7 August 2013

5 minute read

North America

The company reported a net income of $249 million for the quarter compared to $76 million for the same quarter in the previous year.

Over the nine months in the financial year net income rose to $517 million compared to $398 million for the same period in 2012 on sales of $25.48 billion compared to $24.74 billion the year before.

The company had record chicken segment earnings of $220 million with a seven per cent operating margin.

The beef segment rebounded with earnings of $114 million, or 3.1 per cent operating margin.

In its third quarter report Tyson also reported EPS from continuing operations of $0.69 compared to $0.51 last year on an adjusted basis. The company said this was a 35 per cent increase on adjusted basis, or 214 per cent increase on GAAP basis.

The company has repurchased 4 million shares for $100 million and as of 29 June the company had liquidity of $2 billion.

"As expected, we are delivering robust results in the second half of our fiscal year." said Donnie Smith, Tyson's president and chief executive officer.

"We produced strong earnings of 69 cents per share while investing in our people, processes and new businesses and continuing to buy back stock. Our chicken segment achieved record operating income, and our Beef segment rebounded to generate solid returns.

"We see a tremendous amount of opportunity in our business. I am very proud of the team because I'm seeing good long-term decision making to sustain us in the future, and that gives me confidence.

“Prior period results have been revised to reflect a discontinued operation, which was part of our Chicken segment, recognised in the third quarter of fiscal 2013.”

Chicken sales volume grew due to increased domestic and international production driven by stronger demand for chicken products. The increase in average sales price in the third quarter and nine months of fiscal 2013 was primarily due to mix changes and price increases associated with higher input costs. Since many of our sales contracts are formula based or shorter-term in nature, we were able to offset rising input costs through improved pricing and mix.

Operating income was positively impacted by increased average sales price and volume, improved live performance and operational execution, as well as improved performance in our foreign-produced operations.

These increases were partially offset by increased feed costs of $105 million and $440 million for the third quarter and nine months of fiscal 2013, respectively, the company said.

In the beef sector fed cattle supplies decreased, which drove up average sales price and livestock cost.

Sales volumes increased in the third quarter due to increased demand for our beef products.

Sales volumes decreased in the nine months of fiscal 2013 due to a reduction in outside trim and tallow purchases.

Operating income increased in the third quarter and nine months of fiscal 2013 due to improved operational execution and less volatile live cattle markets.

For the third quarter of fiscal 2013, demand for pork products improved, which drove up average sales price and livestock cost despite a slight increase in live hog supplies.

For the nine months of fiscal 2013, live hog supplies increased, which drove down average sales price and livestock cost.

Sales volumes decreased as a result of balancing the company’s supply with customer demand and reduced exports. While reduced compared to prior year, operating income remained strong in the nine months of fiscal 2013 despite brief periods of imbalance in industry supply and customer demand.

Operating income in prepared foods decreased, despite increased sales volumes, as the result of product mix, increased raw material costs and additional costs incurred as Tyson invested in the lunchmeat business.

Because many of the sales contracts are formula based or shorter-term in nature, Tyson said it was typically able to offset rising input costs through pricing.

In the 2014 financial year, Tyson expects overall domestic protein production (chicken, beef, pork and turkey) to increase by approximately one per cent from 2013 levels.

The company
said the recent favourable weather conditions and more ideal planting environment should increase 2014 grain supplies, which should result in lower input costs as well as decreased costs for cattle and hog producers.

Current USDA data shows US chicken production to increase by two to three per cent in 2014 compared to 2013.

“Based on current futures prices, we expect lower feed costs in fiscal 2014 compared to fiscal 2013 of approximately $500 million. Many of our sales contracts are formula based or shorter-term in nature, which allows us to adjust pricing when input costs fluctuate. However, there may be a lag time for price changes to take effect. For fiscal 2014, we believe our Chicken segment will be in or above its normalized range of 5.0 per cent-7.0 per cent,” the company said.

“We expect to see a reduction of industry fed cattle supplies of 2-3 per cent in fiscal 2014 as compared to fiscal 2013. Although we generally expect adequate supplies in regions we operate our plants, there may be periods of imbalance of fed cattle supply and demand. For fiscal 2014, we believe our Beef segment's profitability will be similar to fiscal 2013, but could be below its normalized range of 2.5 per cent-4.5 per cent.

“We expect industry hog supplies to be flat and exports to improve compared to fiscal 2013. For fiscal 2014, we believe our Pork segment will be in its normalised range of six per cent eight per cent.

“In prepared foods, we expect operational improvements and pricing to offset increased raw material costs. Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through increased pricing. For fiscal 2014, we believe our Prepared Foods segment could be slightly below its normalized range of 4.0 per cent-6.0 per cent as we continue to invest in our growth platforms.

“We expect fiscal 2013 sales to approximate $34.5 billion mostly resulting from price increases related to decreases in domestic availability of certain protein and increased raw material costs. We expect fiscal 2014 sales to approximate $36 billion as we continue to execute our strategy of accelerating growth in domestic value-added chicken sales, prepared food sales and international chicken production.”

TheCattleSite News Desk