Source:  Tom Johnston, MEATNGPLACE.COM, 2/5/10

Tyson Foods CEO Donnie Smith told investors Friday the company's chicken business would generate a full-year operating margin, or percentage of sales, of between 5 percent and 7 percent in fiscal 2010. So incredulous were those investors — the number was -1.6 percent in fiscal 2009 and -1.3 percent in 2008 — that they made him repeat himself twice just to be sure.

Smith obliged.

"We've got a great team, and I have all the confidence in the world that they'll deliver on what they say they're going to do," he said in a conference call after announcing Tyson's record first-quarter profit.

Tyson is making headway toward making good on Smith's statement. Operating income in chicken was $78 million, or 3.2 percent of sales, in the first quarter of 2010, compared with a loss of $286 million, or -12.8 percent of sales, in same period last year as feed and fuel costs took a heavy toll.

The company credits continued execution of operational improvements for the turnaround in the chicken business. First-quarter volume and average sales prices increases of 5.6 percent and 2.8 percent, respectively, also helped.

"There's still upside on our chicken business and we'll focus on maximizing operational performance," Tyson COO Jim Lochner said during the call.

Concerns

Shrouding the chicken business, however, are the yet-unknown impacts of Russia's ban on imports of U.S. poultry imports, though Lochner cautioned that Tyson's sales to Russia already were cut in half in 2009 versus 2008 and accounted for only 10 percent of international sales last year. He said the company also is unsure of the potential impacts of China's announcement Friday that it would impose a 43.1 percent anti-dumping duty on imports of Tyson chicken.

Donnie King, Tyson's senior group vice president of poultry and prepared foods, expanded on the issue in a later news conference: "In recent years, we have diversified our mix outside Russia to all parts of the globe, including moving more product domestically. [This is a] business interruption but it's not as crippling as it would have been in recent years.

"In China," he went on, "we'll have more conversation today and next week, but it's a bit early for us to try to predict what'll go on there."

Meanwhile, Tyson's beef and pork segments continued to boost the business with respective operating incomes of $119 million and $62 million on strong exports and cost-cutting measures. Beef broke even in the year-ago period, while pork operating income was $55 million last year.

For the quarter ended Jan. 2, Tyson said net earnings were $160 million, or 42 cents per share, compared with a loss of $102 million, or 27 cents per share, in the year-ago quarter. Sales rose 1.7 percent to $6.64 billion.

Analysts on average expected per-share earnings of 18 cents on $6.58 billion in sales, according to a poll by Thomson Reuters.
Shares of Tyson were $14.72, up 73 cents, in early-afternoon trading on the New York Stock Exchange. Earlier in the day they peaked at $15.25, the 52-week high mark.