Tyson Foods is “cautiously optimistic” for 2024 after a “solid” set of first-quarter results, although at face value they looked disappointing.

Sales revenue was up a meagre 0.4% at $13.3bn in the three months to 30 December and adjusted operating profit (non-GAAP) was down 9% at $411m from the year-earlier quarter.

However, president and CEO Donnie King was keen to emphasise the “sequential” performance from the fourth quarter, particularly with respect to adjusted operating income (AOI) amid the protein giant’s factory optimisation initiatives, which have largely been characterised by plant closures.

“The momentum we established in the back half of last year continued in Q1, highlighted by a $175m improvement in adjusted operating income, 130 basis points of AOI margin expansion, and near doubling of adjusted EPS, all on a sequential basis,” King explained on a call with analysts yesterday (5 February).

“While I’m pleased by the performance in Q1, we still have more work ahead of us and we’re cautiously optimistic and laser-focused on achieving what we set out to do this year.”

King quantified the factory closures in the past year as six of Tyson Foods’ “older, less efficient plants in chicken” and two of the company’s value-added facilities in beef.

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“We are already seeing the benefits of these actions and we'll continue to evaluate opportunities to drive efficiency across our segments,” he added.

Uncertainties remain over the outlook, nevertheless, as price pressures on consumers are expected to continue and as the business faces competition from private label. Tyson Foods also cited strains on cattle supply, which have led to margin “compression” for beef.

“While inflation is easing, consumers are still facing high prices compared to two years ago,” King said. “However, they are still willing to purchase brands they know and trust, and this is reflected in our share.”

Market share in Tyson Foods’ “core” branded lines such as its on its namesake products, Jimmy Dean and Hillshire Farm “remains at historically high levels”, he added, despite a “modest decline” from the first quarter of the previous year.

Tyson Foods reiterated predictions outlined in November that total group sales revenue would be flat in its 2024 fiscal year and AOI would be in the $1bn to $1.5bn range.

For the chicken protein segment, however, Tyson Foods was more optimistic. It adjusted the AOI from the $400-$700m presented last year to $500-$700m.

CFO John Tyson explained with respect to chicken: “Given the strong start in Q1 and that we believe that there were more tailwinds than headwinds, we are tightening our AOI guidance range.

“Based on a lot of various macro factors and the interplay between all of our segments, I think we have reasons to believe, while we could achieve a range of outcomes in that window, the midpoint, plus or minus, we designed it that way for a reason and feels like a way to think about the total look.”

For Tyson Foods as a group, the CFO said that while he is “cautiously optimistic” following a “promising start to the year” there are “a lot of factors at play around total protein availability, consumer sentiment, and other unpredictable factors that would get us to where we are”.

It was a mixed performance by revenue, volume and price for Tyson Foods’ business segments in the first quarter.

Beef sales rose but volumes dropped 4.1% as prices went up 10.5%. Pork revenue dipped, while volume increased 7.7% and prices fell 4.5%.

Chicken revenue also declined, with volume and price down 1.5% and 3.9%, respectively. Prepared foods’ sales edged up, with volume up 2.5% and prices falling 2.3%.

Melanie Boulden, the group president for prepared foods and Tyson Foods’ chief growth officer, said: “Generally, we’re seeing elasticities returning to pre-Covid levels. We seek to balance both price and volume growth to maximise the value of our branded portfolio.

“At the end of the day, this is a challenging consumer environment. And, boy, competition is stepping up. We’re not only seeing competition step up from branded players but also private label is a factor.”