Tyson Foods fiscal 2008 net income drops 67 percent

Tyson Foods Inc. reported early Monday that its net income for fiscal year 2008 was $86 million, down 67.9 percent from $268 million in fiscal 2007.

The Springdale-based company posted total revenue for fiscal 2008 of $26.86 billion, up  about 4 percent from $25.72 billion in fiscal 2007.

“Although it was a difficult year in many respects, we continued to manage the company for the long term and took important steps in our strategy to become a truly multi-national enterprise,” said Richard Bond, president and CEO of Tyson Foods. “In fiscal 2008 and early fiscal 2009, we acquired three poultry operations in Brazil, entered into majority ownership joint ventures in India and China and are awaiting government approval of our third joint venture in China. The convertible debt and equity issued in September allowed us to make these acquisitions while maintaining a strong balance sheet.”

The company said fiscal 2008 income was hurt by $76 million in pretax charges related to plant closures and other cost-cutting measures.

Total revenue by segments for the company were as follows:
Chicken — $8.9 billion in 2008; $8.2 billion in 2007
Beef — $11.66 billion in 2008; $11.54 billion in 2007
Pork — $3.58 billion in 2008; $3.31 billion in 2007
Prepared Foods — $2.71 billion in 2008; $2.66 billion in 2007

Looking Ahead

The conditions — high feed and fuel prices, global economic slowdown, uncertain international trade markets — that made 2008 tough for Tyson Foods are not likely to abate in 2009.

"Currently, we are six weeks into the new fiscal year, and we are facing multiple challenges,” Bond said. “Tight global credit is affecting exports in the short term; however, we believe the underlying demand for our protein products is still strong. While input cost volatility and pricing pressure continues in chicken, our team is making very good progress improving our chicken business, just as we improved beef and pork.”

Analysts at Goldman Sachs have downgraded Tyson Foods’ earnings prospects. Goldman analyst Ken Goldman said consumers are eating out less often at restaurants that serve chicken. That has not only reduced demand for chicken, but has lowered chicken prices below the five-year average. As a result, Goldman lowered fiscal 2009 earnings estimates for Tyson Foods by 49 percent, Sanderson Farms by 66 percent and Pilgrim’s Pride by 97 percent.

Also, The Street.com recently downgraded the shares of Tyson Foods from hold to sell. The downgrade was “driven by (Tyson Foods’) deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself,” according to The Street.com.

Shares of Tyson Foods (NYSE: TSN) will open Monday (Nov. 10) at $7.46. During the past 52 weeks, the shares have traded at a $19.50 high and a $5.71 low.