Coronavirus slowing Tyson exports to China

by Kim Souza ([email protected]) 2,503 views 

Tyson Foods CEO Noel White said despite the opening of China for U.S. protein, a six-fold increase in pork exports, and robust chicken exports to begin 2020, the new coronavirus has backed up ports into China for the past few weeks.

White spoke Wednesday (Feb. 19) about the issue at the CAGNY 2020 Investor Conference in Boca Raton, Fla.

As of Feb. 19 there were 75,691 confirmed cases and 2,124 deaths from the coronavirus (COVID-19), with most of the cases and fatalities in China.

“The potential public health threat posed by COVID-19 is high, both globally and to the United States. The fact that this disease has caused illness, including illness resulting in death, and sustained person-to-person spread in China is concerning. These factors meet two of the criteria of a pandemic,” according to the U.S. Centers for Disease Control.

White said demand for U.S. protein remains incredibly high in China and Tyson Foods is still sending it over, but not at the rate of just a few weeks ago. White said the coronavirus has created disruptions in Tyson’s own ventures inside China. He told analysts there is still strong demand for the products from customers across China. He described the situation as fluid noting that three weeks ago his concerns would have been greater about clearing customs. But given the demand, he thinks the product will begin flowing through faster as the outbreak is contained.

Exports and international sales were forecast by Tyson to be $6 billion this year, thanks in part to the impacts of African Swine Fever that eliminated 35% of China’s pork supply. Tyson expects the impacts of ASF to be a multiple-year event. The Springdale-based company said ASF prompted a global reallocation of all proteins and China has become the world’s largest importer of beef. White has said Tyson is positioned well to help deliver protein to areas that China formerly served, in addition to China itself.

Tyson has said this fiscal quarter will likely be the most challenging of the year. White said seasonally it’s the weakest quarter for beef and the company’s chicken segment remains hindered from low prices and lagging operations inefficiencies.

White told analysts the lingering issues Tyson has had in its chicken are unacceptable and have been addressed, including management changes and product flow modifications in plants and facilities. He said the company remains on track to hit its $200 million cost-efficiency goals for the segment this year.

At the conference, Tyson executives presented a case for Tyson Foods to succeed long-term taking advantage of the growing need for protein around the globe. Tyson said it will be disciplined in spending but remains open to opportunities that grow market share or global footprint. Since 2014 when Tyson Foods acquired Hillshire Brands for $8.2 billion, the company has made five other acquisitions:
• June 2017 – $3.2 billion, Advance Pierre
• June 2018 – $382 million, Smart Chicken
• August 2018 – $864 million, American Proteins Assets
• November 2018 – $2.3 billion, Keystone Foods
• June 2019 – $326 million, BRF assets in Thailand and EU

White said in his nearly 40 years in the business there is always at least one or two challenges.

“There is always going to be some issue that comes up and it’s our job to manage around it,” White said.

Shares of Tyson Foods (NYSE: TSN) closed Wednesday at $77.83 per share, down $2.32 with twice the normal volume. Over the past 52-week the shares have traded between $60.99 and $94.24.