Tyson Foods Posts Higher Profits, Sells Mexican And Brazilian Operations

Tyson Foods capped a busy weekend with a higher third quarter profit, the sale of its Mexican and Brazilian poultry business, and closure of three U.S. plants.

As it announced its third quarter profits of $258 million on sales of $9.68 billion, Springdale-based Tyson Foods also said it would divest its poultry division south of the border. One year ago, Tyson recorded third quarter profits of $245 million on revenue of $8.73 billion.

“Overall, our results were in line with our expectations,” said CEO Donnie Smith. “The Chicken segment could have performed better had it not been for isolated issues at a couple of plants. The Beef segment finished the quarter remarkably well after a difficult start. The Pork segment had a record third quarter despite tight hog supplies due to the PED virus. The Prepared Foods segment had a disappointing quarter primarily due to the continued run up in pork raw material inputs.”

On Friday, Tyson Foods announced it would close three U.S.-based facilities related to its Prepared Foods sector in an effort to streamline costs ahead of its $8.55 billion acquisition of Hillshire Brands. Approximately 975 workers would be impacted by the closures, which are scheduled to take place between now and mid-2015.

MEXICO, BRAZIL SALE
In conjunction with its earnings release n Monday (July 28), Tyson Foods announced it had reached a definitive agreement with JBS SA and Pilgrim’s Pride to sell its poultry businesses in Mexico and Brazil for $575 million.

The transaction will be paid for in cash.  JBS is Tyson’s largest competitor on the world scene and is a majority owner in Pilgrim’s Pride.

Tyson said JBS and Pilgrim’s Pride currently expect to maintain all the operations working to capacity with the existing workforce and to maintain all labor contracts in both countries.

“Although these are good businesses with great team members [in Mexico and Brazil], we haven’t had the necessary scale to gain leading share positions in these markets,” Smith said.

“In the short term, we’ll use the sale proceeds to pay down debt associated with our acquisition of Hillshire Brands. Longer term, we remain committed to our international business and will continue to explore opportunities to extend our international presence,” he said.

Tyson Foods’ Mexican business will be acquired through Pilgrim’s Pride, whose majority owner is JBS USA Holdings, Inc., a wholly owned subsidiary of JBS SA. The Brazilian business is to be acquired through JBS Foods, also a wholly owned subsidiary of JBS SA.

The Mexican business, known as Tyson de México, is a vertically integrated poultry business based in Gomez Palacio in North Central México. It has three plants and employs more than 5,400 employees in its plants, offices and seven distribution centers.
The acquisition of Tyson’s Brazil operations, known as Tyson do Brasil, involves three fully integrated production plants, two in Santa Catarina and one in the state of Parana. Tyson do Brasil employs 5,000 employees.

Tyson Foods said it “intends to remain focused” on its poultry operations in Asia, which include three poultry plants in China and majority ownership of two poultry plants in India. Combined, these Asian operations employ approximately 5,000 people.