Tyson Foods announced Monday (Aug. 7) plans to close four chicken processing plants in North Little Rock, Noel and Dexter, Mo., and Corydon, Ind., over the next three quarters. The news followed a significant financial loss in the third fiscal quarter.
While Tyson did not confirm the total number of jobs eliminated with the closures, estimates from local communities total 2,800 plant positions. The majority of those will be in Noel, with an estimated 1,500 jobs and full poultry production complex closing its doors in October. North Little Rock’s further processing plant will lose an estimated 200 jobs in October. The plants in Dexter, Mo., and Corydon, Ind., employ 500 and 600, respectively, according to local community statistics. Those plants are slated to close in early 2024.
Tyson Foods CEO Donnie King said the decision to shutter the plants was “gut-wrenching” but necessary as the older facilities were in need of major capital investments that did not make sense. The North Little Rock plant is 55 years old and was acquired by Tyson Foods in 1969 from Prospect Farms. It is a further-processing plant and not a slaughter facility. The Noel, Mo., complex includes a processing and kill plant, truck shop and service center and is a major employer in McDonald County. The Dexter, Mo., and Corydon, Ind., facilities are also older further-processing plants.
King said it would cost more to retrofit and update the plants for modern production than build a brand-new plant.
“This difficult decision demonstrates our commitment to bold action and operational excellence as we drive performance, including lower costs and improving capacity utilization and build on our strategy of making Tyson Foods stronger in the long term,” King said in his prepared remarks.
Tyson also announced two plant closures in March and completed in May that eliminated more than 1,700 jobs in Van Buren, Ark., and Glen Allen, Va.
PRODUCTION SHIFT
He told Talk Business & Politics that the company expects to shift production to other more automated facilities, and there will be no loss in production capacity with the closures announced Monday. He said Tyson is working with each community to relocate displaced workers to other plants. King said growers who supply birds to the Noel plant will, in many cases, have the opportunity to grow for other complexes in Northwest Arkansas. He said in some cases, buyer contracts will be bought out.
Employees in the impacted plants are encouraged to apply for open positions at other locations. Tyson said it would assist in offering relocation benefits where applicable. Employees receiving benefits will see no change to those benefits and will be paid for any earned but unused vacation through the date of termination should they not relocate.
Chief Financial Officer John R. Tyson said that based on preliminary analysis, the estimated charges for the plant closures will range between $300 million and $400 million, which will be recorded through the planned closure dates between October and March. The plant closures come on the heels of a 15% reduction in senior leadership headcount in April and 10% cut in corporate headcount relating to the consolidation of its corporate campuses to Springdale.
LEANER CORPORATION
King told Talk Business & Politics the headcount reduction and campus consolation was smooth. He said Tyson is a leaner corporation, and while there are still a few open positions in finance and information technology, most of the key roles have been filled.
“We have great talent around us, and it’s so refreshing to walk down the halls in Springdale and be able to talk chicken, beef or pork without having to leave the building. The last day for someone to move to Springdale was July 31. We are set with the team we have in place now,” King said.
He said the chicken business is on the right track, but there is still work to be done. King said the uplift Tyson can see from the production shifts is around $200 million. He also said Tyson may not be finished with plant closures or production shifts. He was adamant that the six plant closures will not only increase efficiency but also allow for growth. King also said Tyson achieved its $1 billion productivity savings earlier this year, a full year ahead of schedule.
The majority of losses from Tyson’s third-quarter results came in the chicken segment from $11 million in restructuring charges, $107 million from recent plant-closure costs and $210 million in asset goodwill impairment charges.
Stephens Inc. analyst Ben Bienvenu said the additional plant closures are positive for the long-term performance of Tyson Foods. He likes Tyson stock (NYSE: TSN) for long-term investors with patience. However, Barclays analyst Benjamin Theurer held firm to his “sell” rating for Tyson Foods, saying the earnings and revenue misses and overall bleak forecast are not enticing.
Company shares closed Monday at $54.30, down $2.16. During the past 52 weeks, the share price has ranged between $83.08 and $47.11.