Tyson Foods posts $156 million quarterly income; beats estimates

Springdale-based Tyson Foods Inc. is beginning to see consistent financial gains, with its second fiscal-quarter net income reaching $156 million, far ahead of analyst estimates.

For the second quarter ending April 3, the global processor, marketer and distributor of meat had total revenue of $6.916 billion, up 9.6% over the 2009 period. The earnings per share for the quarter was 42 cents, beating Wall Street estimates of 34 cents.

"We are very happy with these results, especially because our fiscal second quarter is typically not our best," Donnie Smith, president and CEO of Tyson Foods, said in a statement. "Our Beef and Pork segments were the main drivers with very strong profitability. Prepared Foods was within its normal range despite rising input costs. The Chicken segment showed significant improvement, due in part to our continued focus on operational efficiencies.”

Revenue for the first six months of the company’s fiscal year is $13.551 billion, up 5.6% over the $12.828 billion in the 2009 period. Net income for the first six months is $315 million, compared to a $223 million loss in the 2009 period.

For the quarter, the company posted operating income gains in all segments — not a regular occurrence in the 2008 and 2009 fiscal years.

The chicken operating income was $114 million (4.6% of sales); beef operating income was $126 million (4.6% of sales); pork segment operating income was $69 million (7.4% of sales); and prepared foods operating income was $37 million (5% of sales).

"While we did predict tightening domestic availability of protein would lead to stronger fundamentals, it happened sooner than expected," Smith said in the statement. "And although the second quarter was a great quarter for us, we think we’ll do even better the second half of the fiscal year as our operational performance continues to improve. We are very pleased with how our third quarter is going, and the summer grilling season is just getting started."

The company boosted sales gains expectations in the beef and pork segments from 2.4%-4.5% to 4% and 6%, respectively.

Tyson Foods’ officials also provided other commentary on the 2010 outlook.
• The company expects to see continued gains in the chicken segment, with grain costs down as compared to fiscal 2009.

• The company expects a reduction in cattle supplies of approximately 1% in fiscal 2010, but the drop in supply should not create “a significant change in the fundamentals of our Beef business as it relates to the previous few quarters.”

• In the pork business, the company expects a gradual decline in hog supplies in the first half of fiscal 2010 that will accelerate into the second half of fiscal 2010, resulting in industry slaughter slightly higher than 2007. Company officials believe they will have adequate supplies in the regions they operate.

• The company also expects raw material costs will likely increase in fiscal 2010 for the prepared foods segment. Officials have made changes in sales contracts that move them away from long-term fixed price contracts and toward formula or shorter-term pricing, “which will better enable us to absorb rising raw material costs. However, in the third quarter fiscal 2010, we will continue to see a negative impact until some of the latest price increases take effect.”

• And in what may be a good sign for the overall national economy, Tyson Foods’ officials plan to increase total capital expenditures for fiscal year 2010 to $700 million.

Tyson Foods, Inc., founded in 1935, is one of the world’s largest processors and marketers of chicken, beef and pork, the second-largest food production company in the Fortune 500 and a member of the S&P 500. The company has about 117,000 employees, operates more than 400 facilities in the U.S. and around the world, and provides products and service to customers throughout the United States and more than 90 countries.

The company posted an $86 million net income gain in fiscal 2008 after reaching $268 million in net income in fiscal 2007. In fiscal 2009, the company posted a loss of $537 million.

Shares of Tyson Foods (NYSE: TSN) closed Friday at $18.62. During the past 52 weeks, the share price ranged from a $20.57 high to a $10.76 low.