NEW YORK — Tyson Foods Inc. appears to be in an enviable position as management sees global demand for animal protein outpacing the company’s processing capacity and is working to catch up.
“It’s a great position where our demand was very strong, and we didn’t have the adequate capacity to produce and serve the customers we wanted and needed,” said Donnie D. King, president and CEO of management, during a May 18 presentation at BMO Capital Markets’ Global Farm to Market Conference. “And that was in our poultry business, our prepared foods business, and then our ready-to-eat beef and pork businesses as well.”
The company has pledged to invest $1.8 billion and open 12 plants over the next two years, which will increase capacity by about 1.3 billion pounds. Seven fully cooked processing facilities will open overseas and increase capacity by 30%, while two beef and pork plants will be added in the United States, increasing capacity by 40%. Two other value-added chicken plants will also open in the United States.
“We decided we were going to take the lead and stay ahead,” King said. “I think it’s the kind of ‘not just make it work, but make it last’ kind of conversation that is about getting ahead and staying ahead. Our growth is good. We have said publicly, privately (to) anyone (who will) listen that we plan to expand and we plan to outpace the market in terms of growth.
King added that a factory in the Netherlands that is now online is sold out.
“We could fill another one (of) the same size if we had it,” he said. “So we’re trying to make up for that.”
Stewert F. Glendinning, chief financial officer, added that the expected return on invested capital should be “in double digits”.
King noted that Tyson Foods is already working on “plans and designs and land purchases for the next round of fully-fired plants.”
It is in the processing of value-added products that the company is experiencing the strongest growth. Further future growth could come from manufacturing value-added foodservice products that reduce operator labor requirements.
“Having ready-to-eat type products, I think, is a plus for this owner-operator at the store level,” King said.
He added that the current market situation is “an unusual inflationary environment” and that Tyson Foods is experiencing inflation of 20% to 30% on virtually all inputs.
In the past, the company’s algorithmic models would have indicated, with the pricing level that was retained, that demand would be more elastic, King said.
“It’s been more inelastic than we would have predicted, which is a good thing,” he said. “We are still seeing very strong demand in retail. We have a recovery environment that is recovering, (but) it’s a little patchy.
Earlier in May, Tyson Foods released its second quarter results for fiscal year 2022. For the first six months of fiscal year 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, in the same period a year earlier.
First-half sales jumped to $26.1 billion from $21.8 billion a year earlier.
“Based on the strong first-half results, we are raising our total sales guidance to a range of $52 billion to $54 billion,” Glendinning said on a May 9 conference call to discuss the results. “To support our sales growth, we now expect volume growth of 1% to 2% year-over-year as we strive to optimize our existing footprint and operate our factories at full capacity. ability.”