Tyson Foods CEO Says Eye On Domestic, Foreign Growth

Tyson Foods is in an “enviable position” in the meat industry and that affords it numerous options, CEO Donnie Smith told an investor conference on Wednesday (March 7).

Despite posting a 47% decline in first quarter net income of $156 million, Springdale-based Tyson Foods reported a return to profitability in its chicken segment and it maintained robust profits in its pork business in its latest quarterly earnings. The company’s beef business has been under market pressures in recent quarters and is expected to see more rough sledding in the short-term.

Still, Smith said that a strong balance sheet has Tyson Foods eyeing growth opportunities.

“It gives us options,” Smith said at the Goldman Sachs 16th Annual Agricultural Biotech Forum in New York. “And that includes building out our foreign operations. We’re establishing company-owned chicken farms in China to supply our three plants, and we’re also double-shifting our plants in Brazil.”

In the U.S., Smith hinted that the company’s prepared food business could see new investment.

“Domestically, we’ll use our capital to grow our prepared foods business, and that could mean building or buying, depending on our needs and the opportunities available. We’ll continue reinvesting in our business, which has put us in a great competitive position. We also will maintain our focus on product innovation and adding value to chicken as we help our customers grow their businesses,” Smith said.

Noel White, senior group vice president of Tyson’s fresh meats division, also told investors he expected the company’s pork margins to remain strong while its beef margins should improve throughout the year following a period of margin compression.

“We originally expected to see a 1-2% decrease in available cattle in 2012, but because fewer head were processed during this recent period of margin compression, we anticipate the availability of fed steers and heifers to be adequate or even greater for the balance of our fiscal year.”

White added that Tyson’s beef processing plants are located in the regions with the highest concentrations of fed cattle, which contributes to the company’s competitive cost structure.

In February, Tyson Foods reported quarterly net income of $156 million compared to $294 million one year ago. Revenue for the first quarter climbed 9.4% higher to $8.3 billion.

A breakdown of segment profitability included:

• Chicken operating income $32 million, or 1.2% of sales
• Beef operating income $31 million, or 0.9% of sales
• Pork operating income $165 million, or 11.2% of sales
• Prepared Foods operating income $51 million, or 5.9% of sales