TSN - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Tyson Foods, Inc.

Second Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference call over to Mr. of President Vice Kathol, Investor Relations. Jon Mr. floor the is yours, sir. Kathol,

Jon Kathol

morning, today's welcome Good quarter Foods, On Glendinning, White, Chief to today's and Inc. Slides furnished remarks Foods Executive and and available investor of are Chief website President Tyson the earnings as of issued XXXX. earnings Form Financial is center an second Tyson the Stewart the are X-K the a morning, been supplemental Officer; website available Noel resource report which for release on SEC on conference this fiscal accompanying ir.tyson.com. Officer. call to at in prepared call Tyson has the and at ir.tyson.com. our

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

our turn to release. call Noel this White. over results, to morning's reconciliations press please I'll For refer the GAAP now to

Noel White

Thank you, and Jon, good morning, everyone.

per of the of well model. and our strength a The earnings despite were Our Foods results margin weather the $X.XX segments Pork segment's share demonstrate and diversified executed events. operating business several and QX Prepared a X.X% record, Beef significant

past our challenges, is to of typically are Chicken quarter, we're and our have results. segment what we improve toughest Although changes parts our driving

international continue quarter, and achieve operations to we improve forward BRF our to team's As the confident integration in of to our fiscal and be our we European addition and Foods, growing we're leveraging is I see gone of as regulatory this move the production domestically looking our well, and expected strengthen has capabilities. expertise close with and the ability and opportunities we're business. third and internationally. by as Thai they The to acquisition Keystone we process chain Pending efficiencies integration ahead resources. optimize encouraged the supply our poultry our both approvals, operation in announced We're international to synergies

year. volume flat in our which on well businesses operating very quarter, XX% was yet to return another operating in the noncore relatively Prepared when excluding Foods price sales, and to second average with several Moving and on In perform XX.X% the segments. up continued income Foods is a Prepared divestitures and last the record. income million of $XXX

volume innovations and share increase investments Our growth have net in spending resulted and gains. year-over-year in MAP

of over this are dollars volume at Our over impressive in the up foods, and categories An Jimmy XX with frozen grow last is all showing volume Core X.X% and growth weeks, example impressive rates X%. Dean to an X categories which year-over-year are breakfast up continues increases.

prices Prepared African as fever our concerns Foods pork quarters expect of on third to input We China. rise swine cost and outbreak increase in in the and beef the fourth

through is it to these plan will time. Our recover additional some pricing, costs but take

are be As we're supply we our result, for key this segment adjusting our divisions for annual outlook can a tight. our and is return value-added A advantage materials XX% of when that raw on and XX% customers supply to end-to-end between sales. supplies chain

we're launching capture space. and As be enter our we to this next alternative the positioned fiscal in are introducing the We'll full-scale initiative in this to growth and early previously announced, proteins well products year, we summer space.

that of Natural added the beef Antibiotics we'll The origin to using expect customers our technology and Ever Prairie last Open X.X% quarter understanding We brands grow strong, into year. we second back million on that choice cattle with to volume distribution Angus of to on certified rating new marketplace. us requirements specific X% beef is half such continues, what the and be trace continues to ranches the compared international to cattle and record growing Beef X.X% Open demand assure which hormones. announced recently from reach their have segment, to rebuilding segment's move well, X% sales our up see in individual the supplies for the we brand demand. aligns process typically be beef beef into and herd We Angus $XXX in Global of most was quickly second cattle of approximately to were will our categories, Prairie how of our allow high-quality volatile ample The premium and cattle performing sourced programs. having the our quality was of move develop availability with for raised margins quarter. is increased improved No year, which and a contributing no the of and DNA Average year products, deep The to fiscal strong indicating as Beef operating to will I'll a and animal beef. beef XXXX. for and improved improved genetics, price income where margin the to has

Turning to million up price of was $XXX the margin. was due an volume improved with Pork live down Operating parts. Average to X.X% availability income X% X.X%, the was while segment.

along outpaced swine of with increased capacity slaughter driving in fever African up pork. United value near-term News of China, the impact initially of the in and hog the costs, States the

headwinds benchmarks improving reasonable are a industry spread returns to USDA We the the achieving while ago. versus year despite our

members, segment's Our the operating ability might fiscal performance. predict year ASF and when for in record the to improved has execute large frontline currently difficult due business. exceed project margin is It to Pork is safety impact our high Pork to our of part team which both X%. well positively retention to We

benefit any will late likely occur believe we or XXXX in later. However, financial

with We income well be Chicken acquisition million XX% was news chicken. American attributable at agile last In $XXX business down considerable domestically. to AFS Volume the XX.X%, positioned primarily X.X% rendering and began for In added was was quarter, improve incremental volume year the Proteins as internationally relatively and segment, the are meet price up to and operating to pricing margin. drove and customer consumer a that of demand needs prices. average the second low

some big as improve market pack XXXX. performed talk solid and position well, to bird offsetting the contracts earlier in underperformance XXXX of businesses and about customers we small in and pricing to weaknesses. are tray a The We into

business grain Tyson the an a great margin addition products opportunities business have my Chicken for operating In robust expecting great segment the of initiatives The we're has brand, XXXX. the around X% to and are year results. the Chicken benefit to continued of prices, into and That several improving, concludes segment's underway we segments. pipeline our and of Chicken improvement iconic and moderating on strengthen the innovation. identified by commentary foundation, significantly is Led

take the Now financials. Stewart will through us

Stewart Glendinning

everyone. Noel, good Thanks, morning, and

quarter company parts sales Beef, in short for compared in by Operating $XXX to other. Prepared right segment changes challenging divestitures a what and to time $XXX was Second pricing second Keystone is and the it. $XX.XX XXXX. acquisition offset product compared we've was average income partially and and on was breakeven billion. accretion down basis. return owned expected down quarter growth the headwinds is quarter acquisitions X.X% the was Pork, affected continued QX by typically Foods Chicken of year. quarter. EPS sales Total X.X% were Revenues $X.XX as in in to cash our XX.X%, most The last income on affected our up in has It million and volume as down million, driven of X.X% mix up was performed at Volume price X%

an As during of the successfully secured of senior approximately acquisition years. funding permanent for a reminder, quarter issuance through second XX with our average maturity we notes the

and and quarter. typical $XX was million, to quarter flows that what tax two cash expected are payments capital were operating for payments due second our deferred we Our the which about hog to

we million second quarter, During repurchased X $XX million. the shares approximately for

We also with continue $XXX in efficiency than as returns toward directed expenditures projects investing capital. million expected capital cost and growth the of we greater

the the rate average billion cash QX. debt interest $XXX million. outstanding Net second was XX.X%. was million. shares of approximately was million, $XX quarter at expense QX for of liquidity Our EBITDA $X.X effective total end billion, Net was Including was in Weighted tax XXX debt-to-adjusted were net X.Xx. and $XXX

our remainder the of fiscal be capital debt. year, priority primary the will our For allocation

of this month at $X We in have $XXX due million end and coming August. the billion

those address new cash our align well the with timing or short-term maturities. flows to as of with existing as We liquidity the expect to needed as

for fiscal in We spending which of I'll a will year. XXXX include to transaction update not yet finally, $X.X the to billion at continue operations as $X.X outlook that higher rate addition, In to the we our And closed. deploy billion for to CapEx scale but Keystone $X.X BRF through than in the range XXXX, for billion growth spending back range has $X.X our yet depreciation. includes doesn't while the billion to plan organic capital

of about in expected for our per Keystone. We additional Liquidity breakeven year be XXXX. excluding $XXX a amortization the XX fiscal grow expense months $XX billion will approximate should when of accretive to expect with the to approximately for million. basis costs. the $XX Keystone $X above pretax on addition expected remain is to minimum XXXX integration is and fiscal and to cash basis and be on Keystone Net transaction target. a year million billion sales $XX for The approximately million interest

effective for $X.XX guidance rate Our financial is potential of included to be share. the to maintaining ASF to a uncertain and our to agility speaking, ASF per opportunities of timing. but the positive the ASF The our is that been tax impacts Tyson. $X.XX the and are Much XX.X% we're uncertainty is expect a year. not around And where earnings have in of due other the impact preparedness we strong affords of have. business financial we global us few that be Broadly in proactive as concerned, companies for position expected

we'll for to return additional Noel Noel? commentary. Now

Noel White

fluid America. pork product when A diversified protein Foods worldwide working we've unprecedented the more African Thank these even Pork, manage XXXX swine we're you, to BSE continuity business to back industry, Stewart. instance begin in potential concludes costs like and and The able of our of will by through circumstances. others the pressure no our material across similar in significant XX there Foods an more Prepared more Thinking Q&A. and and spreads put portfolio upside business, supply is believe as better our XXXX, the raw to This world seen been with consumption but while important event and remarks, maximize handle in even to broad lies is an important. becomes protein and decrease under perhaps Beef the increasing does. ahead. Chicken difficult model geographies agencies than to situation offering in in in could producers and businesses. time is North be PEBB the event prepared Tyson my company prepare what opportunities situation to fast-moving, positioned ASF I That ready global and power supply on years we're our business has government to patterns industry. In I've The that change unusual, fever production never to for

Operator

Instructions]. [Operator

question The first will Bienvenu Ben come Inc. we of have from Stephens

Benjamin Bienvenu

swine Noel, fever. wanted African follow on on your to up concluding that I comments you made

of the So But impact is the your update this you've gauge. with to given were -- respect tough not ASF, did which provide pretty you understandable guidance morning decided is timing comments to the constructive. is to

respect can to And of you us. on operationally to are love you with detailed each segments comments I'd to what and helpful So hear thoughts that strategically guys ASF, any be the major could position then for you provide make for yourselves the about that if more any doing event. would

Noel White

Foods XXX well vicinity million our have has do the our Beef That of matter marketplace. that impacts have died both of positioned that Pork don't as think a as XX in you a that business business, come Okay. XXXX. Ben, I in Chicken the significant it out metric supply, is uniquely to million that there's X%. million place our product of that this the how XXX global that's in not proteins, our some like all about correlates something Tyson XXXX And of and to a an total timing where protein tons incident in of impact. And from China of in area because hogs is there's business,

deal a that doing, to an I've we There's Ben, in So happen couple to event we're that. that X positioned well of reaction that that seen never all in proteins. it's things before, with are

to that reach United this sure the doesn't foremost, disease States. First want and we make

So and the it does with there we're hit disease in then of everything States. to the U.S. the States government United fact, ensure been and the activity react to has keep out if, industry that that doing United possible to the

I is it just X all you, business Pork our So opportunity, not but would tell for species. an

Benjamin Bienvenu

of to guidance And commentary. maintained my That's Obviously, range a with strong year, that half strong have Great. XX%. In get would to half to I that margins. in the helpful ballpark Prepared operating light of the end see the to seen of to business. your related respect in question we second year of first full you've bottom results the the But XX% range, of X% to margins. think is Foods we've the first

Foods of be reflect full you year So any the noted I'm Prepared as through year doesn't ASF, guidance commentary business would on that the yet the rest provide curious particularly pressure can we move given you put just on which helpful. profitability, the

Noel White

product pork Ben, Really, we but what prices ASF, move go timing. prices rapidly. have When U.S. to out reaction Yes. have. fairly product produced back comment for on come risen market that to prices large China, have I'll seen than prices to of hog are fact is product expected the scale to in my escalate on a will in original and start the faster

XXXX. fiscal a matter it's of might whether or into of take when So predicting QX year that our place, that's calendar QX,

at down XX% given, prices that through the pork So from begin an and anticipation XX% slightly is range it we've rising will that to QX is that QX. where we're and

Operator

Howard we Next, have Alexia of Bernstein.

Alexia Howard

plans the supply. to wondering, kinds you you So to my do something as make well, Costco that, beef first backward question is do about Angus make how the integration sure win Walmart had the even the integrate I'm about just doing backward Tyson chicken kinds as of we've moves? think this in And how continue for moves, announcement can to strategically, to those about retailers that? think start those And of tendency on retailers of

Noel White

continuing comment to strong with any by service. for Walmart It ours many and them has on a complex. And customer a extremely to great product is customer, extent I we been possible service greatest is but I hate of win years. segment very think specific that to the many,

been We will Walmart, business in they've is to any that the them years. and strong for extent we with way. partner with many great work our But a assisting can in

Alexia Howard

generation most to the you you're plant-based, something that -- a that retailers talked already from what's plant-based, scale of have getting as launch of burgers a assuming, quickly kind on an idea And be the about on have just how front? able you products? in, follow-up. you'll similar. The distribution feedback then of upcoming I guess, Do And or second do you an I'm

Noel White

basis larger The summer, enter yet the Alexia, a on fairly market this later on limited a product and fall. will much scale this

basis will product into this much and we So limited get in the larger be we then a basis summer introducing fairly a October once November. on and

Operator

The The we Jones Vertical of Group. question Heather next will from come have

Heather Jones

because to quick I have spread a had your guidance was And a So surprised to you Pork something margins you raise USDA mentioned date, your I there. about benchmarks contracting your also. see QX been little to question honestly improving business. on

Or of understand how hog your confidence? wondering, made in hog then your you prices your contracts? relative that the have improve help able Because raised for guidance running faster a reworked you than release you to can Just some your been performance and us you've comment about the but cutout, have you year.

you So help just could that? behind thought the understand process us

Noel White

turnover extremely mentioned, operate down. to continues business I Pork our as are that The Yes. Heather, numbers well,

safety Our greatly Productivity are numbers is much, improved. better. much

performing operationally, we're So strong. exceedingly

both seeing hog saw what beginning than they are markets, that less the We QX, We're public in the to now. the as However, of in of markets. risen effect as product information, like markets the according right well that substantially, have we that would margins QX.

we believe as much, move However, much and particularly through QX QX year, that in we margins QX do into become next of stronger. will

Stewart Glendinning

Yes. Heather, have the comment half year. We QX. a the One of it's as quick that's X% strong half in benefit better here. worth at in back noting is we came obviously, project the the the we what knowing year, came than had Stewart We of of first that, QX. in other

pressure the factors So confidence in despite full seeing that our year the that for QX. we're into

Heather Jones

my business. the on And Chicken Okay. is then follow-up

second I tweaked. time the guidance direction time opposite the the in is moved And it's second sort that has of Tyson's margins have think of that that second quarter this also So been industry. -- the Tyson's

help if 'XX going off-guard it. on that's course being how demand to going understand us had wondering is there outside buy late product and you So address to the us on done just into you help more reverse catch on going what you I XXXX. market? could Did and is and and what was understand Or to what's the

Noel White

into you market our business. tell QX addressed. one wasn't performance as market business that lesser would low Prices affected for QX the we've well moved that a there of through we to in QX. And issues that is came and the by it as, Chicken degree, the fact to anything couple strengthened it's was I primarily issues. have there as factors driven as that Yes. as process Heather, are often seemingly in the of is. I alluded through QX, specific a purely that But some segment specific being in the end -- and no, of

Stewart Glendinning

last just I'd in thing other our this year, a year, One versus number. sort all don't our But on of X you Yes. in grains. and we in a the had get our gain had quarter in hedging into of had normally mark-to-market -- percent those -- our saw delta and Heather, we loss a of between the QX throw impact there, last of year, We this mark-to-market. on couple

worth that's went you on noting So as the consider in quarter. what

Heather Jones

like it percent, the of couple or points in of is amount? percentage A the absolute on percent like basis margins XXX on dollar a marks, couple

Stewart Glendinning

On the margins. But it's meaningful.

Operator

Ben Next, Theurer Barclays. we of have

Benjamin Theurer

So quickly the regards segment. Howard's Chicken to following just in up question on

you've done clearly, the was Brazil Keystone Foods. very good pending acquisitions. I'd on timing those acquisition So say with

question. on of the an update will into things seeing further the how that this on at and customers that pork my little integrating this for evolve, a Foods, your terms So international or with growth once Brazil you're stability bit in on the Chicken obviously a you Keystone seeing switching little businesses of some bit what you looking you're then margin be in with and start Now of people likely light footprint, Chicken now be segment just from it chicken? segment elaborate could also in opportunities opportunities or you first and most getting the stage more expectations later just

Noel White

have. stable. extremely business Yes. been currently would other international domestic us. of plan. of as stable Ben, the The both that has the our have some Domestically, say, through very we on There exactly as business. the well it's It I complements nothing disruptive, that business is structure margin integration the parts gone is work well relatively it a for

Asia. Thailand international basis, in strong a solidifies China. as we the us have On the foothold other that in parts as position gives of well Southeast it It

So been to according no delivered and plan. far has surprises it's so

Benjamin Theurer

Okay. the It mean, a disruption because things. Beef. Perfect. on And in we of there's beginning cold year. little be would then kind short-term been and volatility just was cattle weather a of the pricing the of all follow-up bit too I had at clearly, those of

was quarter. the So still, the surprisingly it throughout margin strong

that done some you of of supply also at of And the And to anything very terms the you X% maintain the doing of supply? is case. particularly secure have you've the I securing that's so just fourth to costs? how on it's terms been whole is continue of what terms and of in quarter how assume lately, then would feel out? order for strong think here? contract margins business And quarter to a route, in in there So segments third in hedging look live that what Because going to done been Beef the relatively strong the the you going some But so do turn one if of particularly to be input in in you you do and level? terms the have

Noel White

long that recently. From is standpoint, Ben, and nature. Okay. supply supply most are unique we our in Many of have term done nothing a source there

normal have we informal. or contracts either So

side, evolved large fact as, some they the a or last the to where cattle over the business the unique is of a of there XX going cattle. for that characteristics we're greater knowledge come has from looking extent to that So years a know so, are in where course producer as the Beef the well of from

that they're a and that evolution the customer type number of for. we have that So looking we of with the agreements source been have to the aligns product cattle has

do So agreements. that, supply have long-term we to

any this us, and typically the QX I QX strong change thing and Beef look as that, would see with we our I for don't quarters are at same substantial So year. business. expect

as same well would as going the in XXXX both that of the it as quarter. XXXX, often there's the QX, So and QX. disruption. said, we regions it there's that. looks operate stronger supply as than we we But like point good volatile the QX QX, strong what this And been. has you horizon was If demand that in cattle anything, could at came into change through most for which weather into it's say outlook I would on as look be There QX, nothing

Operator

next And we from will of Suisse. the have question Crédit come Moskow Robert

Jacob Nivasch

This is Jake Nivasch on Rob. for

a Just questions. quick of couple

So I several you reduced the in exposure export chicken ago, guys market forward, demand your guys guess commodity related capitalize to years volatility. And going I have do think you to rising And differently order the reduce a export to to need then ASF? on to I operate follow-up.

Noel White

And think we that that's when specifically quarters have deboning exporting, leg we those about of are leg that that total largely correct, historically, I we chicken those of are talk today products amount you decreased value products. and many adding more been we chicken exports, the quarters. are to

in producing So them more exporting demand And domestic market. the it than to switch leg for plan done greater and no, back quarters value quarters to export. there leg has intentionally. in no is satisfying There's been producing

Jacob Nivasch

it. That's quick then And other one. Got one just helpful.

the And division raise are lines Foods others? or prices? quickly guess, raise faster how than any can price there channels So can specifically, product that Prepared I

Noel White

expected to input I prices, It's going are the whether somewhat across prices pork -- really be it's prices, all it's think increase. to board. beef

one don't in So prepared. of type product in terms think specific of

the States on global United in With increase basis. but not affect in proteins a only the it export demand, will all

are exports significantly. example, destinations, of So China. has With you'll what an to as to export as lean States an at see from countries have Australia. Prices what look historically importer shipping United that, increased of has up been gone you beef particularly information beef firm Australia

pork in all species. only global markets markets not the and only So it's affecting but not our markets

Operator

The next Goldman we Samuelson from Adam have Sachs. of question will come

Adam Samuelson

as of wanted the in I'm tempering I Chicken reduction first maybe the little that a Maybe give operational more Noel bit the -- segment. the can to the and pack just and you you quarter in more faced? on pressures the tray color facing pressures little margin alluding continue just understand a you're on to that presuming, performance there. in or just Stewart, you're the a bit on outlook and challenges and then the just little business market And market there color well the

Noel White

markets trending up, Well, the are Adam.

came low into QX, the end the as probably was of So we that market.

as January, then. that the February, So we was low. They've through came improved since

bit a of that's a tailwind. So

We're saw season. us, I year planned more We seeing of plan grilling what ago. beef lot year worst poultry improve So This the think demand than was there a for ago. year, seems is Adam. features there be behind to a

perspective, year ago. demand than a position a a very were to be seems in from So we different it

that poultry right some now. challenges would tell operate. that the we On in operational the that side, the I that's be to you happens business there's number just nothing and There is a always of profound couple facilities of with -- there are unique challenges of segment one

Adam Samuelson

Okay.

on expectations the expectations all? is first half a reflection tempering year So 'XX, for second performance? Or half be then, the of margins the margin to fiscal on the come in that at the clear of actual your just more down did

Noel White

No. It's really the first half.

Adam Samuelson

in -- you're and potential where integrated vertically segment And impact just helpful. then impact Chicken ASF in. the this is thinking That's about Okay. the the

think but naturally environment, you most would operate one also there's lot so to an the And inflationary leverage of in operating different a segments.

So well frame size market business, opportunity about that offsets different kind as the would what inflation just should be. and help the think in you prepared maybe the that cost-plus have -- the -- just us we in given how kind of of business the of Chicken segments where some contracts grain benefiting or about think poultry

Noel White

will the Adam, detriment going of short-term poultry. Yes. prepared it's to And basis. benefit be it all beef, species, to on and pork X a

will is costs be time, in increase those Now a in timing along, there issue. passed but

the and Chicken were that fact, we of not tempered what little we that the reason the only outlook reason on and Foods than but we Pork in So that balance Prepared are, earnings Beef, the through bullish more a is XXXX. XXXX into

Operator

Next, Cleveland Michael of Piken we Research. have

Michael Piken

couple Yes. Had of questions. a

is is could of The an you if And on update provide financial second chicken cost us the the savings. then question status new you us an the of status fitness first plant. on if update provide your the could one

if million know if year to it, in track on you're $XXX specifically not a Just I and just but still in put it's tracking still things right are savings.

Noel White

Yes. track. There's delayed. Tennessee. we as Michael, the both Construction being not on is are on proceeding budget. It's -- planned. in announced that plant There's

So that the are no out that just that's business of our And change there. financial part specifically. Michael, breaking fitness, today, not then we

tell for externally. do of don't model. that our is to it We you build into We you But fabric. internally. would that I about However, that yes, it's talk fair think part track your I

Stewart Glendinning

I'd of only out cost the is mentioned those, cost coming well earlier, Michael, on in as as so fronts. I the add, integrate we The think as number Noel coming a of on are the thing acquisitions, just all but synergies planned it front,

Operator

we next Goldman will question JPMorgan. of come from Ken The have

Kenneth Goldman

questions for me. Two

regarding we the guess, is as chicken to the know still gap is able spread you in at disease slow up air? Obviously, out I'm are I'm in China what extent hogs all; to to millions production is B, building whether of about, offset research of the First, what has down do the ASF, A, what telling industry? I of that some your been gone, we China hogs. know curious, and hundreds an maybe And but what curious

Noel White

my situation on exact be Ken, nobody China. the that that speculation would there's because part knows in

-- those from herd you value. range, a percent. I it's at to XX-plus read, all you quoted that's quite we think know, reports that being face to the XX% There's have that the of as accept anywhere

probably the many United basis, And nobody the extent an would I on poultry entire affected. are that's on that increasing hogs in the more say an production? equivalent hog but than annualized exactly States basis, possible. knows to how they So there's are production

However, breeding some China within as flocks. know, there's limitations on you been the

more that going easy. not is have that's the yellow It's saying as produce to that that we're bird. chicken not China the And the It's form we it's just a you bird So in here. white start raising factor chickens. of consumed predominant

we're of So what accustomed it's type to. than a different product

supply turn off comes the and into be So It it's not turn as though equilibrium. you will years multiple poultry. before pork can balance on back

Kenneth Goldman

second figured if anyone segment just you a talking delay, talking does, in I might hog I'm a as much the Pork, in are lag Prepared just But anyone of don't pricing there ever on might, higher segment? a up result I When as least is later to But then No. your That's your about though, catching appreciate you sure. Because be of I understand know, at it And the bit pricing about Pork little my the wanted timing clarification. Foods and hasn't pricing side. Tyson. Prepared I helpful. costs, candor. a in Foods it's question think I are as hard but been well on pork historically, the inevitable prices. hog the do

to wanted of a a little of I were So what sense forecasting there. get you bit

Noel White

in It prepared some as I if prices business be as of product as specifically of Yes. even well didn't. ASF prices both became market Pork each. were And be business. a our futures significant would move so the made up It just would gains higher, our little the well business, result, went as though Pork news as futures more and a hog widespread, to

there particular time now. markets vice is then can live prices be can lag -- rise market I right it. did that So place a the or understand so versa. product this case, a think the as taking of is leave there the the side, get clearly In that of on lag input live product that markets there's product you ahead periods market, price in market recovery, the And rapidly capturing as right the on

priced pretty should QX, be market. So it by the the end of into QX, well

the On change lower. slightly prepared it side, might

Stewart Glendinning

noting has It's to go to with the that team market out side, Yes. some maybe price increases. prepared already the worth the on started

So is already prepared team taking action. well that and

Operator

Mizuho. of Scott Jeremy is Next

Jeremy Scott

Chicken back the on Just margin.

have is key model been I or the acquisition limits with wrestling weighted pricing. through Keystone ability think to your the duration of probably that pass before chicken even since how contracts the thing customer-centric or I average your your

through tomorrow, words, if price? your So rise chicken extent to your roll of to And I mix guess, XX% commodity in by were would what to long decree, prices would how model? business that your realization that other inhibit say, by take government

Noel White

answer have exact many, because there's question Jeremy, pricing way types not models. an that of many to we different

that many immediate sell have pass-through. have that So models, have but it's models, basis, model have a We we we some different a we though fixed-price allows that as priceless on do we models. spot not

or be not though X is to months way it's as the lag So we months. and sell XX going one

in take been we I more with the so a that. customers -- models many on It there's we don't have. of volatility that's through. types answer So will have But you of pass players give to commodity-oriented specific the earnings have different Jeremy. That various can't our to to provide time that done intentionally, pricing stability set up

model earnings in reach the will high reach our not stable set. will looking commodity way nor a market that for the we and pricing we We're prices So more when lows. has been highs the the go stream, that's

Stewart Glendinning

of we that you where would say I one whilst forecast best, quarter, they able the the look why it's just in going. sales have for on a of pretty where good. Chicken, terms the return were it's really why of be you on in benefit think see giving it's detailed worth saw all -- internally in things one noting obviously to the and prepare businesses, models we detailed we you of And the that also reflect other And financial for up. some it's I reasons of reasons why to the heads weakness are

Jeremy Scott

right. All

how can will if your yield willing it I Pork -- that Just from plants don't difficult to side, a suppliers be with would your work product to ractopamine were come of pork from to able you your export on supply? describe to and to there's maybe your that. -- China that would impact your to the you how it's much remove quality And how think I perspective? some Would hog think know to plants be

Noel White

would with groups an do well The for expand with that us our offering that to producers answer, of make today, working worked domestic program. Jeremy. And market both be yes. for it's international have Definitely, the as and product do we can work use. into we Yes. We ractopamine-free produce as We and supply. do that. We

would the So answer yes. be

demand. large-scale on basis the capability have those We meet a to international

I tell service. and to domestic plan continue we with years we've balance the customer that However, to you, for that will many serviced would base

So We well. not past structure will a opportunistic. view And this don't. though as in only we continue the some as as service markets We companies view we the customers mobile, to long-term domestic might this but as our our international have event. business to service

Jeremy Scott

Got it.

Can in from you the the Okay. to grand subpoena looks a like just Q, extent discovery update seems, jury issued ask, can, can you has case? DOJ give action I your class any the disclosure it that on It on document. the

So years. that this there civil has government's Was involvement recently? matter a been anything three here for precipitated the

Noel White

lawsuits. say, disappointed can is No. on pending going comments far. to this that make went I any we're I'm All that But not any it Jeremy,

Operator

Next, we have Michael Piper Jaffray. Lavery of

Michael Lavery

you on the that think have visibility color, cautious in ASF without outlook, context Prepared more way but characterize of guidance that right costs trying least when you Foods, you're to at the in? account give trying said a the a Could increases it the in as little some that to you benefits? your just Is you're you're capture little view pricing into factoring right cost about working your that -- be for then would be to I to to also not think on more

Noel White

accurate, not prices right, had it we because Prepared reaction have have livestock would seen that raw an that because material Foods, impact on in seen matter but prices. higher. I the be timing, Michael, moved of we've think a corresponding has the is It

will we XXXX. that be a beef, it's poultry. if do place matter of if moves So that in expansion XXXX an pork there in or will and that It's into fiscal take think

Michael Lavery

talk very a back about But been there problem. And any of me that Is seem the it's be hasn't that that. Okay. reason a if And comments have think seemed lot that? here, how just be clear believe came -- quantify to Do has major U.S. unlikely. would That's to helpful. I around obviously, about your Or fair risk you characterization? to to you a very it that the would

Noel White

course that, a African rapidly a in but number years, risk in other I years, XX as -- the take we've months of of globally real XX fever think last that swine been spread there's But well has not parts the throughout been Europe. for of of aware as place. years. has China circumstances it could XX Asia only

business. the does in within the from with that any other the a it or place our in and as a doesn't well come associations, there regionalization prepared be the I real. in United come do the on a need country quickly So continue it matter or I threat And that. trade -- the here possibility well trade in We trade it the and to is partners if that the need could as States, and talking that have United pork Europe in and take for government distinct a the from standpoint high with regionalized do AI And States be that we When and in mobilized. standpoint. to that industry need is use think those few country, meetings that it have to we think we as as about be government to prepared lesson to basis. case with We should industry had a take path fact regulatory this it's a ago, as years

has days effort that a been for so. XX or the coordinated there So is last underway

Operator

next, we Buckingham Larson Research of And Eric Group. have

Eric Larson

what impact last be or that pretty it third costs. tailwind forward and becoming sharply. I purchase quarter. not market They whatever think points have spot start fourth yet coming of your would just chicken not to XXX going the would positive anniversary-ing in June grain up in start for practices the basis that mean started want sector are your on they now quarter, year I prices a high some forward, But could margins down to we're on we grain, when -- where look for second follow a been. I the but But grain going I you on more structure hedging down. as it's the quarter, maybe look particularly these grain in how stay mean practices of forward meal, of QX? the maybe this your assumes event. is should input opposed maybe at happened positive the cost XXXX to a your

Stewart Glendinning

so on and QX, a we'll about talk of comments future. Yes. couple the Look, then

this in QX you timing gain So last quarter had same than pure the looking just of in of were course, QX, then, back slightly year. impact prices at the grain higher And the will of first themselves. the into future, the those play course, last on a bit loss -- little year. the prices and this depend quarter year grain this out quarter How

for to think business, around your assumption I the then of the expected that the gave and hedging, price. answer point in commensurate prices getting to return grains which the the around your on we're the expect the both we're price in When we actually, pay question our sales marketplace. end, that at lies we is key the assumptions you making

money. to there's cost just say, sort that price sort be of well, a the that price no we'll into down will answer of lot So therefore, and woven more easy of We've of corn of forecast we've be and corn making given all you.

Eric Larson

Okay.

not historical more lows. the term, into there's is point, price it risks, cetera, a more coming if than still near corn meal, the at some take today, which would But globally. maybe lot So upside I et at of just translates soybeans of got you and supply downside. suspect, really in we're maybe We

the So an side short where more the environment we be pretty like It -- the you'd know seems get noncommercial short. is -- is aggressive? market as short on this both very would commercial well

wouldn't that pass it to seem be pricing on. then risk I'll might And it that there more upside So outlook?

Stewart Glendinning

an potentially, that that our to out the real to It account that thing designed and in any it's of our our I use into grains way think the grains not about in in business. the is take. take is is have Look, Yes. volatility take input we pricing, we hedging speculative. We

change that we're just our a any delay slow don't is impact, time, business. which will will entering a think that Otherwise, market a I benefits. game, dramatic trading not see in in But over market so hedging rising falling sort the will will and action. you our And of sort you of see in

Operator

And next, Zaslow of Montreal. we of have Bank Ken

Kenneth Zaslow

Just I'm questions, a sorry. couple

the not there would to business structural Chicken with back XXXX get issues your levels be to any if are you market that able First, permitted?

Noel White

a We that issues. not performing is Ken. structural after a levels are structural few are want, opportunities. knows No basis. where have not, opportunities team There but that would those the we they do No. nothing and are, at The on specific plants

Kenneth Zaslow

excluding Okay. XXXX. didn't you And to did to doing. not expect said comment, would a said have still obviously, in grow you given the And you say I fair flu quarter you think that that African we last And expect then. number, flu it you'd you're grow profit Is swine African then the fever? exactly back that but all things swine

Noel White

as least growth Yes. XXXX has It be slightly growing, would stable, at think the African herd would. if look leveled swine excluding the positive outlook Even I is into we still Ken, One, for cattle fever, several but off. the not reasons.

However, global demand continues to be extraordinarily strong.

strong So exports demand have very been has been well. as good. Domestic

plants XXXX, in we We -- there Pork. line. came that to over came new several was through as Moving

production did. increased hog greater than what capacity at rate So a

We in growth are hog seeing production.

XXXX So think change in that will closer back come I balance. in that that, we delta saw

up that. strong about positive mentioned, think And at I looks we year, the the for as particularly on a I stronger And was side. has X%. not possibility to a move the than of we us. end that's year something started we're But Pork going being XXXX, poultry, it for the on -- So quarter as into like QX it

exceedingly perform to several had all businesses to in So quarters, record three addition our which continues prepared, has well.

our our of good So at no, being all business point, this component business. International the look last parts

did we cost at historically, International money. money. that make legacy It segment breakeven -- was that this us strengthen. are business to not better continues or It's point. at a Our And

is well. in So our change as business a that

Kenneth Zaslow

I very Or a small you but of Just on I fourth fair? know that be part, Is questions. run it's have -- will assessment? by International, that a quarter. International, rate at profit But lot a a Is of the yes. a fair

Noel White

That Keystone. be legacy on that we our would business Yes. a fair, to excluding Yes, money. that be rate run Ken. that's And make is would

Kenneth Zaslow

very last spending. my promotional is Okay. And question

fever the the you current sort impact? leave some And that change any I'll can it that Chicken levels fair towards of the a chicken. give anecdotes? think you Is seen absent that improved And assessment? You swine there. have African that reasons of one that industry Is from in margins have

Noel White

Well, it's that of alternative the because protein. proteins than other think I chicken.

So a prices they as than an example, ago. significantly beef year were higher are what

promote the an I say, did than they've simply So think as of year $X.XX. more price chosen is chicken alternative, because this ago beef something, year beef. to what cut-out let's the a they I of mean,

So it's strong. extraordinarily

is feature, now. at a they great what right they look to chicken as value So want

MAP more it. going I think than so that's against reason So the that's the primary spend

Operator

session. we any ahead like turn At the Officer, and Noel call back time, I will Chief Mr. to and President conclude conference remarks. now for White, this our to closing Sir? question-and-answer would Executive over go

Noel White

today you joining you Tyson for interest Thank thank us in and for your Foods.

the BMO at week Investor at XX. Day, Thanks, Conference be You'll us hearing everyone. from next again our June and

Operator

we call you, and conference the Thank you management your And and team care, thank everyone. Take sir, you for concluded. again, disconnect a has of rest time At also the Again, lines. the day. now have today. this time, may wonderful your

Tyson Foods (TSN) 6 May 192019 Q2 Earnings call transcript