8

)%

10.8

%

 

3,191

 

 

2,916

 

(2.3

)%

11.7

%

Chicken

 

4,086

 

 

3,553

 

0.6

%

14.4

%

 

7,976

 

 

6,384

 

2.1

%

16.9

%

Prepared Foods

 

2,393

 

 

2,164

 

(5.3

)%

15.9

%

 

4,726

 

 

4,277

 

(4.0

)%

14.5

%

International/Other

 

565

 

 

487

 

5.1

%

10.9

%

 

1,115

 

 

956

 

7.1

%

9.5

%

Intersegment Sales

 

(526

)

 

(427

)

n/a

n/a

 

(994

)

 

(806

)

n/a

n/a

Total

$

13,117

 

$

11,300

 

(1.5

)%

17.6

%

$

26,050

 

$

21,760

 

(0.7

)%

18.7

%

 

Operating Income (Loss)

(for the second quarter and six months ended April 2, 2022, and April 3, 2021)

 

Second Quarter

Six Months Ended

 

 

 

Operating Margin

 

 

Operating Margin

 

 

2022

 

 

2021

 

2022

 

2021

 

 

2022

 

 

2021

 

2022

 

2021

 

Beef

$

638

 

$

445

 

12.7

%

11.0

%

$

1,594

 

$

973

 

15.9

%

12.1

%

Pork

 

59

 

 

67

 

3.8

%

4.5

%

 

223

 

 

183

 

7.0

%

6.3

%

Chicken

 

198

 

 

6

 

4.8

%

0.2

%

 

338

 

 

(210

)

4.2

%

(3.3

)%

Prepared Foods

 

263

 

 

217

 

11.0

%

10.0

%

 

449

 

 

483

 

9.5

%

11.3

%

International/Other

 

(2

)

 

(15

)

n/a

n/a

 

7

 

 

(4

)

n/a

n/a

Total

$

1,156

 

$

720

 

8.8

%

6.4

%

$

2,611

 

$

1,425

 

10.0

%

6.5

%

ADJUSTED SEGMENT RESULTS (in millions)

Adjusted Operating Income (Loss) (Non-GAAP)

(for the second quarter and six months ended April 2, 2022, and April 3, 2021)

 

Second Quarter

Six Months Ended

 

 

 

Adjusted Operating Margin (Non-GAAP)

 

 

Adjusted Operating Margin (Non-GAAP)

 

 

2022

 

 

2021

 

2022

 

2021

 

 

2022

 

 

2021

 

2022

 

2021 2

 

Beef

$

638

 

$

445

 

12.7

%

11.0

%

$

1,594

 

$

973

 

15.9

%

12.1

%

Pork

 

59

 

 

67

 

3.8

%

4.5

%

 

223

 

 

183

 

7.0

%

6.3

%

Chicken

 

203

 

 

6

 

5.0

%

0.2

%

 

320

 

 

110

 

4.0

%

1.6

%

Prepared Foods

 

263

 

 

217

 

11.0

%

10.0

%

 

449

 

 

483

 

9.5

%

11.3

%

International/Other

 

(2

)

 

4

 

n/a

n/a

 

7

 

 

15

 

n/a

n/a

Total

$

1,161

 

$

739

 

8.9

%

6.5

%

$

2,593

 

$

1,764

 

10.0

%

8.0

%

2 Average Price Change and Adjusted Operating Margin for the Chicken Segment and Total Company for the first six months of fiscal 2021 exclude the impact of a $320 million legal contingency accrual recognized as a reduction to Sales.

 

SUMMARY OF SEGMENT RESULTS

 

Beef

Sales volume was up slightly in the second quarter of fiscal 2022 driven by strong global demand, partially offset by a challenging labor environment and continued supply chain constraints. Sales volume decreased for the first six months due to the impacts associated with a challenging labor environment and increased supply chain constraints, partially offset by strong global demand. Average sales price increased in the second quarter and the first six months of fiscal 2022 as input costs such as live cattle, labor, freight and transportation costs increased and demand for our beef products remained strong. Operating income increased in the second quarter and first six months of fiscal 2022 due to strong demand as we continued to optimize revenues relative to live cattle supply and a reduction in direct incremental expenses related to COVID-19, partially offset by production inefficiencies due to the impacts associated with a challenging labor environment and continued supply chain constraints. Additionally, operating income in fiscal 2021 was impacted by a $55 million gain from the recovery of cattle inventory related to a cattle supplier's misappropriation of Company funds.

 

Pork

Sales volume decreased in the second quarter and first six months of fiscal 2022 primarily due to the impacts associated with a challenging labor environment. Average sales price increased in the second quarter and first six months of fiscal 2022 as input costs such as live hogs, labor, freight and transportation costs increased, partially offset by unfavorable mix associated with labor shortages. Operating income decreased slightly in the second quarter of fiscal 2022 due to higher input costs such as live hogs, labor and freight and transportation costs. Operating income for the first six months of fiscal 2022 increased as we optimized revenues relative to live hog supply and due to a reduction in direct incremental expenses related to COVID-19, partially offset by higher inputs costs and the impacts associated with a challenging labor environment.

 

Chicken

Sales volume increased in the second quarter and first six months of fiscal 2022 primarily due to a strong demand environment partially offset by continued supply chain constraints. Average sales price increased in the second quarter and first six months of fiscal 2022 due to the effects of pricing initiatives in an inflationary cost environment. Operating income increased in the second quarter and first six months of fiscal 2022 due to increased sales volume and higher average sales prices, partially offset by the impacts of inflationary market conditions including increased supply chain costs and a challenging labor environment. In the second quarter of fiscal 2022, we experienced $100 million of higher feed ingredient costs and $101 million of net derivative gains as compared to $10 million of net derivative gains in the second quarter of fiscal 2021. In the first six months of fiscal 2022, we experienced $285 million of higher feed ingredient costs and $159 million of net derivative gains as compared to $83 million of net derivative gains in the first six months of fiscal 2021. Additionally, operating income in the first six months of fiscal 2022 was impacted by $18 million of insurance proceeds, net of costs incurred related to a fire at a production facility and was impacted in the first quarter of fiscal 2021 by a $320 million loss from the recognition of a legal contingency accrual.

 

Prepared Foods

Sales volume decreased in the second quarter and first six months of fiscal 2022 due to lower production throughput primarily associated with a challenging labor and supply environment, uneven foodservice recovery and the divestiture of our pet treats business in the fourth quarter of fiscal 2021. Average sales price increased in the second quarter and first six months of fiscal 2022 primarily due to the effects of revenue management in an inflationary cost environment and favorable product mix. Operating income increased in the second quarter of fiscal 2022 due to higher average sales prices, partially offset by the impacts of inflationary market conditions, including $210 million of increased raw materials and other input costs, increased supply chain costs and a challenging labor environment. Operating income decreased in the first six months of fiscal 2022 due to the impacts of inflationary market conditions, including $425 million of increased raw materials and other input costs, increased supply chain costs and a challenging labor environment, partially offset by higher average sales prices.

 

OUTLOOK

For fiscal 2022, the United States Department of Agriculture (USDA) indicates domestic protein production (beef, pork, chicken and turkey) should be relatively flat compared to fiscal 2021 levels. The following is a summary of the outlook for each of our segments, as well as an outlook for revenues, capital expenditures, net interest expense, liquidity and tax rate for fiscal 2022.3

 

Beginning in fiscal 2022, we launched a new productivity program, which is designed to drive a better, faster and more agile organization that is supported by a culture of continuous improvement and faster decision making. We are targeting $1 billion in productivity savings by the end of fiscal 2024 and more than $400 million in fiscal 2022, relative to a fiscal 2021 cost baseline. We are currently on track to achieve our planned productivity savings for fiscal 2022.

 

Beef

USDA projects domestic production will increase less than 1% in fiscal 2022 as compared to fiscal 2021. We anticipate another strong year with adjusted operating margin between 11% and 13% in fiscal 2022.

 

Pork

USDA projects domestic production will decrease approximately 3% in fiscal 2022 as compared to fiscal 2021. We believe our Pork segment's adjusted operating margin will be 5% to 7% in fiscal 2022.

 

Chicken

USDA projects chicken production will increase approximately 1% in fiscal 2022 as compared to fiscal 2021. We anticipate an adjusted operating margin of 5% to 7% for fiscal 2022 as we continue to expect stronger performance in the second half of the fiscal year.

 

Prepared Foods

We believe our adjusted operating margin will be between 8% and 10% in fiscal 2022. We will remain disciplined in our revenue management to ensure that additional inflationary pressures are mitigated by sales price increases, while also working diligently to deliver productivity savings to reduce costs.

 

International/Other

We anticipate lower results from our foreign operations in fiscal 2022 due to supply chain disruptions and other impacts related to COVID-19.

 

Revenue

We expect sales to be $52 billion to $54 billion in fiscal 2022.

 

Capital Expenditures

We expect capital expenditures of approximately $2 billion for fiscal 2022. Capital expenditures include spending for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovation.

 

Net Interest Expense

We expect net interest expense to approximate $360 million for fiscal 2022.

 

Liquidity

We expect total liquidity, which was approximately $3.4 billion at April 2, 2022, to remain above our minimum liquidity target of $1.0 billion.

 

Tax Rate

We currently expect our adjusted effective tax rate to be around 23% in fiscal 2022.

 

3 The Company is not able to reconcile its full-year fiscal 2022 projected adjusted results to its fiscal 2022 projected GAAP results because certain information necessary to calculate such measures on a GAAP basis is unavailable or dependent on the timing of future events outside of our control. Therefore, because of the uncertainty and variability of the nature of the amount of future adjustments, such as legal contingency accruals and other significant items which could be significant, the Company is unable to provide a reconciliation for these forward-looking non-GAAP measures without unreasonable effort. Adjusted operating margin should not be considered a substitute for operating margin or any other measures of financial performance reported in accordance with GAAP. Investors should rely primarily on the Company’s GAAP results and use non-GAAP financial measures only supplementally in making investment decisions.

 

TYSON FOODS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)

 

more, including financial tables

https://www.globenewswire.com/news-release/2022/05/09/2438477/7106/en/Tyson-Foods-Reports-Second-Quarter-2022-Results.html

 

 

U.S. Tyson Foods raises annual sales forecast on higher meat prices

 

Reporting by Deborah Sophia in Bengaluru and Tom Polansek in Chicago; Editing by Aditya Soni, Reuters

May 9, 2022

 

May 9 (Reuters) - Tyson Foods Inc (TSN.N) raised its full-year sales outlook on Monday after soaring meat prices helped the U.S. processor beat quarterly revenue and earnings estimates.

 

Shares jumped about 2% in premarket trading.

 

Meatpackers have come under scrutiny from the White House and Congress over climbing meat prices, with the White House blaming a lack of competition in the sector for the increases.

 

Companies like Tyson say they have hiked prices to offset rising costs for labor and goods like animal feed, which has been accelerated by the war in Ukraine.

 

"Although we continue to see inflationary pressures across the supply chain, we are working to drive costs down," Chief Executive Officer Donnie King said in a statement.

 

Tyson, based in Springdale, Arkansas, now expects annual sales between $52 billion and $54 billion, compared with its prior estimate for the upper end of a $49 billion to $51 billion range...

 

more

https://www.reuters.com/business/retail-consumer/tyson-foods-raises-annual-sales-forecast-higher-prices-2022-05-09/

 

 

Tyson Foods: Avian flu’s impact on company ‘minimal’

CEO says the company’s strong biosecurity program gives him confidence

 

By Roy Graber, WATTPoultry.com

May 9, 2022

 

As the United States poultry continues to navigate through the highly pathogenic avian influenza (HPAI) outbreak, the CEO of the nation’s largest broiler integrator says the outbreak’s impact on the company’s financial health so far has been minimal.

 

Tyson Foods CEO Donnie King, speaking during a conference call with journalists on May 9, said the company has a long history of proactively reviewing and addressing issues that pose challenges to the industry, and that has certainly been the case with the HPAI outbreak. For Tyson Foods, it has been its biosecurity program, King said.

 

“We have a biosecurity program and I will tell you it’s robust in nature. We test every flock of broilers before they go to a processing plant. We’ve been doing that for years,” he said. “Today, we have seen minimal, minimal impact on our operations.”

 

To illustrate the strength of that biosecurity program, King gave an example of one farm where HPAI was confirmed...

 

International operations also protected by biosecurity ...

 

more, including links 

https://www.wattagnet.com/articles/45058-tyson-foods-avian-flus-impact-on-company-minimal

 

 

Tyson Gets Subpoena From N.Y. as Meat Pricing Pressure Mounts

 

David Marino and Michael Hirtzer, Bloomberg

via Yahoo Finance - May 9, 2022

 

(Bloomberg) -- New York State is adding to pressure on meat companies already facing heat in Washington for elevated prices.

 

Tyson Foods Inc., the biggest U.S. meat company by sales, said Monday in a quarterly U.S. Securities and Exchange Commission filing that it “received a subpoena dated April 21, 2022 from the New York Attorney General’s Bureau of Consumer Frauds & Protection seeking information regarding our sales, prices and production costs of beef, pork and chicken products. We are currently evaluating the scope of the subpoena.”

 

Consumers are paying higher food prices even as livestock and poultry producers complain that an overly concentrated meatpacking sector results in smaller shares of profits for farmers. The four biggest beef companies slaughtered 85% of grain-fattened cattle used for steaks, roasts and other cuts of meat for consumers in 2018, according to the U.S. Agriculture Department.

 

President Joe Biden and congressional Democrats have accused the four meatpacking companies that dominate U.S. beef processing of leveraging their market share to profiteer from the Covid pandemic and supply-chain shortages. Executives from Tyson, Cargill Inc., JBS SA and National Beef Packing Co. denied a conspiracy...

 

more

https://finance.yahoo.com/news/tyson-gets-subpoena-n-y-141030823.html

 

 

TYSON FOODS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

 

Source: MarketScreenter

05/09/2022

 

OBJECTIVE

 

The following discussion provides an analysis of the Company's financial

condition, cash flows and results of operations from management's perspective

and should be read in conjunction with the consolidated condensed financial

statements and notes thereto included in Part I, Item 1 of this Quarterly Report

on Form 10-Q and within the Company's Annual Report on Form 10-K filed for the

fiscal year ended October 2, 2021. Our objective is to also provide discussion

of events and uncertainties known to management that are reasonably likely to

cause reported financial information not to be indicative of future operating

results or of future financial condition and to offer information that provides

understanding of our financial condition, cash flows and results of operations.

 

 

                                       22

--------------------------------------------------------------------------------

 

RESULTS OF OPERATIONS

 

 

Description of the Company

We are one of the world's largest food companies and a recognized leader in

protein. Founded in 1935 by John W. Tyson and grown under four generations of

family leadership, the Company has a broad portfolio of products and brands like

Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp® and

State Fair®. Some of the key factors influencing our business are customer

demand for our products; the ability to maintain and grow relationships with

customers and introduce new and innovative products to the marketplace;

accessibility of international markets; market prices for our products; the cost

and availability of live cattle and hogs, raw materials and feed ingredients;

availability of team members to operate our production facilities; and operating

efficiencies of our facilities.

 

We operate in four reportable segments: Beef, Pork, Chicken, and Prepared Foods.

We measure segment profit as operating income (loss). International/Other

primarily includes our foreign operations in Australia, China, Malaysia, Mexico,

the Netherlands, South Korea and Thailand, third-party merger and integration

costs and corporate overhead related to Tyson New Ventures, LLC.

 

Overview

 

COVID-19

 

We continue to proactively monitor and respond to the evolving nature of

the global novel coronavirus pandemic ("COVID-19" or "pandemic") and

its impact to our global business. Our ongoing COVID-19 task force was formed

for the primary purposes of maintaining the health and safety of our team

members, ensuring our ability to operate our processing facilities and

maintaining the liquidity of our business. We have experienced and continue

to experience multiple challenges related to the pandemic. The most significant

challenge we face is the availability of team members to operate our production

facilities as our production facilities continue to experience varying levels of

absenteeism. In the second quarter of fiscal 2022, we experienced an increase in

COVID-19 cases associated with the Omicron variant. The health and safety of our

team members remains our top priority, and we continue to provide a variety of

health and safety resources and services to team members and their family

members. Additionally, we have experienced some challenges in our supply chain

such as volatility of inputs, availability of shipping containers and port

congestion. These challenges impacted our operating costs, but generally, we

experienced lower direct incremental costs associated with COVID-19 in the first

six months of fiscal 2022 as compared to the same period in fiscal 2021, and we

expect this trend to continue throughout the remainder of fiscal 2022. For

fiscal 2022, we expect retail demand to remain elevated as compared to the

pre-pandemic levels and foodservice demand to continue to return to more

historic levels. However, the long-term impacts of COVID-19 remains uncertain

and will depend on future developments, including the duration and spread of the

pandemic, COVID-19 variants and resurgences, and related actions taken by

federal, state and local government officials to prevent and manage disease

spread, and effectively distribute and administer vaccinations, all of which

contain some level of uncertainty and cannot be easily predicted.

 

Strategy

 

Our strategy is to sustainably feed the world with the fastest growing protein

brands. We intend to achieve our strategy as we: grow our business by delivering

superior value to consumers and customers; deliver fuel for growth and returns

through commercial, operational and financial excellence; and sustain our

Company and our world for future generations.

 

Beginning in fiscal 2022, we launched a new productivity program, which is

designed to drive a better, faster and more agile organization that is supported

by a culture of continuous improvement and faster decision making. The execution

of this program will be supported by a program management office that will

ensure delivery of key project milestones and report on savings achievements

connected with the three pillars of the program. The first pillar is operational

and functional excellence, which includes functional efficiency efforts in

Finance, HR and Procurement focused on applying best practices to reduce costs.

The second pillar is the use of new digital solutions like artificial

intelligence and predictive analytics to drive efficiency in operations, supply

chain planning, logistics and warehousing. The third pillar is automation, which

will leverage automation and robotics technologies to automate difficult and

higher turnover positions. We are targeting $1 billion in productivity savings

by the end of fiscal 2024 and more than $400 million in fiscal 2022, relative to

a fiscal 2021 cost baseline. We are currently on track to achieve our planned

productivity savings for fiscal 2022. At this time, we do not anticipate costs

associated with this program to be material.

 

General

 

Sales grew 16% and 20% in the second quarter and first six months of fiscal

2022, respectively, largely due to increased average sales prices across each of

our segments and a $320 million legal contingency accrual recognized as a

reduction to sales in the first quarter of fiscal 2021. The higher average sales

prices were primarily due to the current inflationary environment and recovery

of rapidly rising costs, such as labor, freight and transportation, livestock,

feed ingredients and other input costs. Operating income of $1,156 million for

the second quarter of fiscal 2022 was up 61% due to improved operating income in

our Beef, Chicken, and Prepared Foods segments, partially offset by a decline in

the results of our Pork segment. Operating income of $2,611 million for the

first six months of fiscal 2022 was up 83% due to improved operating income in

our Beef, Pork, and Chicken segments, partially offset by a decline in the

results of our Prepared Foods segment. In the second quarter of fiscal 2022, our

operating income was impacted by $5 million of ongoing costs related to a fire

in the fourth quarter of fiscal 2021 at one of our Chicken segment production

facilities, net of insurance proceeds. In the six months ended April 2, 2022,

our operating income was impacted by $18 million of insurance proceeds, net of

costs, related to the same fire. In the six months ended April 3, 2021, our

results were impacted by $19 million of charges related to the relocation of a

production facility in China.

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Market Environment

According to the United States Department of Agriculture ("USDA"), domestic

protein production (beef, pork, chicken and turkey) decreased less than 1% in

the second quarter of fiscal 2022 compared to the same period in fiscal 2021.

All segments experienced strong demand, challenging labor conditions and

inflation in operating costs, especially in labor, freight and transportation

and certain materials, and we expect these trends to continue through the

remainder of fiscal 2022. Additionally, grain and feed ingredient costs have

increased substantially, which impacts all of our segments. We pursue recovery

of these increased costs through pricing. The Beef segment experienced strong

global demand, sufficient supply of market-ready cattle and increased live

cattle costs. The Pork segment experienced adequate supply of live hogs. The

Chicken segment experienced strong demand and increased feed ingredient costs.

Feed ingredient costs are expected to be higher for fiscal 2022 versus fiscal

2021. The Prepared Foods segment experienced increased costs largely due to the

impacts of an inflationary environment. Additionally, the conflict between

Ukraine and Russia has led to economic sanctions against Russia and certain

regions of Ukraine and Belarus. As of April 2, 2022, the impact of this conflict

has not had a material direct impact on our financial performance. However, the

conflict is still ongoing and there are many risks and uncertainties in relation

to the conflict that are outside of our control. If the conflict escalates

further or if additional countries join the conflict and additional economic

sanctions are imposed, it could have a material impact on our business

operations and financial performance.

 

Margins

 

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