Tyson Foods expects to realize synergies of $675M from Hillshire Brands
In FY17, USDA indicates domestic protein production to increase approximately 2-3% from fiscal 2016 levels and moderate export growth. As we continue with the integration of Hillshire Brands, we expect to realize synergies of around $675 million in fiscal 2017 from the acquisition as well as our profit improvement plan for our legacy Prepared Foods business. The amount expected to be realized in fiscal 2017 is reduced from our previous estimate of $700M as some of the incremental synergies are now expected to be realized in fiscal 2018. The majority of these benefits will be realized in our Prepared Foods segment. The following is a summary of the outlook for each of our segments, as well as an outlook on sales, capital expenditures, net interest expense, liquidity, share repurchases and dividends for fiscal 2017. USDA shows an increase in chicken production of approximately 2% in fiscal 2017 as compared to fiscal 2016. The company provided the following segment guidance: "Based on current futures prices, we expect similar feed costs in fiscal 2017 as compared to fiscal 2016. For fiscal 2017, we believe our Chicken segment's operating margin should be at or above the upper end of its normalized range of 9-11%. We expect industry fed cattle supplies to increase approximately 2-3% in fiscal 2017 as compared to fiscal 2016. We generally expect adequate supplies in regions we operate our plants. For fiscal 2017, we believe our Beef segment's operating margin should be at the upper end or above its normalized range of 1.5-3.0%. We expect industry hog supplies to increase approximately 3% in fiscal 2017 as compared to fiscal 2016. For fiscal 2017, we believe our Pork segment's operating margin should be at least 10%. We expect lower input costs of approximately $125 million in fiscal 2017 as compared to fiscal 2016. For fiscal 2017, we expect our Prepared Foods segment operating margin to remain similar to fiscal 2016 results as we continue to invest heavily in innovation, new product launches and the growth of our brands. Other includes our foreign operations related to raising and processing live chickens in China and India in addition to third-party merger and integration costs. We expect Other operating loss should be approximately $70 million in fiscal 2017."