Tyson Foods Profits More Than Triple

Tyson Foods delivered in nearly every quadrant of its business as the meat giant posted quarterly profits of $249 million, more than triple one year ago when profits topped $76 million.

Notably, conditions in Tyson’s beef segment improved and its chicken and pork business continued to excel.

Earnings per share for the quarter ending June 30 rose to 69 cents compared to 22 cents one year ago. Revenues for the Springdale-based protein company cleared $8.73 billion versus $8.26 billion in the previous year’s comparable quarter.

“As expected, we are delivering robust results in the second half of our fiscal year.” said Donnie Smith, Tyson’s president and CEO. “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.”

BY SEGMENT
Three of Tyson Foods four distinct segments – chicken, beef, and pork – all saw improvements. Smith warned that the fourth segment, prepared foods, struggled with sales volume.

Chicken: Tyson said that 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 reported.

Beef: The once struggling beef sector saw supplies shrink and prices rise, which added to demand and profitability.

“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,” the company said.

Pork: Demand remained strong for Tyson’s pork products, which have been a bright spot on the firm’s financials.

“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,” the company disclosed. “Sales volumes decreased as a result of balancing our 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.”

Prepared Foods: The prepared foods category seemed to be the one dud in the company’s report. Operating income decreased despite increased sales volumes.

“As the result of product mix, increased raw material costs and additional costs incurred as we invested in our lunchmeat business,” Tyson Foods said. “Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through pricing. However, there is a lag time for price increases to take effect.

Shares of Tyson Foods (NYSE: TSN) closed Friday at $28.51. The company’s stock has traded between a low of $14.07 and a high of $28.58 during the past year.

In pre-market trading on Monday, Tyson Foods shares were trading nearly four percent higher.

Kim Souza with our content partner, The City Wire, has more analysis of the Tyson Foods report following the company’s morning earnings call.