PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 22:41 UK, 19th Nov 2012, by Agrimoney.com
Tough times for meat groups not over, says Tyson

Tyson Foods warned that tough times for meat groups were not over yet, despite the biggest US-based protein producer reporting a near-doubling in quarterly profits, which sent its shares soaring 10%.

Donnie Smith, the Tyson chief executive, said that its 2013 fiscal year, which began last month, was "likely to be equally, if not more difficult" than the previous year, in which the meat and livestock industry was tested by rising grain prices and difficulty passing on these increases in full to consumers.

The group was likely to see profitability at its beef and chicken operations fall short of typical levels although, although "strong" US exports would allow the pork division to report margins at least in line with the historical norm.

"The drought conditions will the summer of 2012 reduced grain supplies which will result in higher input costs," Tyson said.

'Rising above the noise'

However, the group forecast that it would raise revenues to "approximately" $35bn for the year to next October, suggesting that it is well on target to meet market expectations for sales of $34.9bn.

Indeed, Mr Smith said that Tyson was, after years of investment and fine tuning in its sales prices, "rising above the noise of commodity markets to produce solid more consistent results".

"It has taken us several years and a lot of work to get to this point, and although there is much more to be done, I believe we have reached a new level of sustainable performance."

In the three months to October 1, the last quarter of its 2011-12 fiscal year, the group reported earnings of $185m, up from $97m a year before.

At an underlying $0.55 per share, the earnings also beat Wall Street forecasts for a $0.44-a-share result.

Poultry revival

The improvement reflected in the main a return to the black in the group's poultry division, which was boosted by the restructuring undertaken industry-wide last year to cut production and regain pricing power over chicken.

Tyson said that its poultry slaughter, by weight, fell by 4% during 2011-12.

Quarterly profits in the, smaller, prepared foods division soared 39% to $39m, also helping balance out the 40% slump to $68m in pork division, which was squeezed by a drop in pork prices resulting from a rise in slaughter rates forced by higher grain costs.

In beef, quarterly operating profits were flat, with high prices balancing out a hit from lower sales volumes and higher costs of buying fattened cattle.

'Didn't make excuses'

While, for the full 2011-12, earnings fell 22% to $583m, Mr Smith termed the result "our best effort to date" given the market headwinds.

"Our team members didn't make excuses they made a difference, and they made money," he said.

Tyson shares closed 10.9% higher at $18.72 in New York.

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