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Tyson Shows Rise in Sales

7 February 2012, at 10:31am

US - Tyson Foods has reported a rise in first quarter sales of 9.4 per cent compared to last year up to $8.3 billion.

In the chicken sector operating income was $32 million, or 1.2 per cent of sales. The beef sector saw operating income of $31 million, or 0.9 per cent of sales and the pork sector had operating income $165 million, or 11.2 per cent of sales. Prepared Foods had an operating income $51 million, or 5.9 per cent of sales.

"Even with higher feed ingredient costs, our Chicken segment returned to profitability in the fiscal first quarter on improved pricing and execution," said Donnie Smith, Tyson's president and chief executive officer.

"Prepared Foods had a strong performance, and the Pork segment continued to produce outstanding results. Our Beef segment is experiencing a rough patch as a result of challenging market fundamentals. Although we are still outperforming industry indexes, if current conditions continue, our Beef results will be pressured in our second quarter.

"Our Q1 results demonstrate that we are competitive and that our multi-protein, multi-channel, multi-national business puts us in a position to deliver sustainable earnings over time," Mr Smith said.

In the 2012 financial year, overall domestic protein (chicken, beef, pork and turkey) production is expected to decrease. Because exports are likely to remain strong, we forecast total domestic availability of protein to be down between two and three per cent compared to fiscal 2011, which should continue to support improved pricing.

In the chicken sector, the company expects industry production will fall by approximately four per cent from fiscal 2011, which should further gradually improve market pricing conditions. Current futures prices indicate higher feed costs in fiscal 2012 compared to fiscal 2011.

"We expect to offset the increased feed costs with pricing and mix improvements as well as operational efficiencies expected to result in additional savings of $125 million in fiscal 2012. Our Chicken segment returned to profitability in the first quarter of fiscal 2012 and we expect it to strengthen throughout the year," said Mr Smith.

"in beef, we expect to see a reduction in fed cattle supplies of 1-2% for the remainder of fiscal 2012 as compared to fiscal 2011. Although we generally expect adequate supplies in the regions we operate our plants, there may be periods of imbalance of fed cattle supply and demand. We anticipate beef exports will remain strong in fiscal 2012. While our Beef segment remained profitable in the first quarter of fiscal 2012, we were challenged by volatile market conditions which made it difficult to pass along increased input costs. We have seen difficult margin conditions early in the second quarter of fiscal 2012, but expect them to recover throughout the second-half of the fiscal year. For fiscal 2012, we believe our Beef segment will be profitable, returning to our normalized range in the second-half of the fiscal year.

"In pork, we expect hog supplies in fiscal 2012 to be up 1-2% compared to fiscal 2011 and to be adequate in the regions in which we operate. Additionally, we expect pork exports to remain strong in fiscal 2012. While we expect results should remain above our normalized range for the balance of the fiscal year, we do not expect the remainder of fiscal 2012 to be at our first quarter levels.

In prepared foods, we expect operational improvements and increased pricing to offset increased raw material costs. Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through increased pricing. We expect results should remain within our normalized range for the balance of the fiscal year.

"We expect fiscal 2012 sales to exceed $34 billion mostly resulting from price increases related to decreases in domestic availability of protein and rising raw material costs."