Tyson Foods Sees Positive Chicken Outlook

US - Tyson Foods says the chicken outlook remains positive, while its beef, pork and prepared foods are generating strong returns.
calendar icon 14 September 2009
clock icon 4 minute read

The Beef, Pork and Prepared Foods units of Tyson Foods, Inc. are experiencing solid results, while the long-term outlook for the company's chicken business remains positive, Tyson officials reported today at the Barclays Capital Back to School Consumer Conference.

"We're now in the last month of our fiscal 2009, and since we reported earnings on August 3, our business has been trending pretty much as predicted," said Leland Tollett, Tyson's interim president and chief executive officer.

"The Beef and Pork segments are running efficiently and effectively, and we're generating strong returns. We've been making progress toward improving our chicken operations, and we still have room for improvement there, but I like the way things are shaping up as we move into 2010."

Donnie King, Tyson's group vice president for Refrigerated & Deli, said: "The outlook for chicken industry fundamentals is much improved over the past couple of years, although the economy has affected demand and altered consumer spending. Tyson is uniquely positioned to reach consumers no matter how they're spending their food dollars, because we are in all channels of retail and food-service."

Mr King highlighted a cross-promotion with Lipton called 'Take It to the House', to boost football season sales of non-carbonated beverages and Tyson wings and boneless wyngs in the hot deli section of 5,000 retail outlets.

"This is a great opportunity to brand a food-service item, increase volume in a high impulse buying category and grow our customers' business," Mr King said, adding that previous promotions similar to this have lifted sales volume of those products in the range of 25% to 200% during the promotion period.

Commenting on Tyson's Prepared Foods segment, Mr King said it is running the best it has since the company acquired it in 2001. The national launch of Wright Brand bacon, the growth in Tyson's private label lunchmeat business and strong food-service tortilla sales have led the segment's success.

Noel White, Tyson's senior vice president of pork margin management, provided an update on Tyson Fresh Meats, the company's beef and pork business.

Mr White said: "Our business model is designed to make Tyson the low cost, high revenue player in the regions we operate. These are high revenue, high volume businesses with solid returns that consistently outperform the industry averages."

He said that, unlike Tyson's chicken business, the beef and pork businesses do not raise their own livestock for processing. White said Tyson's Pork segment delivered record profits in 2008, and the first three quarters of 2009 have been stable.

On Tyson's Beef segment, Mr White said: "It has had a strong resurgence since 2005-2006 when we struggled with export market disruptions, fewer available cattle and our own execution.

"Since then, we've implemented several initiatives around staffing, yields and efficiencies and eliminated four non-competitive plants. After making those changes, our Beef segment averaged a 1.7 per cent adjusted operating margin in the previous five quarters, even with a 14 per cent decline in revenues since the fourth quarter of 2008. We delivered a 2.4 per cent margin in our third quarter – a very good result in this demand environment." The Beef segment's historical operating margin range is 1.5 to 3.0 per cent.

"Tyson Fresh Meats' returns have been in or above their normalised ranges for about 18 months now," Mr White said. "Our team's outstanding operational execution has allowed us to deliver solid beef and pork returns even in a slow demand environment."

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