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Tyson Foods shares jump, as beef, pork boost profit hopes

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Shares in Tyson Foods jumped to an eight-month high after the meat giant unveiled a smaller-than-expected drop in profits, helped by improved beef and pork margins – which it expected to last into next year.

The Arkansas-based group, the top US meat processor, unveiled earnings down 8% at $447m for the three months to July 1, on revenues up 4.6% at $9.85bn.

On a per-share basis, underlying earnings reached $1.28 per share, ahead of the $1.18-per-share figure that Wall Street had expected.

While Tyson Foods reported a 21% tumble in $298m in operating profits at its chicken division thanks to marketing and staff costs, the decline was largely offset by improvement in other meats.

In pork, operating profits rose by 11.5% to $136m, spurred by "strong demand for our pork products and increased exports", which enabled price rises, and helped margins rise by 0.7 points to 10.3%.

In beef, margins rose by 1.3 points to 3.7%, boosted by "stronger domestic demand for our beef products and increased exports", at a time of "improved availability of cattle supply".

Sales price for the quarter increased, thanks to the firm demand, during a period which witnessed a "decline in live fed cattle costs".

'Favourable operating environment'

"The beef and pork segments were very strong performers," said Tom Hayes, the Tyson Foods chief executive.

And Mr Hayes forecast a "favourable operating environment" for the divisions for its 2018 financial year, which begins on October.

Margins in pork would, helped by a rise of about 8% hog supplies, come in above their "normalised range" of 6-8% in the next financial year, after closing the group's current financial year at about 12%.

In beef, margins will end this financial year at about 5%, and maintain that level in the 2018 period, helped by "ample supplies" of cattle in the area in which Tyson operates.

Market reaction

Mr Hayes said: "We're nearing the end of a record year of earnings per share and operating income, and we're looking ahead to fiscal 2018 with great enthusiasm.

"We anticipate delivering another record year," he said.

Tyson Foods shares touched $67.70 in early deals in New York, before easing back to $66.43 in late morning trade, a gain of 4.9% on the day.

By Mike Verdin

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