Tyson Foods saw its third-quarter net income fall because of COVID-19 as the company reported $340 million in related costs tied to the coronavirus. But Tyson still beat analysts’ expectations for the quarter.
Tyson announced its third-quarter financial report on Monday, highlighting one of the first major financial reports from the meatpacking industry during the April-to-June time period when coronavirus disruptions heavily affected the industry.
Despite packing plants shutting down and the food service industry also largely closed, Tyson reported $10.02 billion in sales, down just about 7.9% from the same quarter in 2019.
The company reported net income of $527 million for the quarter, or $1.44 a share, down from $676 million for the same quarter in 2019, or $1.84 per share.
Tyson reported $340 million in direct expenses related to COVID-19. Those costs included worker costs due to health as well as production facility downtime. Some of those costs included buying personal protection equipment for workers, as well as facility sanitation and testing for COVID-19.
The company also paid $114 million in bonuses to workers, which were partially offset by credits in the CARES Act. Some costs were also tied to premiums for cattle producers, the company cited.
Worker absenteeism has declined at Tyson plants, and production has rebounded, “nearly back to normal,” said Noel White, Tyson’s CEO. But White added the livestock industry still has significant backlogs of animals. The company estimated roughly 1 million cattle were backlogged when beef plants closed, and the industry estimate for the backlog of hogs is closer to 3 million head.
Tyson also announced the company will promote President Dean Banks to chief executive office in October, replacing White. White, who took over the position in 2018, will remain with the company as executive vice chairman of the board of directors. Banks came to Tyson with a technology background in 2017 and was named Tyson’s president last December.
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As expected over the last quarter, Tyson executives reported retail sales and values went up for the company as food service sales declined, affecting sales for products such as chicken. The company was faced with large volumes of livestock but production shortfalls as workers became ill, but also high demand at grocery stories.
Tyson executives said they do not expect a full recovery in beef, pork or poultry until people are out eating in restaurants again nationally.
Tyson has 140 food-processing facilities in the U.S., and some are still operating below capacity. The Food and Environment Reporting Network database of food-processing infections shows Tyson has had more than 10,000 workers infected by the virus.
White also noted Tyson facilities have not been hit as hard in other countries as in the U.S. “The impact of COVID-19 in other countries where we operate has been less than expected,” White said.
Tyson also announced last week the company would expand COVID-19 testing at plants, including weekly testing for front-line workers. The company will also conduct daily screening at plants. Tyson also announced the hiring of a chief medical officer and 200 nurses to work at facilities.
“I would say we’re as prepared as we can be,” Banks said. “We are still investing in research, making sure we very much understand this virus. We’re working closely with communities and local health officials to make sure we’ve got every possible precaution in place.”
Asked about international demand and the impacts of African swine fever in China, White said ASF continues to spread but at a lower rate than a year ago. Demand, though, continues to grow and will continue to outpace the production growth.
“There continues to be strong demand from basically all parts of the world, including China. The fundamentals have not changed,” White said.
In its filing with the Securities and Exchange Committee, Tyson also reported that the company received a request for information on May 22 from the U.S. Department of Justice’s Antitrust Division related to fed cattle and beef packing markets. Tyson said it is cooperating with the DOJ.
The department has been investigating anticompetitive behavior in the cattle industry as cattle prices fell while boxed beef hit record highs.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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