Tyson Foods continuing to play catchup with capacity expansion

186

Tyson Foods, Inc. appears to be in an enviable position — management sees global animal protein demand outstripping the company’s processing capacity and they are working to catchup.

“It’s a great position where our demand was very strong, and we didn’t have the adequate capacity to produce and service the customers that we wanted and needed to,” said Donnie D. King, president and chief executive officer, during a May 18 presentation at the BMO Capital Markets Global Farm to Market Conference. “And that was across our poultry business, our prepared foods business and then our case-ready beef and pork businesses as well.”

The company has committed to investing $1.8 billion and opening 12 plants over the next two years that will increase capacity by approximately 1.3 billion lbs. Seven fully-cook facilities will open overseas and expand capacity by 30% while two beef and pork plants are being added in the United States that will grow capacity by 40%. Two additional value-added chicken plants also will open in the United States.

“We made our minds up that we’re going to get out front and stay ahead,” Mr. King said. “I think that’s the ‘not only making it work but make it last’ kind of conversation that is getting ahead and staying ahead. Our growth is good. We’ve said publicly, privately (to) anyone (who will) listen that we plan to grow, and we plan to outpace the market in growth.”

Mr. King added that a plant in The Netherlands that is coming online now is sold out.

“We could fill another one same size if we had it,” he said. “So, we’re trying to catch up with that.”

Stewert F. Glendinning, chief financial officer, add that the expected return on the invested capital is expected to be “double digits.”

Mr. King noted that Tyson Foods already is working on “blueprints and drawings and the land purchases for the next series of fully-cooked plants.”

The processing of value-added products is where the company is seeing the most growth. Additional future growth may come from the manufacturing of value-added products for foodservice that reduce the labor needs of operators.

“Having ready-to-eat type products, I think, is an advantage for that owner operator at a store level,” Mr. King said.

He added that the current market situation is “an unusual inflationary environment” and Tyson Foods is seeing inflation from 20% to 30% across virtually every input.

In the past, the company’s algorithmic models would have indicated, with the level of pricing that has been taken, that demand would be more elastic, Mr. King said.

“It’s been more inelastic than what we would have predicted, which is a good thing,” he said. “We’re still seeing very strong demand at retail. We got a recovering foodservice environment, (but) it’s a bit uneven.”

Earlier in May, Tyson Foods released its second-quarter results for fiscal 2022. For the first six months of fiscal 2022, ended April 2, Tyson Foods’ net income was $2 billion, or $5.35 per share, and up from $943 million, or $2.58 per share, during the same period of the previous year.

First-half sales surged to $26.1 billion from $21.8 billion the year before.

“Based on the strong first-half results, we’re raising our total company sales guidance to a range of $52 billion to $54 billion,” Mr. Glendinning said during a May 9 conference call to discuss the results. “In support of our sales growth, we now expect 1% to 2% volume growth on a year-over-year basis as we work to optimize our existing footprint and run our plants full.”

Source: Food Business News