Tyson Foods Financial Recovery: Turning the Tide in 2024

Executives at Tyson Foods Inc. of Springdale are feeling optimistic after its chicken segment has rallied from a poor 2023. (Provided)

The financial recovery of Tyson Foods seems well on its way.

The food-producing company in Springdale had a well-documented and forgettable year in 2023, reporting an income loss of $648 million. Tyson Foods reported three negative quarters to end fiscal 2023, the company’s first quarterly losses since 2009.

The company’s chicken segment, the historic backbone of its operations, had a disastrous year, reporting negative operating income of $770 million.

In addition, Tyson announced multiple plant closures during 2023, and even a couple in early 2024, closures that resulted in thousands of lost jobs. It also announced it would not renew contracts with dozens of its chicken farmers in northwest Arkansas.

But the bad news for Tyson Foods appears to be in the rear-view mirror. The company started fiscal 2024 with two steady quarters, generating momentum and company optimism.

Tyson Foods is scheduled to announce its third-quarter financials for fiscal 2024 in August. The company declined to comment for this article; a spokesperson said Tyson Foods was in a quiet period because of the pending quarterly report.

Tyson Foods Recent Financial Results

“One of the comments I make is ‘What a difference a year makes,’” Tyson Foods CEO Donnie King said at an investor conference in May. “If I think about at least the first half of this year, we are fundamentally a stronger company. And fundamentally is talking about … controlling the controllables [and] operational excellence.”

During the investor conference, then-Chief Financial Officer John Randal Tyson spoke of the company’s “headroom” for further improvement. He said Tyson Foods projected that its strategic moves of 2023 would save more than $200 million in operations year over year.

“I think we’ve realized that today,” Tyson said. “Safe to say, we feel there is headroom to continue improving our operations.

“All in all, we’re feeling optimistic about the chicken business.”

John Randal Tyson, son of company Chairman John Tyson, was suspended by Tyson Foods in June after he was arrested by University of Arkansas police and charged with driving while intoxicated, his second alcohol-related arrest since November 2022.

Back to Basics

When King and John Randal Tyson spoke at the BMO Global Farm to Market Conference in May in New York City, Tyson Foods had just released its second-quarter financials for fiscal 2024.

The company reported revenue of $13.07 billion and income of $145 million; revenue was down from $13.13 billion in 2023 but income was a significant improvement from a loss of $97 million a year prior.

The chicken segment also bounced back with a reported operating income of $158 million, up from a negative $258 million.

That revenue was down wasn’t unexpected because Tyson Foods’ recovery plan involved a focus on efficiency. The streamlining of the chicken production network was a prime example as Tyson Foods closed old or inefficient plants.

“We have done things such as make pretty strategic network moves across our organization,” King said at the BMO conference. “We’ve closed six poultry plants, two case-ready beef plants, and we announced the closure of one of our more inefficient pork plants. I would characterize it as back to the basics.”

Andrew Strelzik, senior analyst with BMO, hosted King and Tyson at the conference. He told Arkansas Business in an email that Tyson Foods’ strategic moves, coupled with a stronger poultry market, have righted the ship.

“Most notably among the internal actions has been the benefits from closing older, less competitive chicken plants and transitioning production to its remaining plant footprint, which drove cost efficiencies and higher plant utilization rates that are benefiting profitability,” Strelzik said. “Chicken industry fundamentals also have strengthened over the last several quarters, given limited supply growth, stronger demand and lower feed costs.”

The successful chicken segment offset a tougher first half-year for beef, which reported a loss in operating income. King said a “topline” appraisal of the company’s segments — beef, chicken, pork, prepared foods and international — was positive.

“They are all doing better than they did a year ago,” King said. “I’m very proud of the execution of our team. I would also hurry on to tell you that the mindset is continuous improvement, and we are certainly engaged in that.”

‘Execution and Action’

King said two-thirds of the company’s turnaround in the chicken segment was because of organization changes, while one-third was because of improving market conditions, such as the stabilization of the price of chicken feed. In January 2023, King replaced poultry head David Bray with Wes Morris after he felt poor planning led to some of Tyson Foods’ woes.

“I am most excited about the fact that [the chicken rebound] is driven by execution and action,” King said.

Another change the company made that is paying off was switching from not using antibiotics of any kind in chicken production to not using antibiotics that are important to human medicine.

The chicken industry has struggled in recent years with the hatchability and survivability of its birds. King said Tyson Foods is managing production better now to properly balance supply and demand.

“We have had issues with our genetics and with our performance in live [operations],” King said. “We made the switch and have seen a number of benefits in that. Our live performance has really come a long way.

“Hatch and livability are better than industry averages. We have not been able to say that in a long time.”

Morris said the changes made across the board in the chicken segment have aligned the company with its supply-and-demand balance. High demand led to increased production — and higher overhead and labor costs — but when the demand declined, an oversupply of chicken proved costly.

Tyson Foods, at the same time, had been struggling with hatchability. Poor survival rates led to Tyson buying more chickens on the open market, a costly process.

“We’ve talked about the live [operations] being better; plant performance and network optimization is right on target; capacity utilization continues to improve sequentially,” Morris said in a conference call in May. “We’ve improved our order fill rate while actually lowering our working capital over $400 million, driven almost exclusively by inventory.”

King said the company still has work to do but is on the right track. “It is very simple in the approach we have in chicken, and simple works very well for us,” King said.