Tyson Foods Inc.’s latest fourth quarter earnings exceeded expectations, despite a weaker performance of the company’s chicken segment and the impact of COVID-19.
Tyson reported fourth quarter adjusted earnings of $1.81 per share on Nov. 16. Wall Street predicted $1.19 and the company reported $1.21 in the prior fourth quarter.
Fourth quarter adjusted sales of $10.641 billion were reported, below the $10.8 billion forecast by analysts and $10.884 billion in the prior fourth quarter.
The Springdale, Ark.-based company reported fiscal 2020 earnings per share of $5.64 and sales of $42.366 billion, compared to $5.52 per share and sales of $42.405 billion the prior year.
Net income was $692 million in the fourth quarter, up 86% from $372 million a year ago. Net income was $2.15 billion in fiscal 2020 and $2.035 billion a year ago.
The latest fiscal year and fourth quarter ended Oct. 3.
The results included costs directly associated with COVID-19, totaling about $200 million in the fourth quarter and $540 million for the fiscal year. These included production facility downtime and sanitization, personal protection equipment, COVID-19 testing, product downgrades and donations. They were partially offset by CARES Act credits.
Additional indirect expenses associated with COVID-19 were related to raw materials, distribution and transportation, plant underutilization and reconfiguration, premiums paid to cattle producers and pricing discounts.
“While we will continue to face pandemic-related challenges in fiscal 2021, we’re settling the business down to be focused on executing our long-term strategy while generating strong returns for shareholders,” said Tyson CEO Dean Banks.
Banks said Tyson expects about $300 million in costs related to the pandemic, plus higher grain costs and rising freight and labor costs, in the coming fiscal year.
Tyson grew e-commerce sales into a $1 billion business with more online grocery orders in fiscal 2020.
For the quarter, beef volumes were up 11.8% and pork up 15.2% while chicken gained only 1.9% and poultry prices slipped 2.3%. Banks said the chicken segment was hurt by higher absenteeism in certain markets and low pricing.
After removing the impact of an additional week in 2020, sales of Tyson’s chicken segment fell 5.4% in the fourth quarter and fell 1.7% in fiscal 2020. The company said this was primarily due to lower production and lower foodservice demand due to COVID-19. It was partially offset by increased retail demand.
Volume sales for chicken were flat, but prices fell an average of 0.6% from fiscal 2019. For fiscal 2020, feed ingredient costs were relatively flat compared to fiscal 2019.
Tyson said the U.S. Department of Agriculture projects a relatively flat to slightly increased outlook for chicken production in fiscal 2021, compared to fiscal 2020.
Tyson reported international sales of $1.856 billion for the year, up from $1.289 billion in fiscal 2019. Much of the added sales resulted from the acquisition of the Thai and European operations of BRF S.A. in June 2019.
Tyson expects annual revenue between $42 and $44 billion in fiscal 2021. Capital expenditures are forecast at about $1.2 to $1.4 billion, including for capacity expansion, growth, safety, animal well-being, infrastructure replacements and upgrades and operational improvements expected to result in production and labor efficiencies, yield improvements and sales channel flexibility.
Tyson Foods raised its dividend to an annual rate of $1.78 in fiscal 2021.