May 12, 2011
Tyson experiences a surge in sales
US meat and poultry processing giant Tyson Foods has experienced an increment in sales by 15.7% to reach US$8 billion for the second quarter of 2011 in contrast to last year.
Overall Operating Margin was 3.8% with chicken operating income coming in at US$37 million, or 1.4% of sales.
Beef operating income was US$94 million, or 2.8% of sales, and pork operating income was US$146 million, or 10.5% of sales.
Prepared foods operating income was US$31 million, or 4% of sales.
Net interest expense is projected to be US$100 million lower in fiscal 2011 compared to fiscal 2010 due to bond buybacks, recent rating upgrades and the amendment of our revolving credit facility.
"Overall, it was a solid quarter, and I am pleased with the results," said Donnie Smith,
Tyson Foods' president and chief executive officer.
"We produced record sales for the second quarter on substantially higher sales prices in addition to increased volume. All segments except chicken were within or above their normalised operating margin ranges. While chicken was well below its normalised range, it was profitable, and we believe it will continue to be profitable in the third and fourth quarters. Our beef segment remains solid, and our pork segment continues to produce outstanding returns. Prepared foods is moving in the right direction, and we have got more work to do in this segment.
"Most exciting to me is that we still have a significant amount of opportunity to increase profitability throughout Tyson Foods. We will continue to face challenging and volatile market conditions in fiscal 2011, but we maintain our belief that earnings should be comparable to 2010 due to our on-going operational improvements and focus on execution," Smith said.
In 2011, overall domestic protein (chicken, beef, pork and turkey) production is expected to increase slightly.
As exports are likely to grow as well, we forecast total domestic availability of protein to be down slightly compared to 2010, which should continue to support pricing.
Based on USDA data, Tyson expect industry production will increase from fiscal 2010 levels. In addition, current futures prices indicate higher grain costs in fiscal 2011 compared to fiscal 2010 of nearly US$500 million.
The company said it expects to offset a portion of the increased grain costs and the impact of additional supplies with operational, pricing and mix improvements.
Due to these factors, Tyson said it expects its operating margins to be below the company's normal range; however, it continues to expect to remain profitable during the remainder of 2011.
Tyson expects hog supplies in 2011 to be comparable to 2010 and to be adequate in the regions in which the company operates.
Pork exports are expected to remain strong in fiscal 2011.
Operational improvements and increased pricing will offset a likely increase in raw material costs in fiscal 2011. As many of our sales contracts are formula based or shorter-term in nature, the company is able to offset rising input costs through increased pricing.
Sales for 2011 are forecast to exceed US$32 billion mostly due to price increases associated with the rising raw material costs.
