Tyson Profit Up 47 Percent; Chicken Demand in China Slows

Tyson Foods Inc. of Springdale on Friday said quarterly earnings rose 47 percent, driven by record first-quarter sales in its chicken, beef and prepared food segments.

The world's largest meat processor said net income was $254 million, or 72 cents per share, up from $173 million, or 48 cents per share, during the same quarter last year.

Revenue was about $8.8 billion, up about 5 percent from $8.4 billion in the same quarter last year.

"I'm very pleased with our strong first quarter results, and I'm confident in my expectations for the full year," Donnie Smith, president and CEO, said in a news release. "We're growing sales and earnings and executing our strategy -- including making our third prepared foods acquisition in less than a year -- while reinvesting in our existing businesses and buying back shares.

Earlier this month, the company announced it had bought Bosco's Pizza Co. of Warren, Mich., makes a variety of stuffed breadsticks and frozen pizzas. It serves the food service sector and retail customers throughout the Midwest and some retailers nationwide.

During a Friday morning media conference call, Smith said Bosco's was a great fit for Tyson, which can use its sales and distribution expertise to expand on Bosco's regional strength.

"They are very, very good at what they do," Smith said. "A large portion of their business today goes to the school lunch program in that five-state region. Their products are very well known and very well accepted among their customer base."

Sales in prepared foods hit $907 million, up about 8 percent from $841 million in the first quarter last year. Operating income was $16 million, down 51 percent from $33 million in the first quarter last year.

Tyson's chicken, beef and pork divisions each reported sales increases, as well:

  • Chicken sales rose 2 percent to $2.9 billion, and operating income more than doubled to $225 million, a company record.
  • Beef sales rose 7 percent to $3.7 billion, and operating income rose 26 percent to $58 million.
  • Pork sales rose 4 percent to $1.4 billion -- the second-largest in company history -- and operating income fell 3.2 percent to $121 million.

For the full year, Tyson Foods projects sales of about $36 billion, above analysts' estimates.

Tyson's international division lost $28 million, with China accounting for a major part of the losses. Smith said the company has been aggressively building company-run chicken houses but low demand and an oversaturation of the market has caused Tyson to slow that plan.

Smith said Tyson will finish building the houses currently under construction and acquire land-use rights for future houses. But he said new construction will wait until the market demand returns.

"We're not going to be double-shifting our China plans until we see the demand situation change," Smith said. "Demand is down, the market is oversupplied and [with] the pricing structure it doesn't make any sense for us right now to continue … to keep our [foot] on the accelerator.

"We won't start that construction during the fiscal year like we would have previously."