Tyson Foods 4Q profit falls on higher costs

Tyson Foods 4Q profit falls on higher costs
From AP, staff reports
ST. LOUIS — Tyson Foods’ net income for the fourth quarter was less than half of what it was last year, the meat producer said Monday, with higher grain costs offsetting better prices and revenue, particularly in its chicken business.
Tyson Foods, founded in 1935 with headquarters in Springdale, Ark., is one of the world’s largest processors and marketers of chicken, beef and pork, the second-largest food production company in the Fortune 500 and a member of the S&P 500. The company has 117,000 workers worldwide, including more than 1,100 at its Union City facility.
While there were operating income declines of $3 million and $12 million for beef and pork, respectively, that metric tumbled $223 million for chicken, meaning that an operating income of $141 million last year in chicken turned into an operating loss of $82 million in the final quarter of the year.
President and CEO Don-nie Smith said he expected chicken supplies to drop next year, giving the company a chance to raise prices and profits.
“I feel confident that we will see progressive improvement throughout the year,” Smith told analysts during a conference call. But he warned it could still be months before the chicken division returns to strong profitability. “Our best shot is going to be in the back half” of the year, he said.
All segments are profitable midway through the first fiscal quarter, Smith said.
Tyson posted a net income of $97 million, or 26 cents per share for the final quarter of the year, compared with $213 million, or 57 cents per share, a year ago.
The results fell short of the 31 cents per share that analysts had expected, according to a survey by FactSet. Revenue climbed 13 percent to $8.4 billion, beating expectations for revenue of $8.2 billion.
The company increased prices sharply, with chicken up 5 percent, pork up 13 percent, and beef up 19 percent. Still, profit margins remain under pressure because of higher costs at Tyson.
That was a shift from previous years, as recently as 2008, when feed costs rose but Tyson was unable to pass along those costs to consumers because of weak demand.
Yet margins are under pressure. The company said its fourth-quarter operating income was 2 percent, compared to 5.3 percent the year before. For the full year, operating income fell to 4 percent from 5.5 percent.
Net income for the full 2011 fiscal year fell slightly from the year before, in part because of a $675 million jump in feed and ingredient costs.
Grains and beans to feed animals are the most expensive cost to raise chicken, pigs and cattle. Corn hit record highs this summer and other crop prices have shot up as well.
Tyson Foods said it earned $750 million, or $1.97 per share, compared to $780, or $2.06 during the same period last year.
Annual net income was below analyst expectations for net income of $2.01 per share.
Revenue was $32.27 billion, compared with $28.43 billion the year before.
Tyson reported adjusted net income for the year, excluding gains from tax provisions and equity sales, of $1.89 per share. That was below analyst expectations of $1.95 per share.
Revenue will likely be flat during its current fiscal 2012 year and Tyson forecast sales of roughly $34 billion.
But profits might improve during 2012. Tyson said it expects U.S. meat supplies to fall between 2 percent and 3 percent during the fiscal year, which will help the company raise prices further. Tyson expects to spend between $800 million and $850 million to update its facilities to make them more efficient.
Shares of Tyson Foods have traded between $15.46 and $20.12 over the past 52 weeks. Published in The Messenger 11.22.11

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