TSN - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to the Tyson Foods’ Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jon Kathol, Vice President of Investor Relations. sir. ahead, go Please

Jon Kathol

Officer welcome call Tyson year. of Tom prepared Chief call and Officer. Chief quarter accompanying Slides On Incorporated earnings are today’s Executive and President conference the Hayes, Stewart to morning, Glendinning, Foods Financial the is remarks third today’s been report Form and Good are XXXX issued this release an supplemental Investor on furnished the website on on available has SEC to as and at available quarterly at website Relations X-K earnings morning, the a ir.tyson.com. ir.tyson.com. Foods our which Tyson fiscal

Our available are margin, results the risks as with such discussion filings remarks XXXX. projections. growth the aspects other risks earnings respect Please this Reform conclusion on business. actual today can that basis and this of share, These our include Securities that to expectations property of in and affect Tyson's to of Tyson Foods margin without today’s income, like sales, events future AM that this the note could in Tyson's encourage noted. August be morning forward-looking and prohibited. form differ broadcast release of statements X, you subject expressed statements today's various cause website and and unless Foods rebroadcast operating being for Eastern remarks a outlook the as defined Act our read the its SEC views of after to I of to Private written this of earlier for at in or statements I from to the uncertainties re-transmission approximately issued future These current This with hour business. strictly reflect references on Litigation operating materially of our performance Time. consent remind adjusted are earnings that our would on re-distribution, an otherwise call any to and recorded is everyone per will is any Tyson call X:XX is one call on Monday, call. A the replay

please press this to morning’s to reconciliations I’ll Tom our turn GAAP results, call For now refer over Hayes. the to release.

Thomas Hayes

Thanks everybody. morning, joining good Jon, us Thanks today. and for

can inventories we recovered to share. we around basis, take XX%, quickly we reach our and pricing We new a keeping activity. to capturing compared for about have with freight And last XXX% changes. challenge a terms once this now by future XXXX effect effect. to be run contracts costs our chicken. in While low-priced with satisfied the segment. competing weather Typically, uncertainty and Instead, summer demand, that in and results, are beef proteins in Intertwined pork not and quarter, to are clearly the while To normal driven grow activity. QX with growing our recover, curved we chicken particularly chicken continued our third future demand, displaced and in strong aggressively weekend our supplies we trade to low, freight Rising addressing react more increasing tariffs about Day year $XXX all Memorial costs and Chicken relatively businesses. of we season business QX, promotions. of in are be retail million expect competing expect a by market with been new net cool are policies to foodservice $X.XX expire our FY and plan per On longer-term estimated and rate for year,

to efforts are growth. short-term likely curving price Our recover

to demand as fast but and want as be growing, issues, global not grow. the as fast protein be. could continues Despite not we current trade we We to are as

moving Our products albeit markets in export are at lower values. the

pork. offsetting of we the playing lower and our new results to relationships, Foods and proteins. demonstrated markets. third of quarter Prepared in last value compared Sales We In value-added Beef are X.X% and year. working build existing the products strong chicken was We into up volume to strengthen markets all segments, certain across QX, delivered margins our in inroads

across Ongoing costs savings We year-to-date. the $XX were company. million tightly Financial are quarter million Fitness managing and in $XXX the

$XXX $XXX years. to Having year We in mindset million beneficial target and exceed next are current program continuous an the two already incremental is the million proving our over this the market. facing this and established when the to on be track improvement cost challenges

costs, in investments making we our While we strategic are on business. people and focused also our are

in improve are employee already satisfaction safety tight efforts results retention to markets. improved proving with Our and labor

yielding supply capabilities benefits P&L by are flexibility. and innovation and real chain driving investments CapEx improving Our production

results financials Now Stewart? I’m Pork, segment Chicken as going as and to ask our takes Prepared us the Beef, well through Foods. in that Stewart

Stewart Glendinning

Thanks, Tom, and good morning, everyone.

is of last tax X% to benefit. $X.XX excluding Third quarter $X.XX compared year, QX EPS up the

revised annual our $X we $X.XX we share. guidance last week, per down to to EPS As announced

original first is but strong a we weakness carry market expecting Our QX of forecast weeks into the three the by fourth from QX been saw when we over had improvements. underpinned end quarter, of

our to very $X.X long-term to continue in create Year-to-date operating model, many pressure which is and to strong our business cash. ability value. are year. generate XX% flows factors our to ability shareholder on, There billion, compared to last cash diversified up portfolio, focus our positives we believe external business, at our While are

income with total Operating company year basis versus X% Third XX were $XXX than sales quarter up points. and was up to billion, on volume revenues X% return more was million, X.X%. last total company QX $XX up

$X $XXX projects $XXX of our year capital. well of Our share shares expenditure on million. in million returns excess the for continue focus million outpaced Through delivering as for with to total third a cost the in in capital were invest $XXX million by quarter, we repurchases depreciation

of to months nine the rate expense EBITDA the under $XXX effective excluding just debt liquidity Net of adjusted $XX quarter the X.X $XXX and was times, QX. billion cash end was million million year. million debt of third Net third total million quarter $XXX the for XX.X%. net the interest Our was was $XX at in tax for and was adjusted first

average growth Demand and decreased our and performed of now grow year, and increased flat. Angus Reserve remained income Certified I'd flow of and driven Open X.X% And We revenue also very third demand cattle programs Certified XXXX the margin. volume a Beef X% including million Natural like premium Beef expect Compared X.X% approximately incremental availability result our well Premium. review an million reform. price Beef, operating initial continues in outlook a while to seeing an to business Chairman's segments. of and with provide plants. of QX increased strong products and operating segment cash $XXX as $XXX relatively sales results case-ready performance near were sizable in our to tax our quarter for we're The in for our last fiscal by Prairie

above segment, X% X.X% supply similar With it did per of be down XXXX. reduced are believe $XX volume head, A million in the values. adequate performance, average hog but margin. results operating a decline costs than not XXXX cattle to prices the down income $X with for and Pork by by we should into balance Beef generated Pork strong price. The export lower XXXX Pork fiscal Revenue in supply fiscal fiscal well to XXXX. X.X% was more segment, and margins, finish supply X.X% due compressed and exacerbated and with follow. how In our we demand appears be up will expected set margin operating

and whenever more continue to into upgrading our Pork Foods value Prepared more we're products will possible. moving added We mix

year. this over around us for higher the While Pork will currently for segment to time, operating is more X% leading will our believe lead be stable Pork margins the difficult, environment margin to operating

on and supplies to hog year. income proteins. of market environment, increase quarter. margin. X%, challenged plants. to but of were a segment the to Tariffs We Pork the million in expect remained in next affect supply approximately average Chicken Fitness price, sufficient Chicken XXXX relatively continue in low operating in to by fiscal operating from due around the volume providing The concerns soft million segment we segment while an increased relatively Based with product the price quarter Financial flat. X.X% pricing. higher trade a X.X% results could benefited operating savings for segment expect competing demand $XX on generated fiscal The our third $XXX X% margin current Revenue

labor million non-recurring export feed in charges. headwinds experienced freight, $XX and chicken Additionally, costs and increased

on capabilities, long-term segment focused stability. lower is shift Currently results however, partnerships, remain why priced Chicken over customers demonstrated relatively from customer innovation, are our the which and will and as Pork. Beef more We challenged growth, margins value-added has to and Chicken higher

similar an a around result, results in X% fiscal As margin and XXXX XXXX. expect we in operating of

of performed the operating and income Our XX.X% with average X.X% million well margin. increased with acquisitions QX increase. in in X.X% $XXX momentum building segment while Prepared is Revenue and another drove volume price Foods

Operating by fiscal strong Financial The to savings. to bottom costs. income XX% positive recovery, quarter, top sales competitive operating the major net fiscal in XXXX growing input continuing categories improvement all XXXX, are in fourth volume, the freight in we to similar was dollars into with affected next Fitness is We acquisitions, With expect leading categories. margin and $XX nearly Prepared also exceed Foods and higher and line segments across investments results million in drive year. momentum price attributed and

on Before his fiscal offer to XXXX for Tom like and XXXX. distribution thoughts we views activity, to some our I'd back and channels on go M&A

to and capital focus shareholder business. priorities Our on will continue driving value the allocation growing

would over interest billion in And approximately Net to we we fiscal grow and our and billion sales as continue XXXX. will to and expect $XX disciplined to of XXXX In topline be $XX growth through return debt should approximate acquisitions. around XXXX, to the business fiscal will organically shareholders We X% we billion, share $XXX $XX million expected cash through growth. dividend XXXX. pay buybacks in cash and fiscal down expense be deploy which

expected is XXXX. in effective Our rate XXXX around and tax be XX% to fiscal

to on drive approximately our million in billion providing and we in growing the billion as $X.X plan billion growth. balance Based shares price any in We share XXXX our XXX QX, have generating fiscal around on diluted continue expect $X.X and That remarks. while concludes approximately business. my capital and our returns expenditures, and focus average are out We fiscal flexibility costs, cash repurchases. share we improving stripping XXXX to in before we volume average to on sheet CapEx $X.X planning to be growing good

to Tom. back Now

Thomas Hayes

Okay. Thanks Stewart.

X.X%, while food driver intentionally moved was X primary decline. ahead retail dollars dip the decline our Core it Our positive, volume that negative was volume retail and performance did Tyson wasn’t declined peers of pricing beverage slightly. of outpaced Total a volume total though

this categories declines was were Within pricing. the improvement based declines driven stock, poultry. we profit our and strategic In Share by volume plan dogs, two executed Core expected specific retail that more volume saw driven X by dogs on by hot driven period, during more aggressive the share In added has more Day quarter but volume this slowest aggressive were during Memorial value recent improving. the performance retail traditionally competitive for also activity poultry, is competitive category. pricing what declines hot been

is our In Dean important on well. well burgers Ball winning Ball the sold a to focus back driven the are it's continue new doing poultry. Dean hot in the early Jimmy and days season back-to-school frozen to in off category by doing half retail Other consumers. challenges Park with also have start. move and Protein dogs the next convenience. focused Our poultry cooked we strong retail channel consumers are to innovation Refrigerated been of and paltry the were that raw declining introduced has on volume Jimmy several products a Eggwichs are already strategic Park as In market, to Packs year fresh the

For labor deli, saver that's white the for pulled have in-store new chicken we a customers. product rotisserie meat a

effective In In appeal meal labor Tastemakers item Tyson remains foodservice, sector more kits continuing and solutions help to a on a for One channel, is back-of-the-house called consumer Dish. high foodservice labor with improve operators, cost efficiency a the Pan free convenient up dynamic innovation addition, and Tyson offers in challenge showing products.

of six up over positive distribution year. trend volume foodservice their last Our continued products focus X.X%

changed growth Our a period our and has relative of lapped performance to our we period as decline. competitors lapped strong competitors

sales opting saw on among wars growth. temporary then Relatively focus led late QSR offers fewer burgers limited prices rather chicken, low to to the changes a we which beef on QSR feature a making schedules, public heated time our had and impact competitors than up some promoting to burgers customers burger chicken. the summer, the As promotional

Looking bigger playing expect to we with return customers. foodservice role back-to-school to will forward season, chicken key a the

a bit to Finally, talk like about I'd M&A.

the refining plan company world our are our the protein growing brands. as part of fastest-growing sustainably and feed strategic We to with

way, us consumers. changing We expect As sold received a pizza this protein, our several created should that In with distribution businesses in to June, non-protein new Smart we American is national plans we billion provide Foods to opportunities with we the full-year fourth in positive great month. organic stability company Together, we selling made of quarter. Tyson. growing focus are to In and and in fast to announced this additional chicken customers example. margins. its and gives producer APF acquire extremely This in brand crust year ability of on Proteins, AdvancePierre acquisition has a we've our a Tecumseh unlocked The Poultry, our as we've The business regulatory acquisitions the up savings a this May, close chicken our scale acquired and Chicken of an revenue gone approval and brand. the which $X.X well, and well-known part first and contributed integration anticipate incremental has category.

this like growth advantaged in remarks, Tyson the the protein. rock of of market to we foundation wrap reinforce I’d is Foods as prepared an solid pure up business. So our leader

model brands positions grown the operating unique our insight balanced growth. deep and commodity go options markets. flow that has creates advantage through Our presence across model protein on all-in allocation us to we've A behalf shareholders. of prudent of the cash This major upside the to activate value-added allows of stabilizes and in our taken capital consistently great the on

reality the for while innovating tomorrow. embrace will of We simultaneously today

long concludes game to we our the time. to we ready a to generate Denise are remarks, That and commitment returns begin steadfast will prepared Our continue ensures over Q&A.

Operator

Hayes. Mr. you, Thank

Ken question Zaslow of Bank session. now will Please And from of will first [Operator We be question-and-answer ahead. the Montreal. go Instructions] your begin

Kenneth Zaslow

morning, Good everyone. Hi.

Thomas Hayes

Good morning, Ken.

Stewart Glendinning

Ken. morning, Good

Kenneth Zaslow

as such bit costs, My to question change because levels, that pass through the the it bit but conservative depressed is, you XXXX how you does get to about and see a little is you more frame driving like you more seems curve, Are little numbers? XQ disconnect? what being Can just there's it hog of importantly freight to you a talk get it synergies. a overly

Thomas Hayes

but certainly said Certainly, as relates the Chicken. I talk business, as our about But remarks that. I more XXXX be and biggest growing is you. maybe Stewart it my prepared faced in protein disappointment, to Chicken environment don't tackle margins going certainly can is here, to I why We similar what the we've throughout XXXX very to will kick see to world. the

a very where as Mexico, has noise continue can. One to and of The take Beef but we the things like and bit, on focused and future. obviously advantage good particularly that continue I it to into we're the of feel exports tariff we're to is very trade see we are shape. relates impeded well segments doing that in Prepared Foods that

has we off a down our see start, a of supply chicken. come Pork plentiful. be livestock is to And challenge slow pork bit really So will to but improving. and

we’re Foods improvement, Prepared the happy our that’s are to that. and higher course. are continue us the trajectory. in fitness results sure from mix, chicken that's area being the need sure with because we export order come growth businesses the we expect have There and and benefit with and in probably through off want expected continue spoke on maximize those I of So doing prices continue team savings value happens value we low the The that to we But one we confidence. soft. and Demand up we want that ability Chicken for to we make need at that make mix through we to to caution thing a in are come to to us added our drive our deliver focused to to is and sure is model. that where added proteins demand will financial competing that and the really for is to concerned deal the about make

by it, your attack some volume, affecting as cost, on few all we’re are but issues those yes, reason Chicken… Ken, pass So, to with us so were the we dealing through affecting the but about inflation, year costs, used headwinds on now, as getting have or go those freight but the into higher that's we that certainly prices all freight continued conservative, we’re and food why comments, issues, tackle

Stewart Glendinning

those, some Tom Yes, may as QX be Pork, Chicken a QX. QX, I on of saw thoughts of first of in continue mentioned, both Ken, as couple to those expect we trends and of all those just we mean to

at relative And year so see QX look the performance to of last the in and you'd same think thing I QX.

On about you is, great I performing the business The businesses are in point just Prepared feel Foods, we a that Beef. to well it.

giving the so really Beef, powerful for As QX perhaps at be QX. we expect as good we've for you and look and as X% return sale QX, not to full-year given on guidance while X% for QX

so On return giving XXXX, allow that you I we’re the on will you guidance mean And sales. to I the think dimensionalize all on QX.

that the points of on and That's Chicken drivers forward their grains so into for is estimates. curve see grains specifically, One some year. the in you'll Chicken prices to of on flowing next forward higher curve

– how around see flowing specifically also move our prices Chicken. So that depending in will numbers QX will own on on through moves expect higher grain to we around,

So hopefully with of detail. you helps that the some

Kenneth Zaslow

a Very for – think it thoughts leave And did coming you a helpful, was opportunity follow-up just have good an buyback that you seems on stock, lot Thank to back and follow-up about cash stock. I’ll say guys there. then that in is, This you time buying you. a that? there remember my to to of be any

Thomas Hayes

that. Ken, the thanks on say, just heads for I’d mean I up Well,

back great last last quarter, $X.X got million the years, billion $XXX $XXX almost stock. share. of bought a in buying the year-to-date. million In three have record of we We I mean

are the buyback to will of that we us capital allocation can part pull you will to be of leavers stock think that. various see – I and expect continue

Kenneth Zaslow

it. Okay, appreciate

Thomas Hayes

at of course. a quarter speak want I specific to

Kenneth Zaslow

thank Okay, you.

Operator

Samuelson Goldman Please be Adam of will question from go Sachs. next The ahead.

Adam Samuelson

business in freight, Good deeper guess and those everyone. grow the by out if declines buy you. things that margins segments at bracket and of Pack company third the Small bit thank expense, between I one your has think question. my have chicken there maybe Prepared, looked lot a And diversity of and of and year-over-year that the bit kind to people in Yes, the mix, grow little about time and over so been thinking I is would Thinking you can of and the labor, some in there a current Bird quarter quarter. on been across little in offset, then of Tray of a that the the wanted environment, and would and feed cost, of more and dimensionalize way morning, losses pieces just versus first and impact some fourth I have those be derivative profitability helpful? an a seeing business. to any Chicken take you’re

Thomas Hayes

Sure Adam. buy versus headlines, I'll talk give you I’ll about grow. some and

I Chicken us the competitive about weak the us demand one-time The thing that think Estimate in in have LTO I of XXX about I fire out quarters this capability which our factor demand, Domestic events, a would revel, about to for talk in and quarter, uncertainty demand at are as our as the is impact something the $X.XX the some long-term that pertains switching. maybe the main with of will certainly export plants basis affecting significant that the results headwinds help in did and is the that that's approaching had of hopefully points shift EPS. that the uncertainty we that good production say. compete sure. proteins. being totaled certainly for domestic terms a short-term one is for shifts but say in let uncertainly will one-time those it – us when grains behind – is then $X.XX that us. The are – as EPS increase us, area most could short-term didn't see Chicken headwinds think well legs we deviation effect then a mark-to-market other And about about of are for weak categories, there events is the three called the we export –

LTOs weakness down from this past that's it's versus Buy the talked benefit but grow, ongoing We going of about. for proteins to see by expected more had it we sure headwind. a we cheaper unusual Pork value pork I demand, this with and summer quarter. occurrence the is be and Beef certainly the caused So and and long-term coming a benefit, the

lower where And chicken the much priced enough as from volume didn't that and as on to us fully capitalizing market. we dropped advantage have so take our do, as couldn’t those so buy nearly we we prevented normally products of

in two. that's the story So those

Stewart Glendinning

say you look thing it of The you is just costs, gives sense feed helpful. impacted about impact so Yes. logistic might that be is helpful. XX% or I'd at of to so a add if driven only by be QX and It those,

Adam Samuelson

Pork helpful And on then clear on That's Okay. color. the just guidance. just segment, be the

it would at I to fiscal X% year-to-date weak and you the breakeven, about to on fourth the beginning quarter imply just Mexico are with issues X% margins on or right I or know the packer is now. export full weakness. for something You're July then talk in margins or expected tariffs get magnitude near else? I year the be fiscal mean wouldn't that have to Can

Stewart Glendinning

Certainly on the exacting to We expect are now. our right don't forecasts. margins tight be

there a right now. things is can is of that you the volatility of lot appreciate that One

but – are supply seen sure we we we as performance. getting the as the have have imbalance range why are more for we relates coming a demand. into So trouble to full-year there the What been have doesn’t hogs, an has market, the such in hogs have wide

number think want to what we up can full and based know have hit. we you we're But that confidence we we now sure right in today. give certainly we So XXXX shows making that that on the make we sure

Adam Samuelson

the it on. pass appreciate I’ll I color. Okay.

Operator

will from Bernstein. go Alexia question ahead. Howard next Please of be The

Alexia Howard

Good morning, everyone.

Thomas Hayes

Hi Alexia.

Alexia Howard

you're And be marketing that of an follow-up. programs the on the spending awful business coming lot you're I'm about more some I at is the next Foods Hi. idea through, a going maintaining or the is year? outlook is offset for the for Prepared margins to the then missing? ask cost level I the have saving that that Can XX% If despite

Stewart Glendinning

Yes.

we the happy margins but we we to Foods, continuing that that to sure invest. Prepared want we make continue are to So are, we in are have with where

We levels shares, to growth category dog our right sure hitting in as keep saw had spending in we we mass that some although did will improve hot lost the the is order you make the margins.

is efforts intention that's bit back are get answer. at brands sure continuing make spending. behind focus Our continuing the to are our so innovation and MAP are will store, that a part and that paying we But of we there the be to also of on to mass right short categories, right but

Alexia Howard

big then Great. you to for relatively now prepared and on. your in do And pass you'd AdvancePierre be another the more to future? is deal? right are of on highest it What recently. distant take obviously assets terms you looking kind the to the you've and what leverage have Thank I’ll strategy, too follow-up, in not the done do Do of you acquisition acquisition appetite

Thomas Hayes

Yes.

leverage. about the as talk about cultures it our talk So same or acquisitions relates maybe

So us Tyson. in we same to the that synergies that the new brands, really can scale, or geographies to so on puts some bring are focused we going extent take some a assets are strong And deliver to capabilities position. they new areas, the

properties. about the And that So of we filters those talking specific are course, use.

we're to margins, that's stabilize that's time. it's best that's APF, believe margins talk be and over where going improve we've owners, to in try what about done the with it's taking, doing be our with interest strategy share will leverage. of what we focused the we're on to acquisitive and American Proteins And continuing We

Stewart Glendinning

depend willing think, the It say I that leverage, I would sufficient, Yes. And one. of type is little being there's to. number to two, note go we'd us. on that number bit specific Relative say important a to to to to not investment-grade will is it number be just that asset, a

And rating the closely agencies. we've worked so with

Alexia Howard

Thank very I’ll Great. pass much. you on. it

Operator

be question Aslam Farha from Please of go next will Stephens, The Inc. ahead.

Farha Aslam

good Hi, morning.

Thomas Hayes

morning. Good

Farha Aslam

first relates question to On Prepared Foods.

the benefits share starts color we is and delivering really of us XXXX think your plant topping comes pizza toppings the on with plan? you restructuring. are when Could I on pizza that with where

Thomas Hayes

looking good. are Things Sure.

We much We're importantly have to the more the product the have. It's Look volumes quality, automated running are place levels. the and right up the normal we than great it. most returning that it's back that plan, at we process want headway. and in making

so commitments and locking comeback, looking some are things in we're And good. volume our for

Farha Aslam

the pizza so to revamped from million strategy? that $XXX so benefit And do get or expect you

Thomas Hayes

haven't be out broken fire, to the going into margin exactly is for it’s the relates We surprise our or to projections to improvements say with but FXXXX. guidance baked margins

Farha Aslam

then you pretty material just $X.X color with $X.X a what year, CapEx billion? that a expenditure step-up. it's for or Okay. And down follow-up. next quick billion, That pursuing year projects provide Could to as on next going break incremental that you're

Stewart Glendinning

One all is I in new is there carry-through year, to are Yes. so would in plant. a that the you're will seeing I too, projects; this mean in That's project. very lot A expenditure land plant chicken of mostly noteworthy. what from that one from a year. Humboldt are large There large Tennessee. point this number the big of

we are investments, which one payback is important have pretty other powerful heavy to The underway and forward. redo network, as are distribution a our and move those we some project have

Farha Aslam

And those Financial Fitness? savings million Or are be of $XXX would your captured incremental? kind in that

Stewart Glendinning

the of yes, savings, Some total they're in well; in either our Fitness or forecast. captured our Financial

I've you. So given of add top the wouldn't that the to I guidance of that any

Farha Aslam

Right. for color. the added Thank you

Stewart Glendinning

You’re welcome.

Operator

The & Morgan Ken next of Goldman question ahead. will Co. Please go be J.P. from

Kenneth Goldman

Hi, good morning.

Thomas Hayes

Ken. Hi,

Kenneth Goldman

Tom, I don't for guidance long-term have anymore. your you segment each know

time, Or about. that that. to to was the the that ago, were cards. past. was rings bit Not the food is to going But that saying to had about about there the higher specific uncommon. not long-term not reasonable? have that just a think a numbers. words in we XX% that. A I'm is their the in curious, mouth, it should once and a is sort you sales have marketing we of talking some is on range, And still kind now lot this needed? long to that put does we need XX% people in seem the So when of but is well XX% you not spending now press get a than Maybe reasonable But were still in maybe little mind what I'm packaged we companies cost to XX% more are of for your we that thinking

Thomas Hayes

in You're actually have the plan mouth What view resilient of the do the a we business, things continue it. up invest I've did because we we move Prepared longer-term said the been the my going that not not And grow is we to which is as team is to also execute in has that putting smart the that doing, make business. I the continue to for margins Foods to that words in acquisitions and business it and have say aren't place. potential

So EBIT want in continue to business. the Foods we Prepared to grow

the that we there it if up, back certainly invest we to going time which to is lever use. we where is So need need pull in areas in a some be we'll to that MAP, need other amp a to

pushing the in sacrifice continue a terms head, it's going of margin think exactly is but XX% grow. a to the business going or can margin, And I for backwards specifically. that don't where having to EBIT to but because having we're So too business hard we total want XX%

Stewart Glendinning

on earnings is that driving I that you, right? return higher. bottom that of delivering We best our base? I line? push Yes, could to against which I'll And more And focused the is, point be Tom's last question on earnings with capital the the And that's base. think focus our exactly leaving right. is a is our growing highest on our against even that top say add capital is that, shareholders, so The Tom, just margins would we're really what's for

Kenneth Goldman

Thank heard to points say grains the Small you for get And my you're, to the I forward that you Chicken where the Stewart, I what at Was company. plus? just on then curve thought statement follow-up wanted a cost for that. whole I that meant specifically higher partially, of sense prices. Birds least on

Stewart Glendinning

pricing of wasn't one was what's the that to Yes, And so in those birds. that question costs. grain the driving higher Ken, on from, it answer XXXX? my dynamic was I come of dynamics impact pointing is – the

say to look curve, to at simply look the you this higher. year, next grain you as if Just costs at they're year compared when price that the

And we so give you as cost obviously that to consider guidance. need we higher

Kenneth Goldman

Okay, much. thanks so

Operator

will question of Robert go Moskow Suisse. be next Credit The from ahead. Please

Robert Moskow

fiscal raw questions, for Prepared there I is saying is to Foods XXXX. But materials. guidance compared for think material A you're thank for couple you. Hi, flat of for XXXX, fiscal XXXX, raw yet no

for thinking, excess margins And this supply all positive any and deflationary could have then being follow-up. foresee margin guidance XXXX fiscal that Beef, XXXX? into there? incorporated and thoughts you to with you maybe Have Now some a I for of Pork your just

Stewart Glendinning

the a Yes, pieces That's why lot would break simpler for good of level. we a We've moving to material get way and their at the say we across. And out of all so incorporated you I are guidance. margin we reason there the costs. including that here, lowest which factors, think message want don't the us some give that's raw to

Robert Moskow

into get to the want don’t yet? you specifics so Okay,

Stewart Glendinning

because one, of a some of specifics. apart, that sensitivity the about break moving I to talking want to a there's lot two, don't and I there I think think Yes. competitive pieces; because are

Robert Moskow

thought value-added When compares these of question. competitive heard I do you new keeping that given of of added you're that up any I different coming to kind a saw the disappointment competitors. And intensity? I business, from kind how being demand quarter, thought the it a about at of additions? soft? of did come demand your in capacity pack more you I track Tyson's one of some are of competitors also, been In And tray by demand, feel Chicken And announcements talking even has business picking Okay, lot capacity expense. all

Thomas Hayes

focus what just the trying marketplace. the we of haul, other while are us, we're but is, need, keeping and we tray the on the of And do we in to for Absolutely, capacity value-added, capacity on kind demand. also – that in that's and not against our supply do, drive. pack But our and are all track some battles lose focused expansion, some win we certainly, battles long the businesses

of time, there's what at that the the a two way What are out, business. that’s be that for most are to the to So down And this about capacity areas way it. course, expansions but we think the three need sometimes going some going we the of yes, Tyson, and competitive lose, But will to we we win. our road? years is look –

Stewart Glendinning

when our Tom was thing Yes, expecting. the It weaker weak expecting is So were mean, demand, we on that, – I were it's only I’d it than flat, right? bad say say we e volume was outcome. wasn't a

the it's We to so all expected of matter volumes up, ways... see and

Robert Moskow

expansion timing? no change your to capacity so Okay,

Stewart Glendinning

No change.

Robert Moskow

thank Okay, you.

Operator

Michael will Please question next Cleveland be of go Piken Research. ahead. The from

Michael Piken

how the I Tray Small dynamics in due talk if – But just of various big recent Yes, we've could and bit a between each off in much was bird seen wondering the about other? bird Bird, obviously, just the softness a segments tray lot hi. how play of is of to and little maybe kind Pack, you the softness. pack weakness softness big in

Thomas Hayes

bird supplies past talked into in talked hurt which maximize advantage is take big it, buy those having of timing, Yes. does the where to terms go I model about, a our about how coming or components, it's Certainly, versus we can't the of are the when the potential. that been we in that down as grow we and ability countered

feel about we of pretty other the mix terms In business. elements, our the of good

break We I the be and out out, those. you and Michael, specifically. called all Haven't for absolutely hit of do that competitive Although, we in we’d Stewart sure always plans, terms individual it that. want probably, pieces. it that planned, purposes to big have don't want want make as we But won't give you the can't we to color as done we

Michael Piken

Chicken more if versus just other you don't Chicken to of me things? tray break your want guess, versus segmenting segments, out probably versus Birds value-add you business kind of even away. to business that's one that could without the components then, guess, at has your swing Though. acquisitions. between try recent let more I like I seems added value And AdvancePierre, maybe Okay. It this Small percentage commodity pack the break out various that

Thomas Hayes

things about ongoing to that talked Well, we’ve growing. one margins sure of the is plan we stable is trying what are and for the make

an So markets they as are advantage have sort prefer lower, in they competitive and won't continue we model high, And not be marketplace. potentially the to certainly immune don't to stabilizing as won't mean probably of where to of we to of where stabilized when as that continue we low. believe our some that margins – be as internally a they're conditions we we're And high margins. doesn't our the competitors. – That

mix is our good. So

for necessarily and clear value-added, But now. the in level hitting some And as we and to seen Like to insulation puts the a continue the build have do We more And the innovation. on focus in we if that drive plan I to are like of and we we is that as Tyson this, continue is you when success. right certainly, talk innovation level. that we don't have feel But strong going team down are about industry the model. the have. brand pressure our about the it conditions way the all that our business, up brands We highs, you've go well.

Michael Piken

Okay. Thank you very much.

Operator

Jones will Group. go Please Vertical next ahead. The question Heather of from The be

Heather Jones

Good morning.

the you expected earlier. correctly were to to said in something you I into were demand QX? some specifically, the challenges saying the to fire, you like to Did abate, demand et the accelerate you going understand things cetera, when Chicken, related short-term – of that but want clarify Just that, pressure

Stewart Glendinning

which pressure in to we in one-time the that from demand QX, an increase specifically was the QX. show terms certainly, not you because of We're it fire, don't the I'd quarter. Well, our demand I expect point just for it will again. obviously, But for numbers, have to be to event, USDA a given do think, speaking that better fourth

Heather Jones

Okay.

Stewart Glendinning

be you the the trends it. QX earlier. expect just is should the easiest what probably QX about following: think continue the through in should way way I into said That's just think Chicken you in business, me that saw The against clear see to to Let you which in QX.

Heather Jones

XXXX, And rough continues that given X% into for guidance your you're XXXX as well? assuming

Stewart Glendinning

correct. That’s

Heather Jones

spread but And of want your Pork plants look on was the when in you figures beat if Okay. QX side, And – Belt. like, Corn Western the it's all, don't and lot late mean, the look the I the there, there, late to at year-on-year. dead I in then better out I than a actually up horse your and are at it and way

to QX? the sure sense trying actually is of worse seeing just So sense we're I this Mexico that implies why make get the Or you export exposed than like part understood? to of get much to a markets, trying markets guidance? you than but conservatism improvement guidance I'm such just your the an are a just a make on your in maybe I'm QX to more

Stewart Glendinning

go a through things. couple let’s Well, of

X% all, Chicken. relative and point go which First continue to from of were in the the I you our some that When specifically, to trends is to that I the business gave answer QX again, QX QX I the earlier, to in and back QX back Beef expect say I margins the go to of Pork into our are take X%. full-year

in Beef. is of as QX. size be just the but that that's as the to works strong is And strong to And – only the expected math the Beef is of overlook QX way the because one so not easy

Heather Jones

worse. on is yes, because been question specifically Pork I'm there My improvement a for Pork. to – market, in has really guidance it was materially last something is really, drive dramatic specifically, get few And But on deterioration? the pork weeks. you that that I'm Or is out, all that there kind of can being figure just trying to see factor we just conservative? is some that other – there will

Stewart Glendinning

see the our trends is in the QX. July in are we we marketplace. have, differences, market, of the – belts processes us, course, trends those the and already, producers through of the that some under seeing we of course, are There continuing various for Yes, benefit that between

may expect then. our saw relative price We – we a to some QX, in in we are last little float QX. to course, we others, so than around the improvement see Of see that to were and to bit. less get But do some same levels we integrated don't and back improvement expect to year, we expected had

Heather Jones

for clarity. so much you Thank Okay. the

Operator

of Lavery Michael ahead. Piper Please be go will from question next Jaffray. The

Michael Lavery

you. Good morning. Thank

sticking Just Pork. with

seeing XQ exports? that, continuing, the trends on catalyst are much depend a does what of in And would these for be for so? you some recovery If you if improvement how

Thomas Hayes

in minute for was put versus down and Pork about X%-ish some And exports was X% huge. to value QX Yes. are about Certainly, The me Pork the just there. year. a about of let Beef cutout talk last Beef QX. perspective

Mexico So created. of $XXX majority that's pressure has that to that of $XXX Beef about the Pork total and issues The is for million with in million lower due revenue. Tyson lower the

is markets So in us, today, for the uncertainty not to the stable, the and Pork return those important. exists Beef business critically having that business,

we're for those numbers. have on. us, most disruptions need markets where to us. way, And all We annualized is continue. I focused concerning to those numbers clearly by open the the are have that's to – is that's But thing that those So gave

a of huge equation. So part are absolutely, exports, the

Michael Lavery

And just number clear, your for for not improvement assumption XXXX is guidance What’s to your or necessarily? in Pork?

Thomas Hayes

state going that are It's and have the improve. don’t know. to have kind predict. – an We to just they hard steady because today that we assumption It's of we don't

to it. and it's open one, us, to for trade an tariffs, If you on it hear debate. as But that an relates happy answer have

expect time. We stay for to some open

Michael Lavery

could how that opportunity offset help? it see a say that country the handicap sort factor market be? adjustments could much with? workaround? third-party of do is much grain or too something that Is to for or early you of an evolving? Is you How And see Or that

Stewart Glendinning

would that. And is to That sort give be it. wrestle us on Yes, this question would accurate us are an seen very, has of trying you that will protein difficult actually producers for various to for just the very difficult emerged with answer answer. tariffs be it to to

Michael Lavery

very you much. Thank Okay.

Operator

ahead. will go Theurer Ben of from Please The Barclays. next be question

Benjamin Theurer

morning, and for good thanks my questions. Hi, taking

on up the follow Beef out with comments the upcoming and quarter. put wanted the quickly for to you Just expectations

up sales the But incremental in take I look up almost performance. we if to so up look because down X%. you So less if of attractive roughly context Prices and flattish on price a is that volume was change or brings on was would and a as volume at to X% which for quarter clearly that volume environment if seems a put basis, seen you there an it demand mean but just be figure. the pricing into Beef X%. year-to-date more X%, are take actually, we and

you right. about to terms guidance, are to could just get weakness was volume appreciate talked actually that to much sequentially are margins to get the your XQ a clarify specific Beef you lower you and X% if that in order that on of margin price point expecting make into that them. What see what So in significantly would on be

Thomas Hayes

the for question. Thanks

good think I one. it’s

is try getting specifically, of specific of what the in to you break stay of that so we of far get to from volume. the quarterly the see happen to and trends we I sense what I estimate into trends the sort guidance one of price wouldn't what reason that, beyond why I want were out, are. But bottom give So and think that line going some and that’s

Benjamin Theurer

the and attractive Is Chicken, outlook fair continue the environment mean, Would then, for I be assuming environment Beef overall similar but full-year. source more just such hence, the XXXX as a assumption? outlook have and dynamics conservative next into you protein such as expect a cheaper more a a on a that as in you of definitely optimistic to segments year Beef? becoming basically on to ones Beef that the Okay, more

Thomas Hayes

XXXX. outlook, in there. of out what Ben. that's Prepared we Yes, about the we this do talked animals I would we've Foods, point, do into that optimistic our say are we visibility at have number And good have because that see good an

Going we sure discussion, a access need that is increased export absorbing continually to those production. open the make back to that the to countries,

is spread business. a business Our

the we come by environment. process and and And margins as so It's regions, very are the a have good when past. about we the good have a in and will way, right balance, through the we talked we calendar the in

projections that You are want XXXX right bit But out all where and might sure a giving we hesitant do now we're until be little make because us like right for we the you. to way we feel the

Benjamin Theurer

perfect. Okay, Thanks.

Operator

Please Markets. be The David of will go Capital ahead. question go next from RBC Please Palmer ahead.

David Palmer

on In looks It helpful Thanks past, small, to those mix, Tyson's morning, thought was a that peers. follow converged as mix versus up the processors the in just margin segment bird like that Chicken we peer midsized margin-wise. really good value-added Chicken? gap your

reason of couple towards big guess where your You header been by But times margin being guys. of by certainly your a Prepared the as that surprised a mentioned bias decline little by the a Chicken. I'm case of and in off Foods to sort with for led burgers I you the couple a in lately, that's that promotion change

as of Is LTOs you the a factors looming change sort And give us could big of a forward from going think So factor? for should Thanks. ranking large? big sense about really of we the a that Chicken?

Thomas Hayes

I They factor forecast, are it they out. relates mean to our are in and big we have as those

XX%-ish, Chicken you up like If about LTOs, were something think the burger LTOs those David, that. XX%. were in foodservice down

the national was business. accounts, a of huge when That's, our it So part course, you big number. look at a of

a mix affect It it does our are the but impact. around we affect for - is focused right. do we that, you're we big And can influence what margins. that right So on does that sure, have that us. to to And need

David Palmer

cost more feed is dynamic going And going okay? as be that the Bird of that essentially a is And as just particularly the on mid-size far business, holding Small margins, that side up to of forward?

Thomas Hayes

we comment like we're Bird by another sure. bird don’t positioned we do do business but get breakout our where our I angle. relates to for margins it from Small side, I as – But your

David Palmer

you. thank Okay,

Thomas Hayes

You’re welcome.

Operator

Jagdale from Jefferies. will Akshay next be The Please of question go ahead.

Akshay Jagdale

over taking in that as it margin value-added right? are internal as said both and that the context, the external So have to just Chicken to you business. seemed forward there your your context into entire actually you as now and that with question. market, for that's has, business the internal specifically long-term mean, full-year much Thanks the of follow factors we ball have a short-term. In for the significantly from agreement so I get being I'm business I that long-term context going compressed how the sense roughly, stable, right, has can is is is about to quarter, is ask driving what much wanted morning. valued happened can is in your relates change it strategy, in you've the what But where don't margins Thank Like commodity, we good guys XX% that a far of external of this to is down a guidance a much you. Hey, park, today to X But put multiple your value-added business. XX the just come like Chicken. versus sort higher-margin so swings versus how that right? in plus businesses

Thomas Hayes

by We Stewart's I stressed that tell haven’t the intact, the looking competitive been page would but is Akshay, What that model it's broken down you, since here. stressed way. at it the marketplace. is

growth. even driving that what more on So hold to in have implementing value-added been of a we be road, doing. We've bump would going the the that in so changes but we to we're be will does breakout? up, the I focused had continue will terms model do And the really say

Stewart Glendinning

about external. factors, internal I'd mean, XX% numbers. just say, relatively change, say the I it’s about Yes, rough the rough a for the I'd or XX%, to balance I'd give full-year the sense. and sort is That's you of

Akshay Jagdale

curve things I you mean, you're forecasts far. have if internally building difficult, but what, demand And could so But planning. that it. demand the to are plant, key anything, right, competency for are competency lower. moved differently? Can when it's Tyson been somewhat just – I happened? was hallmark new a that demand Hillshire, at such Tom, one anything you're you has here doing from area, company. time the the And internally related help changing the that a follow-up us Got coming again during Obviously, know understand project it's your a

Thomas Hayes

would it of going And more getting They I portions mean, Chicken, in is the understand I I are what performance how we it's can some hard. not And We are some more be. just is the to were portfolio, the commoditized? but to are. across this. get I say entire is planning we better to can would And a and commoditized predict we technology say, looking they around the process, always doing customer need do be I very S&OP like there's process, of. bit sales sound. better. and better. and overall, on we say, But we surprised, were not somewhat that's be things The to say, something position frankly, we'd would would operations front, in a particularly,

going sure through that business, period that we are challenge will for can. in pleased I to managing to as honest. this a detail the to in us, wouldn't model the part stress And But to if put For where is possibly we as of periods, feel it I sure I we tightly our every they was told trying is on do that every being Chicken. good difficult difficult have our team with make we're up the have continue I single stand is and you that's hand. make the be forecasting that

that forecasting our need better. we sure get to make to So continues

Akshay Jagdale

it Thanks. on. I’ll pass

Operator

Jeremy ahead. be will of question Please go from Scott next Mizuho. The

Jeremy Scott

and Chicken. the relationship the Thanks. price Maybe your on just value-added the that on margins specifically underlying follow-up commodity, of products versus a in your of

as heading there into about talked before. which that under as insulation, that an versus pressure, the value-added the summer I think prices came you your expectation well with as both was grow, there be buy would

up breast what prices pricing of And is the or expectations? where first provides Tyson your your regards guess, distraction quarter? to cost had the is marginal outpacing living on the elasticity I point question too value-added you further it become versus the the we isn't, is as to we meat So of with if the have model And when marginal this revenue? in to such it grow level have is, the processing insulation your reliant buy then is secondly, demand of breaking

Stewart Glendinning

those We of So products I reach is don't mix to hold having positive, provides the our a downward it And relative chickens think, going are just to volume will And amount that because on that relationships strong that But the customer you're first certainly, you see pressure do there's certain thought getting when that we going value-added the through, because, volume. some not a of ultimately to that coming have of price competitively I to kind at mean, think products also think from gives to you demand market all, you would stability. right. no relationship we U.S. I frequently we competitive about look have. think There's that mean, group, some – what marginal no the point be. our you'll top I the if talk still fact have have within profitability I away a the margins. rankings. model that's that the find where of question us of there's higher of But we're sensitive. of ultimately, expecting good that. near

Jeremy Scott

were help segments, Chicken year, the next I little Okay. guess, because us was an different two out, year. I gross you next you you M&A be for with the a you bit roll of the Can year? on your net through same going you that to as out in And just update margins that considering can surprised they And [XXX] called maybe had out books. rolling this called give impact there? potential that accretive acquisitions on

Stewart Glendinning

in much. back next of work the to the as see that Don’t the that out those are break seeing be we they're number you you're specifically have is going relative of to don’t the the them relative factors the through significant specific we most that so size this gross for total year Chicken, average year. acquisitions. external are moving big ones The – because size M&A from the of to a Chicken, didn't But to half which total why not

Jeremy Scott

be on every or trade. if we if $X equivalent $X.XX the might be given the lastly lower issues year, XXXX above at it But is I you earnings number a assume the just next on with comfortable fiscal billion – Maybe in the X.XX? bit to appreciate visibility, for earnings, you sales Okay. that's now for would about

Stewart Glendinning

– But make the and you haven’t EPS you I blocks point. right this think speak so estimates. We given good to that to the can any at building the that guidance, given going I've not I'm right

Jeremy Scott

End you. of Q&A Thank Okay.

Operator

our And for over conclude to Mr. back question-and-answer Hayes and the will gentlemen, session. I remarks. conference like this ladies would Tom hand closing to his

Thomas Hayes

that today. business fundamentals the Thanks, for say questions haven't our Thanks model Okay. gang. of I will the changed.

We have a diversified portfolio, strong brands.

us for We really long-term are We well set team, keep our focused. joining you up and growth. appreciate

excited And about We later will are on very the way we'll Thanks XXXX bring what improvement. this afternoon. in of continued talk everybody. to you

Operator

Ladies disconnect time gentlemen, today's concluded. for lines. At Thank may and you. the has you this Thank conference presentation. you attending your

Tyson Foods (TSN) 6 Aug 182018 Q3 Earnings call transcript