Source:  MEATINGPLACE.COM, 2/4/11

Tyson Foods on Friday said its first-quarter profit soared 86 percent, topping expectations due to stronger prices for its beef and pork and sending its shares up as much as 7 percent.

“Clearly Tyson is a much better company than it was just a year or two ago, and there is room for further improvement via chicken productivity,” said J.P. Morgan analyst Ken Goldman. He noted the results got a large one-time boost from hedging gains, but higher chicken volumes and beef and pork pricing also contributed to the strong performance.

Tyson Chief Executive Donnie Smith said the company’s chicken business was well within its historically normalized ranges even without the quarter’s mark-to-market gains. He attributed the strong quarter to a more efficient cost structure, processing flexibility, live production improvements, and better yields and product mix.

“Beef and pork are off to a great start, and their combined results in 2011 should be similar to 2010,” Smith said. He also predicted the company’s chicken business would stay profitable in the remaining quarters of the year, aided by improved operating efficiencies.

Smith gave a more sober view of overall industry fundamentals, however, saying he expects no meaningful volume growth in either the retail or food service segments until 2012, due to continued elevated levels of unemployment and underemployment. “We believe consumers will maintain their cautious stance,” Smith said on a conference call with analysts.

For 2011, domestic production of chicken, beef, pork and turkey is expected to rise slightly and exports are likely to grow, while domestic availability of protein will be reduced slightly, supporting prices, Tyson said.

The company warned that it expects operating margins in its chicken business to be lower for the rest of fiscal 2011 due to higher grain costs and expanded industry supplies. But it said it expects to be able to offset much of those increases with operational, pricing and product mix improvements.

“Unlike fiscal 2008, when the industry experienced a similar production and grain cost environment, we expect to remain profitable during the remainder of fiscal 2011,” the company said.

Tyson said net income in its fiscal first quarter ended Jan. 1 climbed to $298 million, or 78 cents a share, from $160 million, or 42 cents a share, a year ago. Sales increased 15 percent to $7.6 billion.
Excluding a gain from the sale of an investment, Tyson said it earned 75 cents a share. Analysts had expected a profit of 62 cents a share and $7.15 billion in sales, according to Thomson Reuters.

Chicken
Tyson said seasonal production cutbacks the company planned at the start of fiscal 2011 have continued into the second quarter, to match its supply with customer demand. The company said operational improvements in its chicken business have produced $600 million in cost savings since 2008, with another $200 million in savings projected for 2011.

Beef
Tyson predicted a gradual reduction in fed cattle supplies of 1 percent to 2 percent for the remainder of the year, compared with 2010. Live weights should increase, the company said, while supplies are expected to remain adequate and beef exports strong.

Pork
The company projected hog supplies in 2011 would be similar to last year’s and pork exports would remain strong. It expects results in the pork business to continue to exceed typical ranges for the rest of the year, but not to continue at the record levels of the first quarter.

Director elections
Tyson, which also held its annual shareholder meeting on Friday, said it elected seven board members: Chairman John Tyson, Jim Kever, Kevin M. McNamara, Robert Thurber, Brad T. Sauer, Barbara A. Tyson and Albert C. Zapanta.

The board position held by Don Tyson, who passed away Jan. 6, was not filled.

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