The paragraph introduces the Tyson Foods second quarter 2024 earnings conference call. Participants will be in a listen-only mode and can ask questions after the presentation. The conference is being recorded and the call will be led by Tyson's President and CEO and CFO. Other executives will also be joining the call. The company will make forward-looking statements regarding their expectations for the future, which are subject to risks and uncertainties.

The speaker, Donnie King, thanks the team members for their hard work and discusses the company's improved performance in the second quarter. He also mentions the company's strong performance in the first half of the fiscal year, with increased adjusted EPS, operating income, operating cash flow, and decreased capex. The company is also expanding its offerings in seasoned and marinated meats to reduce exposure to commodity markets.

Tyson Foods is focused on meeting consumers' needs by offering convenient and high-quality food options at home. They have a strong portfolio of protein brands, which has helped them maintain a healthy market share despite a challenging environment. They continue to support their brands through efficient marketing, innovation, and partnerships with customers. In the past year, they have gained 400 basis points of dollar share in their core business lines and have seen growth in their bacon brands, reaching a record high in Q2.

The speaker is optimistic about the company's opportunities in the bacon market and expects their share to continue improving. They emphasize the value proposition of their brands and their potential for household penetration. In terms of performance, the company's prepared foods segment is facing challenges due to consumer focus on value, but they are gaining dollar share in bacon and seeing growth in non-retail channels. In the chicken segment, the company has seen significant improvement in profitability due to better market conditions and their focus on operational efficiencies. In beef, limited cattle supplies have led to spread compression, but overall results for the first half of the fiscal year have met expectations.

Tyson Foods is focused on managing their resources and improving profitability in the face of a tight cattle supply. They have made the decision to close a pork facility in order to optimize their footprint and better serve customers. The company has also recently rebranded with a new logo that represents their team's purpose of feeding the world like family. Their strategy for long term value includes fortifying their core proteins, building their brands through innovation, and growing globally, particularly in Asia.

The company has identified strategic pillars of operational excellence, customer and consumer obsession, and data and digital to support their growth. They are focusing on controlling controllables, optimizing their footprint and network, and operational excellence. They have seen tangible progress in these areas and their sales and adjusted operating income have improved in the second quarter.

In the second quarter, the company's operational performance and higher AOI led to a 66% increase in adjusted EPS. Prepared foods revenue was slightly down, but volume growth from an acquisition helped offset this. Chicken sales declined due to lower volume, but AOI increased significantly thanks to strategic actions and operational improvements. The beef segment saw an increase in both volume and pricing, but AOI decreased due to compressed spreads.

In the second quarter, the company saw a decrease in operational efficiencies offset by growth in revenue and improved pricing in the pork segment. There was also progress in the international business towards stronger profitability. The company remains disciplined in capital allocation and has strong operating cash flow and free cash flow. Their balance sheet management approach remains the same, focused on building financial strength, investing in the business, and returning cash to shareholders while maintaining an investment-grade credit rating.

In the second quarter, the company's net leverage decreased to 3.6 times, and they ended the quarter with $4.4 billion of liquidity. They successfully raised $1.5 billion in new senior notes and plan to use the remaining proceeds to retire outstanding notes. The company remains committed to a disciplined capital allocation strategy and has updated their outlook for fiscal 2024, with overall sales expected to be flat but AOI guidance raised due to strong performance in chicken. The AOI outlook for prepared foods is tightened, reflecting seasonality, while uncertainties in the cattle cycle lead to a negative AOI outlook for beef. The company has seen solid performance in pork and has raised their guidance for this segment.

The company is uncertain about the rest of the year due to factors such as consumer behavior and commodity costs. They anticipate Q3 to be weaker than Q4 and are maintaining tight controls on spending. They are confident in their ability to fund their dividend through free cash flow. The CEO thanks the team for their hard work and believes they have a solid strategy in place. The call is now open for Q&A.

Donnie King is pleased with the results of the business in Q2, but is not completely satisfied. The company's diverse portfolio is helping to offset challenges in the beef market. They are executing their priorities for fiscal '24 and have seen improvements in profitability, cash flow, and capex. They have raised their guidance but acknowledge uncertainties and the need for continued work.

The speaker is responding to a question about the company's performance and strategy. They mention that their results were as expected and their brands are strong, but inflation is impacting their customers. They plan to offer products at different price points to meet consumer needs. The speaker then passes the question to Melanie, who provides more details about the company's projections for the third quarter and the rest of the year, specifically in regards to prepared foods. She mentions that profit delivery is typically lower in the second half of the year and expects this year to be the same. She also discusses the split between the third and fourth quarters and the impact of commodity costs. The speaker then asks for further clarification on the company's view of the consumer, particularly in the food service industry, and Melanie responds.

The speaker discusses the impact of inflation and low savings rates on the consumer, particularly in lower income households. They highlight the advantage of the company's protein categories and diversified portfolio in meeting consumer needs across various value tiers in both retail and food service. The speaker also mentions a shift from fine dining to quick service restaurants and an increase in meals consumed at home. They then address a question about chicken production volume.

Donnie King is responding to a question about how the company has managed to maintain high profits despite lower sales. He explains that the chicken supply is expected to increase by 1% in 2024, but there are issues with liveability and hatchability that will likely result in lower supply than projected. He also mentions that genetic selection has been focused on yield and feed conversion, and that the use of no antibiotics has had an impact on the supply chain.

The speaker discusses various diseases affecting poultry and predicts that the supply will be less than 1%. Another speaker talks about the company's supply and demand planning, which is in a good position for the rest of the year. The company's volume and pricing are solid, but there is a challenging comparison period. The speaker also mentions grain-based models that affect pricing. In response to a question about beef, the speaker discusses heifer retention and the outlook for the future.

The speaker discusses the lack of evidence for significant heifer retention and potential factors that could affect it, such as weather patterns and cow slaughter rates. They also mention an increase in guidance for the chicken side and attribute it to factors such as favorable feed prices, improved pricing, and increased productivity.

The speaker discusses the success of the chicken team in focusing on fundamentals, resulting in a $325 million improvement. The team has made tough decisions and improved live operational performance and network optimization. They have also improved order fill rate and lowered working capital. The speaker mentions a new plant in Danville and strong leadership and growth plans. The speaker also mentions that Q1 and Q3 are typically strong quarters and that the industry is paying attention to consumer behavior and growing conditions.

The company plans to invest in their value-added business in the second half of the year, with a focus on live performance, operational execution, and supply and demand. The pork industry is seeing improved profitability due to lower feed costs, genetic improvements, and better herd health, but the company remains focused on controllables such as operational excellence and mix management.

The company is focused on controlling the controllables and improving their operations to drive cash flow and support the dividend. They are prioritizing optimizing their network, restoring chicken performance, and strengthening their prepared foods business. The company is also managing the uncertainties in the beef and pork industries and acknowledges the potential impact of consumer behavior on their performance.

The speaker discusses the current state of key commodity markets, mentioning the cattle cycle and potential weaknesses in pork and prepared foods in the third quarter. They express optimism about their chicken business and the potential for operational improvement in the future. The company's guidance reflects a balanced outlook, with potential for growth in fiscal year 2024 and beyond. They do not provide specific details on the operational performance opportunity, but indicate that it is a focus for the company.

The speaker is responding to a question about the potential impact of heifer retention on the beef industry. They mention the uncertainty surrounding whether heifer retention has begun and the potential for a drop in volume and throughput. However, they also mention that they have a strategy in place to mitigate the effects of a potential herd rebuild cycle. They are monitoring factors such as weight per carcass and are confident in their strategy regardless of the outcomes.

The company is pleased with its progress in controlling operational excellence and efficiency, managing its mix, and delivering to customers. They see potential for further improvements as they navigate through different outcomes in the market. In regards to chicken, the decline in volume in Q2 was a result of missing the demand signal in the previous year and issues with profitable sales. The company has addressed these issues and is moving forward.

The company's chicken business is doing well and they are expecting strong growth in the second half. Demand for beef has been challenged, possibly due to the HVAI, but pork and chicken have seen strong demand from retail promotional activity. The company has narrowed their guidance for beef, but there has been no significant deterioration in margins compared to Q2.

During a conference call, Brady Stewart and Heather Jones discussed the beef promotion and stated that they will continue to monitor it in the third quarter. Donnie King also mentioned that there is still a lot of work to be done in the chicken business, but there have been improvements. Wes Morris added that there are more tailwinds than headwinds, but there are still uncertainties in the grain market, chicken supply, and consumer mindset. They also have investments planned for the value-added business in the second half of the year. Additionally, in past years, the company has provided information on their normalized earnings power and segmented earnings.

The speaker is responding to a question about the company's earnings power and clarifies that they are not making any adjustments to their long-term outlook at the moment. However, they plan to review and potentially provide more information on this in the future. The speaker also highlights the positive performance and potential tailwinds in the chicken and prepared segment, and mentions that the rest of the year is expected to be fairly balanced with some potential seasonality in pork.

During a conference call, Tyson Foods executives discussed the company's confidence in their balance for the rest of the year and the midpoint of their guidance. They also addressed the impact of a cold snap on chicken production in January, stating that it did not significantly affect earnings. The executives did not provide a specific forecast for leverage but stated that they were trending towards a lower leverage target of two times or below. They also mentioned that start-up costs in prepared foods may continue to be a headwind in the third quarter but are expected to have mostly hit in the second quarter. Finally, they did not give a specific forecast for the beef segment outlook.

The speaker responds to a question about the range of outcomes for beef profits, stating that it is influenced by factors such as beef demand, cutout and drop pricing, and live cattle costs. They also mention efforts to balance cattle grading and consumer demands, as well as improving efficiencies and finding new value streams. The speaker is also asked about the capex outlook and how it will be affected by the improving profit environment.

The speaker, John Tyson, responds to a question about the company's plans for capital expenditure. He mentions that the company is focused on managing cash flows and expects free cash flow to cover dividends. They are not adjusting capex based on profitability, but rather returning to a normalized level of spending. The company sees opportunities for investment in their prepared portfolio and value-added businesses, as well as ongoing maintenance and repair needs. In regards to chicken, the company still has work to do and plans to focus on growing their value-added business, but it is unclear if this will affect their current footprint.

The speaker discusses the supply-demand balance and network moves that have been made. They anticipate recovering all volume in chicken and pork and expect to grow with demand in the more profitable parts of the business. The back half of the year for chicken looks promising due to moderated grains and strong demand. They have built 12 processing plants around the world in the last two years.

The speaker discusses the company's plans to improve operational efficiency and increase profitability through various actions such as reducing spending, improving product mix, and utilizing available capacity. They also mention their focus on filling up capacities and lapping ramp-up costs in their international business. The company is confident in their ability to deliver expected results and is grateful for the continued interest in Tyson Foods. The conference concludes with the speaker thanking attendees for their participation.

This summary was generated with AI and may contain some inaccuracies.