Donnie King
President, Chief Executive Officer at Tyson Foods
Thanks Sean, and thank you to everyone for joining us this morning. Q3 was another solid quarter as momentum continues to build. Compared to the third quarter of last year, AOI is up more than $300 million, growing nearly 175%, and adjusted EPS increased by more than $0.70, or almost 500%. Q3 not only dramatically improved versus last year, but also marked the highest profitability in the last seven quarters. What's even more impressive is that we delivered these results despite well-known headwinds in the cattle cycle, as we benefited from our diverse portfolio.
I want to take this opportunity to thank all of our team members across every segment and function for their hard work in contributing to these results. In Q3 and for their dedication to driving operational excellence, which, as you know, has been a priority for us. Let me highlight the performance in chicken. We delivered segment AOI of more than $300 million, the best third quarter profit result in eight years. We are raising our guidance in chicken for the third consecutive quarter. The midpoint of our outlook is now $350 million better than our initial expectations coming into the fiscal year.
I want to emphasize that the operational improvements we've been driving are enabling us to benefit from the market tailwinds, invest in our value-added portfolio while also enhancing our results. In fact, all of our businesses are more agile, collaborative and disciplined than they have been in some time. Beyond the strong results in chicken in Q3, pork also came in better than we anticipated, while beef and prepared foods were in line with our expectations.
Our disciplined approach to capital allocation continues to improve cash flow. Year to date, free cash flow is better by more than $1.2 billion compared to last year. This growth was driven by improved profitability, and our focus on managing working capital and controlling capital expenditures, while still investing for profitable growth. And again, we're delivering these results in the face of a challenging environment for beef. Better performance has helped us to reduce our net leverage ratio for the third consecutive quarter.
Before I talk more about the performance in the quarter by segment, let me remind you that we have some of the most iconic retail brands in all our food with top brands in protein. Behind Tyson, Jimmy Dean, Hillshire Farm and Ball Park, we have the number one or number two market share in eight of our core business lines, and enjoy favorite brand status in key categories. I remain highly confident in our strategy and optimistic about our future and the ability to drive long-term value for shareholders.
Let's move to segment performance starting with prepared foods. In foodservice, we continue to broaden our customer base, grow in margin accretive channels and expand our presence in broadline distribution categories. This led to overall volume and sales growth in Q3. AOI for the quarter was right in line with our expectations. Operational execution, including supply chain improvements and more efficient and effective marketing support through digital are delivering results. In addition, we are leaning into our top performing SKUs to capture opportunities to expand distribution. While our brands remain strong, we are continually focused on new innovations to expand the appeal and market opportunities for our products. For instance, the Jimmy Dean Griddle Cakes platform is an innovation we're very proud of. We've launched two flavors, maple and blueberry, and we're seeing an exceptionally strong repeat rate and customer adoption, making it one of the most successful prepared foods innovations over the past five years. Our focus on execution and innovation are keeping us on track to deliver another solid performance for the year.
As I mentioned, Chicken had one of its best quarters in some time. While we are clearly benefiting from better market conditions, including lower grain costs, our actions and focus on the fundamentals across all aspects of the value chain are also contributing to these strong results. Our live operations continue to improve with hatch rate and livability up year over year. We've generated efficiencies and improved utilization in our plants by optimizing our network. Our demand planning and customer service have also taken significant steps forward, as we improve order fill rates and continue to build long-term partnerships with customers, all while reducing inventory. We've reinvested some of the proceeds from these improvements into the long-term growth of our value-added chicken business. For instance, we've accelerated the ramp up of our Danville fully cooked facility, and launched new products like Honey Bites and restaurant quality wings. In summary, our focus on the basics has built a fundamentally stronger chicken business with an eye on the future.
Moving to beef, as expected, elevated cattle costs continue to compress spreads in fiscal Q3. While pasture conditions have improved this year, clear signs of meaningful herd rebuilding have not emerged. We continue to be laser focused on things we can control, such as labor utilization, yield and mix management to meet consumer demand and customer needs, as we manage through the challenges of the cattle cycle.
Turning to pork, the overall health of the herd and the productivity of sows remain strong, driving an ample supply of lean hogs, combined with solid demand and the benefits of our improved operational execution. AOI increased noticeably versus last year.
Now let me take a moment to reflect on who we are. Our purpose is to feed the world like family, where protein remains clearly at the center of the plate. In fact, protein is the largest category in the retail food and beverage sector, accounting for about one-third of sales in the U.S. We believe protein plays a central role in any healthy diet. This is why we see consumption growth is up 1.3% across beef, chicken and pork in fiscal Q3 per Nielsen, and is also why we have protein as a foundational core.
Our strategy encompasses our differentiated capabilities and scale and our diverse portfolio across channels, categories and eating occasions. Our strategic pillars are supported by key enablers of operational excellence, customer and consumer obsession, along with data and digital. One key goal is building on our iconic brands to value up our core proteins. Today, Tyson, Jimmy Dean and Hillshire Farm are three of the top 10 protein brands with room to expand household penetration. Brands are our best opportunity to drive faster growth, higher margin and stronger returns, and is the most effective way to generate long-term shareholder value.
As I've emphasized all year, our priorities are centered on controlling the controllables, including cash management. Our cash flow performance this year demonstrates the success we've had on this front. We are also focused on operational excellence by continuously improving chicken, strengthening prepared foods, navigating beef through a difficult cattle cycle and driving efficiencies in pork. We came into fiscal '24 with plans to deliver against these priorities. Our focus on being intentional and deliberate on executing those plans is delivering tangible results.
With that, I'll turn the call over to Curt to review our financial performance in more detail.
