Tyson, facing lawsuits over pandemic-related deaths, spent $540 million on COVID-19 in fiscal 2020
Tyson is facing wrongful death lawsuits tied to its handling of the coronavirus pandemic
Getty Images
Tyson Foods Inc. TSN,
Expenses included costs associated with worker health,
downtime at facilities, personal protection equipment and production facility
sanitizing. The company said in its fourth-quarter earnings release this week
that the total doesn’t include indirect costs, like raw materials and pricing
discounts, that were also involved in managing the pandemic.
Nonetheless, the company is facing wrongful death lawsuits tied to the company’s handling of the coronavirus, and new allegations that a manager at the company’s Waterloo facility “organized a cash buy-in, winner-take-all betting pool for supervisors and managers to wager on how many employees would test positive for COVID-19.”
“We are extremely upset about the accusations involving some
of the leadership at our Waterloo plant,” said Tyson Chief Executive Dean Banks
in a statement posted on the company website.
“We have suspended, without pay, the individuals allegedly
involved and have retained the law firm Covington & Burling LLP to conduct
an independent investigation led by former Attorney General Eric Holder. If
these claims are confirmed, we’ll take all measures necessary to root out and
remove this disturbing behavior from our company.”
Tyson’s chairman, John Tyson, whose grandfather founded the company, also posted a statement, saying he’s “embarrassed by this alleged behavior, and we will not tolerate any disrespect or disregard for the well-being of our team members.”
MarketWatch has reached out to Tyson for any further comment.
COVID-19 ripped through the Waterloo Tyson facility,
infecting 1,000 of the 2,800 workers at the plant and killing at least six.
During the earnings call on Monday, Banks said the company launched an internal task force at the start of the pandemic, and has organized a “monitoring strategy” in which a sample of workers are tested each week. Banks said the program “has so far proven to be invaluable.”
Of the aforementioned $540 million coronavirus spend, about $300 million of it was spent on “thank you bonuses” and benefits paid to workers.
Tyson reported fiscal fourth-quarter adjusted earnings per share of $1.81, up from 50% from the previous year and well ahead of the FactSet consensus for $1.19.
Sales of $11.46 billion were up from $10.88 billion last
year and also exceeded the FactSet consensus for $11.01 billion.
Banks said on the call that low staffing was a challenge during the quarter.
“The inefficiencies driven by reduced staffing levels and
poor execution has translated to higher cost per pound,” he said.
“We expect progress toward these issues to face headwinds
from absenteeism and other COVID-19-related complexities during the first half
of the year but remain hopeful that a vaccine and gradual return to normalcy in
the second half will result in net improvement for the year.”
CFRA analysts downgraded Tyson stock rating this week to buy from strong buy with a $75 price target.
“Despite
surging COVID-19 cases, we believe Tyson’s recent investments in worker safety
reduces the risk of plant shutdowns anywhere near the rate we saw back in
April/May, even under a Biden administration,” Arun Sundaram wrote.
However,
the company faces other risks.
“Although COVID-19 costs should significantly come down while efficiencies improve as the food service channel recovers, other costs are trending higher (i.e. feed, transportation, wages, plant startup expenses), which could surprise us to the downside if beef and pork processing margins quickly normalize as Tyson finishes working through the backlog of overweight cattle and hogs from this past spring,” CFRA said.
“Also, it
sounds like the chicken segment could take a while to see material improvements.”
Tyson stock is down nearly 2% in Friday trading, and has fallen 32.8% for the year to date. The S&P 500 index SPX,
