story by Kim Souza
ksouza@thecitywire.com
Tyson Foods execs were seen on Wall Street Wednesday (Dec. 10) in business suits rather than their signature khaki. The Springdale-based execs gathered for an investor conference in Manhattan and CEO Donnie Smith made an appearance on CNBC’s Closing Bell Segment.
Board Chairman John Tyson, Smith and other top executives spent the day talking up the company’s future following the recent $8.5 billion acquisition of Hillshire Brands.
"This is an exciting time as we integrate Hillshire Brands into Tyson Foods and we have set higher expectations for growth," Smith said in his opening remarks. "The depth and breadth of our portfolio, our continued growth in value-added poultry and prepared foods, our well-positioned brands, our category leadership and the synergies we're capturing are unlinking us from the volatility of the commodity markets."
EXPECTED SYNERGIES
The company again outlined more details on the $500 million in synergies it expects to glean by 2017 from its marriage to Hillshire Brands. The first $200 million in synergies is expected in 2015.
Donnie King, president of Tyson’s North American Operations, placed the synergies into four buckets. The bulk of the savings will be felt in the company’s prepared foods segment — $140 million in 2015 and $250 million by 2017.
He said combined procurement of raw materials will generate $40 million in savings in 2015 and $175 million over the next two years. Synergies in manufacturing processes and logistics will generate $25 million this coming year and double to $50 million by 2017.
Lastly, King said organizational and fiduciary savings on the pro forma company are expected to be $20 million in 2015 and $25 million by 2017.
He said managing this massive amount of savings is nothing new for a company of Tyson’s scale. During periods of volatile grain prices he said it was common for Tyson Foods to offset $10 million a week in expenses.
OUTLOOK CONFIRMED
Smith said the outlook for Tyson Foods is bright given that it now has the No. 1 brand in breakfast sausage, fresh chicken, frozen, fully-cooked chicken, frozen breakfasts, smoked sausage, hot dogs, corndogs and super premium sausage.
The so-called “Tyson 2.0” projects $42 billion in annual sales in 2015 with adjusted earnings for the year in the range of $3.30 to 3.40 per share. This represents an increase of at least 12% compared to fiscal 2014. He said the added money in consumer’s wallets from gas savings are likely to boost restaurant sales which is a plus for Tyson’s foodservice business.
"We believe we are your best investment opportunity in food because we have all the tools in the toolbox to continue our growth, and everything we do is focused on consistent earnings growth over time," Smith said.
Chairman John Tyson also announced that Smith has been named to the company's board of directors.
"Donnie's election to our board not only cements the already strong alignment between the board and our senior management, but demonstrates our shared commitment to a strategic business plan designed to continue delivering impressive growth," Tyson said.
CORPORATE IMAGE
Sara Lilygren, vice president of corporate affairs at Tyson Foods, was a featured speaker at Wednesday’s Investor Conference. She spoke about the meat giant’s mission to protect its corporate reputation saying that future growth depends on it. She said companies are no longer viewed though a soft lens, but gritty details and greater clarity is what the public expects.
“Communication management is an important function today, perhaps more than ever before. We take this responsibility seriously — defending and enhancing our company’s reputation. Everybody has a microphone, camera and access to a website,” Lilygren said. “We are trying to meet the public’s expectation with the use of social media to tell our own story. We are also monitoring 24 / 7 all the things said about Tyson Foods on social media feeds and separating the relevant chatter from the non-meaningful noise.”
Lilygren said Tyson has been proactive in its advocacy for animal welfare with its FarmCheck program which uses a third party service to visit grower farms to check for approved animal welfare practices.
She said Tyson has also instituted a “no antibiotics, ever” program for chicken it produces. This was the result from customer pressure for antibiotic free chicken. When referring to the controversial GMO issue, Lilygren said Tyson has not been as vocal, but she expects that to change in the near future.