Tyson posts larger-than-expected profit

Cattle Market & Farm Reports, Editorials
Dec 20, 2007
by WLJ

Tyson Foods Inc., the world’s largest meat processor, reported a bigger-than-expected profit for its third fiscal quarter last week and raised its profit forecast for the year as it rebounds from last year’s losses.

Tyson credited higher average sales prices for chicken, beef, pork and prepared foods, export growth and a cost-cutting program that is ahead of a target of saving $200 million this year.

Those factors more than offset higher feed prices for animals, boosted by demand for corn for producing the alternative fuel ethanol.

Analysts said chicken, Tyson’s second largest business by sales after beef, drove the quarter’s gains on higher profit margins under the cost-cutting program, higher shelf prices in stores, and export demand led by China.

Springdale, AR-based Tyson said that it earned $111 million, or 31 cents a share, for the three months ended June 30 versus a loss of $52 million, or 15 cents a share, a year earlier.

“I feel great about the progress we’re making,” chief financial officer Wade Miquelon said in a conference call.

For the quarter, sales rose to $6.96 billion from $6.38 billion a year earlier.
Tyson raised its forecast for the fiscal year ending in September to between 82 cents and 92 cents per share from an April estimate between 65 cents and 90 cents. It was the third profitable quarter after three quarters of losses last year that yielded a net loss of 17 cents per share in fiscal 2006, which ended last September.

Export sales jumped 31 percent to $661 million, including a $70 million increase in chicken leg quarters to China, other Asian markets, Africa and the Middle East.

CEO Richard Bond said antibiotic-free chicken launched in the U.S. market in June is already a hit among consumers and retailers and promises to boost growth in fresh chicken sales.

Sales and operating income improved from the previous quarter and from a year ago in all four segments—chicken, beef, pork and prepared foods.

Bond said the cost management program launched last year had already beat its goal of saving $200 million this year, helping reduce general costs by 12.4 percent for the first three quarters. Bond said he expects more than $250 million in savings this fiscal year from the effort.

Tyson said the volume of meat sold fell, as expected, after the plant closings and because of higher prices for its products.

But the average sales price for all its meats increased, allowing it to book higher revenues.

Feed costs were higher as corn soared because of demand to make the alternative fuel ethanol. Tyson said in its chicken business, the second largest segment by sales after beef, net grain costs were up $113 million in the quarter from a year earlier.