Tyson Foods Profits Struggle Due To Chicken Segment

An $82 million loss in the chicken segment pulled fourth-quarter earnings for Tyson Foods down to $95 million, well below the $208 million earned during the 2010 period.

For the year, Tyson Foods’ pork segment was the star, posting the largest operating income ($560 million) of the four operating segments.

Earnings per share of 26 cents missed the 32 cents per share that was the consensus of analyst estimates.

Revenue during the fourth quarter was $8.404 billion, up 12.9% compared to the 2010 period.

For the fiscal year, Springdale-based Tyson Foods recorded net income of $733 million, down 4.18% compared to the 2010 period. The full-year earnings per share reached $1.97, ahead of the $1.95 that was the consensus of analyst estimates. Full year sales totaled $32.266 billion, a gain over the $28.43 billion in the 2010 period.

“In fiscal 2011, we produced record sales and our second best EPS in company history despite record input costs, which included $675 million in additional feed and ingredient costs in our Chicken segment,” Donnie Smith, Tyson’s president and CEO, said in a statement released Monday (Nov. 21) morning.

Smith said about 6 weeks into the company’s first fiscal quarter all operating segments have positive operating income.

The company was able to use roughly $1 billion in cash flow during 2012 to reduce reported debt. Total debt for the company as of Oct. 1 was $2.182 billion, down from $2.536 billion as of Oct. 2, 2010.

SEGMENT REPORTS
• Chicken segment sales during the fiscal year total $11.017 billion, up 9.49% with average price increases of 4.7%. Operating income in the segment during the year was $164 million, down from the $519 million in the 2010 period. The fourth quarter saw an $82 million loss, down substantially from the $141 million gain in the 2010 period.

“Current futures prices indicate higher grain costs in fiscal 2012 compared to fiscal 2011. We expect to offset the increased grain costs with operational, pricing and mix improvements. Our Chicken segment is currently profitable and we expect it to strengthen throughout the year,” the company noted in the earnings report.

• Beef segment sales during the fiscal year total $13.549 billion, up 15.7% with average price increases of 16.9%. Operating income in the segment during the fiscal year was $468 million, down compared to the $542 million in the 2010 period. Operating income during the fourth quarter reached $118 million, down slightly from $121 million in the 2010 period.

• Pork segment sales during the fiscal year total $5.46 billion, up 19.94% with average price increases of 15.2%. Operating income in the segment during the year was $560 million, up 46.9% compared to the $381 million in the 2010 period. Operating income during the fourth quarter was $113 million, down from $125 million in the 2010 period.

“(W)e expect pork exports to remain strong in fiscal 2012. Based on these factors, we expect strong fundamentals in our Pork business to continue in fiscal 2012,” the company noted in the report.

• Prepared Food segment sales during the fiscal year total $3.215 billion, up 7.2% with average price increases of 9.6%. Operating income in the segment during the year was $117 million, down from the $124 million in the 2010 period. Operating income during the fourth quarter was $28 million, up over the $10 million in the 2010 period.

OUTLOOK
Company officials said fiscal year 2012 revenue should top to $34 billion “mostly resulting from price increases related to decreases in domestic availability of protein and rising raw material costs.”

Tyson officials also plan to spend up to $850 million in capital expenditures during 2012.

“We will continue to make significant investments in our production facilities for high return operational efficiencies, other profit improvement projects and development of our foreign operations,” the company noted in the earnings report.

Shares of Tyson Foods (NYSE: TSN) were set to open Monday at about $18. The stock price closed Friday at $19.45. During the past 52 weeks the share price has ranged from a $20.12 high to a $15.60 low.

Michael Tilley with our content partner, The City Wire, is the author of this report. He can be reached by e-mail at [email protected].