Source:  Tom Johnston, MEATINGPLACE.COM, 11/23/09

Newly named Tyson Foods CEO Donnie Smith said Monday in an earnings call the company's mission in 2009 was "about stopping the bleeding" from 2008, when soaring grain prices combined with weak demand and prices pummeled its chicken business.

A second consecutive profitable quarter for Tyson's chicken segment, although still lagging in comparison with the company's pork and beef businesses, suggests a mission accomplished.

"You know, 2008 was a terrible year in chicken," Smith told investors. "2009 was about stopping the bleeding, and we did that and have been profitable since February."

Tyson's chicken business posted operating income of $32 million in its fiscal fourth quarter ended Oct. 3, compared with a loss of $91 million in fourth-quarter 2008. Sales in the quarter rose to $2.6 billion from about $2.4 billion as volumes and prices rose, respectively, by 10.4 percent and 0.6 percent.

It marked the second straight profitable quarter for the chicken segment, which reported operating income of $143 million in the third quarter, compared with a year-on-year loss of $30 million in the third quarter of 2007.

However, analysts expressed concern the chicken segment's operating margin was relatively low at 1.2 percent. Among the issues, Smith said, was the addition of production lines, where yields were "very disappointing" amid a transition to hand deboning that workers are in the process of learning.

"We think the back half of our year is going to be an improvement over the first," he said. The company expects overall domestic protein prices to climb as a weak dollar promotes growth in exports and supplies tighten.

Overall results

The Springdale, Ark.-based protein giant, meanwhile, reported on Monday an overall loss of $455 million, or $1.22 per share, in the quarter compared with a profit of $48 million, or 12 cents per share, in the year-ago period. The company cited a non-cash goodwill impairment charge in its beef segment of $560 million, or $1.50 per share.

Excluding that charge, Tyson posted a profit of 28 cents per share, compared with 13 cents per share, and all operating segments – chicken ($32 million), beef ($120 million), pork ($48 million) and prepared foods ($39 million) were profitable. Sales rose $13 million to $7.21 billion in the fourth quarter, which had an extra week.

For the full year, Tyson lost $537 million, or $1.44 per share, compared with a profit of $86 million, or 24 cents per share, in 2008. Sales dipped to $26.7 billion from about $26.9 billion. Tyson projected sales in 2010 would be $27 billion.

Shares of Tyson were trading at $12.91, down 16 cents, in midday trading Monday on the New York Stock Exchange.

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