Financial Performance

Slaughterhouse Fire Singes Tyson Beef Sales

The largest U.S. meat producer missed fourth-quarter earnings estimates as beef sales volumes dropped 4.2%.
Matthew HellerNovember 12, 2019

Tyson Foods missed quarterly earnings estimates on Tuesday after a fire at a Kansas slaughterhouse delivered a hit to beef sales and pushed up its costs.

Excluding items, the largest U.S. meat producer earned $1.21 per share as sales rose nearly 9% in the fourth quarter to $10.88 billion on the strength of its chicken and pork segments. Analysts, however, had expected earnings of $1.29 per share on sales of $11 billion.

But sales volumes in Tyson’s beef business, its largest, fell 4.2% in the fourth quarter, with sales down 1.3%, reflecting the fire at the Holcomb, Kan., slaughterhouse in August. The incident left restaurants, food service companies, and grocery chains scrambling to buy beef from other facilities.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

In trading Tuesday, Tyson shares jumped 7.1% to $88.64. The company had warned investors in September that it was experiencing “short-term challenges” in the fourth quarter, citing commodity market volatility, implementation of enhanced food safety initiatives, slower than expected operational improvements in the chicken segment, and the fire.

It said Tuesday that the fire resulted in $31 million of net incremental costs.

Tyson reported $3.86 billion in beef sales for the quarter, with the lower sales volumes being partially offset by higher prices. Operating margins for beef were 9.7%, up from 8.9% a year earlier, while margins declined in the pork, chicken, and prepared foods units.

In prepared foods, which includes products sold under the Jimmy Dean, Hillshire Farm and other brands, sales rose almost 3% to $2.15 billion. The company “has been trying to develop and sell more packaged food products in a bid to distance itself from boom-and-bust cycles in the traditional meat business,” The Wall Street Journal noted.

For fiscal 2020, Tyson is forecasting an adjusted operating margin of between 6.5% to 7.5% for its beef business.

“We’re very optimistic about fiscal 2020, and we currently expect to meet or exceed our long-term earnings algorithm of high single-digit adjusted earnings per share growth as we’re well positioned to take advantage of opportunities in the global marketplace,” CEO Noel White said in a news release.