February 3, 2014

Tyson reports net income growth of US$254 million in Q1

For the first quarter ended December 28, 2013, Tyson Foods Inc. reported net income of US$254 million, or US$0.72 per share, compared to US$173 million, or US$0.48 per share a year ago, while sales advanced 4.7% to US$8.8 billion brought about by the strength of its chicken and beef segments.

"I'm very pleased with our strong first quarter results, and I'm confident in my expectations for the full year," said Donnie Smith, president and CEO of Tyson.

Tyson was able to report strong results despite losses in its international segment and on-going concerns about the impact of porcine epidemic diarrhoea virus (PEDv) on the US swine herd. PEDv is a highly contagious virus that kills 80% of the piglets that contract it. In its earnings report, Tyson said it expects to cut its domestic pork production 2% to 4% because of the PEDv virus.

Smith added that the outbreak has created a fluid situation, and the company is monitoring events closely.

Disease (an outbreak of avian flu) and widespread food-safety concerns among Chinese consumers have prompted Tyson to slow its expansion in China. The company has been building company owned chicken houses in China. But company officials decided to change the pace of its build-out plans when market dynamics in China became unfavourable. Smith said demand for chicken among Chinese consumers is down, and the market is over supplied with chicken.

However, the company will continue to acquire land-use rights as the company needs to continue its build-out strategy, Smith noted.

On a segment basis, chicken and beef recorded increases, while the pork and Prepared Foods segments had declines in operating income.

Tyson reported record operating income of US$225 million for its chicken segment. Increased international production and a mix of rendered product sales drove growth in sales volumes for the segment. Additionally, operational improvements and lower feed ingredient costs of US$170 million also supported sales volume growth. Increases were partially offset by US$28 million in losses in international operations and declining average sales prices.

Operating income for the beef segment increased to US$58 million for the quarter compared to US$46 million in the comparable year-ago period. Sales volumes advanced on improved demand for the company's beef. Average sales prices climbed on lower domestic availability of fed cattle supplies, which fuelled rising livestock costs. Export markets also improved along with the company's operational execution.

In its pork segment, sales volumes decreased on weak customer demand for pork, the company noted. Operating income for the pork segment declined to US$121 million for the quarter due to higher input costs.

Operating income for the prepared foods segment declined despite an increase in sales volume spurred by improved demand for Tyson prepared foods products and incremental volumes from two acquisitions later in fiscal 2013, the company said. The company also cited higher raw material and other input costs of approximately US$40 million and additional costs incurred through investments in Tyson's lunchmeat business and growth platforms.