Tyson Foods Reports Improved Chicken Results

US - Among the highlights of Tyson Foods' third-quarter and nine-month results are that sales for the latest quarter was more than 11 per cent higher than the previous year. The beef and pork segments contributed improved operating margins, while chicken showed improved performance, and prepared foods were hit by rising costs.
calendar icon 10 August 2010
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Among the highlights of the report from Tyson Foods are that third-quarter 2010 sales were $7.4 billion, up 11.6 per cent compared to last year. Third quarter 2010 EPS was $0.65 compared to $0.35 last year

Overall operating margin was 6.8 per cent, with beef and pork above their historical normalised ranges. Chicken operating income was $186 million, or 7.4 per cent of sales, or 5.9 per cent when excluding $38 million of insurance proceeds received during the third quarter of fiscal 2010. Beef operating income was $176 million, or 5.6 per cent of sales. Pork operating income was $125 million, or 10.0 per cent of sales, while Prepared Foods operating income was $22 million, or 2.9 per cent of sales.

The company repurchased over $400 million of debt during the third quarter fiscal 2010 and over $900 million through the first nine months of fiscal 2010

Donnie Smith, Tyson's president and chief executive officer, commented: "This was a fantastic quarter for Tyson Foods, with record earnings, sales and operating margin. With more than $600 million in operating cash flow, we were able to pay down debt by $400 million while continuing to invest in our business, bringing our debt to its lowest level since 2001.

"The Beef and Pork segments posted phenomenal results with record return on sales. Chicken continued to improve and performed within its normalised range. Prepared Foods struggled with rapidly rising input costs, but still managed a decent return.

"Looking ahead, our operational improvements and lower interest expense will help us finish 2010 in a great position and give us a strong start to 2011."


According to the report, operational improvements and lower interest expense will help Tyson Foods to finish fiscal 2010 strong and put it in a good position for the start of fiscal 2011. The company expects overall protein production (beef, chicken, pork and turkey) to increase in fiscal 2011 compared to fiscal 2010. It also anticipates that export markets will improve in 2011. The following is a summary of the fiscal 2011 outlook for each segment:

Chicken – While chicken production is expected to increase, domestic availability will depend on export volumes. Current US crop conditions are favourable, however, because of volatility in the world grain markets, grain costs could be higher in fiscal 2011 compared to fiscal 2010. Additionally, Tyson Foods will continue to focus on making operational improvements to help maximis margins.

Beef – Tyson Foods expects to see a gradual reduction in cattle supplies of one to two per cent in fiscal 2011; however, the company does not expect a significant change in the fundamentals of its Beef business as it relates to the previous few quarters. Adequate supplies are expected in the regions where the company operates.

Pork – The company expects hog supplies in fiscal 2011 will be comparable to fiscal 2010 and believes it will have adequate supplies in the regions in which it operates. Tyson Foods expects pork exports to remain strong in fiscal 2011.

Prepared Foods – Based on analysts' estimates, raw material costs will likely increase in fiscal 2011, but the changes in Tyson Foods' sales contracts moved us further away from long-term fixed price contracts toward formula or shorter-term pricing, which will better enable the company to absorb rising raw material costs. However, there is a lag time for price increases to take effect, which makes it more difficult to absorb the rapidly rising raw material costs experienced during the third quarter of fiscal 2010.

Further Reading

- You can view the full report by clicking here.
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