December 8, 2014

Tyson Foods to drop Brazil, Mexico operations

The deals to sell Tyson Foods' Brazil and Mexico operations to its competitor JBS are expected to finally close at the start of 2015 and by March of the same year, respectively. The larger Mexico deal is only awaiting regulatory approval, said Tyson CEO Donnie Smith.

As early as late July, the US meat giant announced plans to sell its Brazil and Mexico operations as they faced business challenges. Smith said the Brazil operations were underperforming while those in Mexico paled in comparison to the potential seen in the US$8.5-billion acquisition of Hillshire Brand.

Tyson, has also put on hold its expansion in China because of weak consumer demand due to food-safety concerns.

While Tyson's chicken business has been profitable in the US due to lower grain costs and escalating beef prices, it is not the case in its international business.

In its recent annual report, Tyson reported 7.9% margins for US chicken in fiscal year 2014, while its international chicken business suffered a negative 8.8% operating margin. Its plants were running at just 67% of an 8 million head capacity.

International sales grew only minimally by 4.3% to $1.381 billion in fiscal 2014, but the operating losses continued to gallop since 2012 when it amounted to $70 million. In 2014, the figure ballooned to $121 million, more than thrice the $37 million lost in 2013.