The operator introduces the Tyson Foods Third Quarter 2024 Earnings Conference Call and explains the format of the call. Sean Cornett, VP of Investor Relations, introduces the speakers and mentions the availability of a supplemental presentation. The speakers will make forward-looking statements and caution that these statements are subject to risks and uncertainties.

The company has seen significant growth in Q3, with AOI up 175% and adjusted EPS up 500% compared to last year. Despite challenges in the cattle cycle, the company has delivered strong results and is raising their guidance for the third consecutive quarter. Chicken segment has performed exceptionally well, with the best third quarter profit in eight years and a raised outlook. Operational improvements have allowed the company to benefit from market conditions and invest in their value-added portfolio.

The company's businesses have become more agile, collaborative, and disciplined. Chicken and pork performed better than expected in Q3, while beef and prepared foods met expectations. The company's approach to capital allocation has improved cash flow by $1.2 billion compared to last year. The company's iconic retail brands, such as Tyson and Jimmy Dean, have strong market share and are well-known in key categories. The CEO is confident in the company's strategy and optimistic about future value for shareholders. In the prepared foods segment, the company is expanding its customer base and increasing sales through operational execution and marketing improvements. They are also focusing on top-performing products to expand distribution.

The company is constantly working on new innovations to expand their product appeal and market opportunities. They have had success with their Jimmy Dean Griddle Cakes and their focus on execution and innovation has led to strong results. They have also seen improvements in their live operations, efficiency, and customer service. The company has reinvested in the growth of their value added chicken business and is focusing on the basics to build a stronger business. However, elevated cattle costs have affected their beef business.

Tyson Foods remains focused on controlling labor utilization, yield, and mixed management to meet consumer and customer demand during the challenges of the cattle cycle. The company's pork division has seen strong health and productivity, leading to increased AOI. Protein remains a central part of the company's purpose and strategy, with a focus on building and expanding their iconic brands. The company's priorities for the year include controlling what they can and managing cash flow.

In the third quarter, the company saw a 1.6% increase in total net sales, with improvements in beef, pork, and Prepared Foods offset by declines in chicken and international sales. The company's focus on operational excellence and executing their plans has led to tangible results, including the best AOI, AOI margin, and adjusted EPS in the past seven quarters. The Prepared Foods segment saw a 2.1% increase in revenue, while chicken sales declined 3.2%. However, chicken AOI increased by $370 million due to better supply and demand alignment.

The company experienced growth in AOI due to lower input costs, net-of-pass-through pricing, strategic actions, and operational efficiencies. In the beef segment, revenue increased due to higher average carcass weights, but AOI decreased due to compressed spreads. In the pork segment, revenue and AOI both increased, driven by higher prices and improved spreads. The company remains committed to disciplined capital allocation and maintaining financial strength, with strong cash flow from operations and a focus on controlling capital deployment. Year-to-date free cash flow has greatly improved compared to previous years.

The company's strong cash management and improved profits have led to a decrease in net leverage and they are committed to further reducing it. They expect sales to remain flat but have raised their AOI guidance, particularly in the chicken segment. The AOI outlook for Prepared Foods remains the same, while the beef segment is expected to continue facing challenges in the cattle cycle. The pork segment has seen improved results and the company has maintained tight controls on spending. The CAPEX range for the year has been narrowed down.

The speaker, Curt, emphasizes the company's successful multi-protein, multi-channel strategy and raises their full year AOI guidance by $100 million. Donnie expresses gratitude to the team members and customers for their hard work and partnership. He is confident in the company's strategy and looks forward to delivering long-term shareholder value. The first question during the Q&A asks about the underlying fundamentals of the company's two biggest segments, chicken and beef, and how they compared to expectations in the quarter. Donnie responds by saying they are pleased with their Q3 results, which were the best in the last seven quarters.

The company is experiencing positive results in their multi-protein portfolio, with chicken, pork, and prepared foods offsetting challenges in beef. Their focus on operational excellence and controlling controllables has led to improved performance and financial strength. The company's chicken segment had its best operating income in eight years, while beef is managing through volatility and pork is seeing improved profitability. In terms of quick service restaurants, the company has a unique view and has seen some green shoots, but there may still be challenges with traffic and targeting lower-income consumers.

Donnie King and Melanie Boulden discuss the impact of the pandemic on the restaurant industry and Tyson Foods' position within it. They mention that protein is a consumer staple and Tyson holds leadership positions in 8 out of 10 categories and 3 of the top 10 brands in protein. They also highlight Tyson's diverse portfolio and flexible manufacturing infrastructure, which has helped them partner with customers on limited time offerings and develop innovations. Additionally, their commercial scale allows them to reach various types of establishments, including schools, quick-serve restaurants, fine dining establishments, and travel and entertainment venues.

The company is focused on improving their product pipeline, leveraging their manufacturing base, and shifting to advantaged channels to meet consumers' needs. This has led to momentum and growth going into fiscal year 2025. In regards to chicken, there has been improvement in cost fundamentals due to lower grain costs and cost and mix actions. The Chief Architect in Poultry, Wes Morris, is pleased with the results and the company is well positioned for growth.

The company has been focusing on improving their live fundamentals and investing in operational improvements, resulting in improved capacity utilization and reduced working capital. They have also been investing in their retail and food service sectors, with a strong innovation pipeline and investments in quality and consumer promotions. The company has raised their guidance for the year. In terms of beef, there are no clear signs of herd rebuilding, making it difficult to predict the future of the beef cycle.

The speaker discusses the key indicators of the beef cycle, including drought monitoring and regional differences. They also mention that there is no expected increase in supply in the short-term, but they are focused on controlling costs and improving efficiency. The company's multi-protein portfolio is driving momentum, offsetting challenges in the beef business. The speaker is asked about opportunities for further improvement in the chicken business.

The speaker discusses the company's margins and how they are lower than expected despite internal improvements and a strong external environment. They mention having a different business mix and volatility compared to commodity players, and their focus on stabilizing earnings and creating sustainable value. They also mention the difficulties of forecasting in the beef industry and decline to provide an outlook for 2025, instead suggesting to discuss it in the fourth quarter.

The speaker discusses the lack of data supporting a herd rebuild, but mentions positive factors such as pasture conditions and feed costs. Brady Stewart then explains how the company has improved its beef performance through cost-effective operations. The next question is about the strong improvements made in chicken, with a 360 bps increase in hatch rate. The speaker explains that this is due to sustainable improvements in breed and husbandry, rather than early liquidation of flocks related to plant closures.

The company's genetics and strategic focus are opposite from the previous cycle. The hatch is up and they believe it is sustainable due to their programs and execution. The company's livability is also up in a tough environment and they expect it to improve in the fall. In regards to beef, the company believes the current downturn may be extended due to slow rebuilding, increased imports, and drought conditions. They will continue to evaluate and focus on these factors and have made investments in their beef operations.

The company is satisfied with their partnerships and is evaluating future outcomes. They have a strong multi-protein portfolio that has helped offset the current cattle cycle. The next question is about the performance of their Prepared Foods segment, specifically in terms of volume growth and price. The company notes that volume growth was driven by Food Service, but overall price was flat. They mention that they are seeing a promotional environment and that consumers may be hesitant to pay higher prices.

The company has made investments to add new capacity and capabilities. Despite facing higher expenses and lower input costs, they were able to achieve flat profits compared to the previous year. This was due to improved operational excellence, commercial success, and strong growth in food service volume. The company closely monitors pricing and promotional dynamics and is able to make changes quickly due to their strong brands, customer relationships, and data-driven insights. Protein is seen as an essential staple by consumers and has lower elasticities compared to other food categories. This is why the company's retail volume grew in the quarter.

The speaker discusses the company's performance in the third fiscal quarter, which was stronger than expected due to improved performance in the poultry department. This led to an increase in the overall guidance for the fourth quarter. The speaker also mentions that the international side of the business is improving.

Donnie King, Tyson's CEO, discusses the company's current initiatives and investments in the international market, which is expected to drive growth. Devin Cole, the Head of Global McDonald's business and now also the International business, is optimistic about the team and assets in place to meet customer and consumer needs. The focus is on safety, food quality, innovation, and operational excellence to drive growth and efficiency.

Donnie King and Devin discussed the retirement of Amy, the former leader of the company's International business. They thanked her for her contributions and wished her well. Peter Galbo asked about the sustainability of chicken profitability, and Wes Morris attributed 40% of the current performance to market factors and 60% to investments. He stressed the importance of sustainable performance regardless of market conditions. Curt also joined the call and mentioned a large bond maturity coming due in the fourth quarter.

Curt Calaway discusses the company's approach to managing their debt and mentions their current liquidity of $4.8 billion. He also talks about their upcoming bond maturity in August and their plans to pay it off. In response to a question about chicken, Wes Morris emphasizes the importance of focusing on the fundamentals of the business and working with key customers to stabilize earnings. Donnie King mentions the company's efforts to increase the mix of value-added branded products.

In response to a question about collaboration, Donnie King, a Tyson executive, discusses the company's focus on teamwork and its mission to provide high-quality protein to the world. In another question, Curt Calaway, another Tyson executive, explains that the company's guidance for the fourth quarter is consistent with previous quarters, and that they expect a relatively even split in profits between the third and fourth quarters.

Melanie Boulden, a representative from the company, responded to a question about the future seasonality and Q4. She mentioned that they expect a strong Q4 compared to previous years due to reduced costs associated with new capacity and capabilities, operational excellence initiatives, strong performance in the Food Service business, and growth in bacon. She also expressed confidence in their path forward and credited their hard-working team. Another speaker, Curt Callaway, mentioned that their SG&A has been trending lower throughout the year due to disciplined cost control. The operator then turned the conference back over to Donnie King for closing remarks.

The speaker, Donnie King, expresses gratitude for the listener's interest in Tyson Foods and mentions the possibility of speaking again in the future. The operator then concludes the conference and thanks attendees for participating.

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