Tuesday, May 11, 2010

Tyson returns to profitability

Meat producer Tyson Foods Inc. returned to profitability in its second quarter on improvements in its chicken business and higher beef and pork revenue.
The company said it expects the trends to continue as demand picks up for exports and in restaurants at home.

Results beat analyst expectations, and the company said the second half of the year should be strong, too, as pricing continues to improve and demand keeps increasing as people start going to restaurants and eating more meat again.

The industry has been working through a downturn brought on by a combination of high production costs — because of volatile commodities prices — and slumping demand as shoppers pulled back on spending. That crimped profit margins and forced companies to cut production to raise prices and make more money, which is happening now for Tyson.

For pork and beef, which are typically more profitable, the recovery is well under way, particularly in beef.

Tyson — based in Springdale, Ark. — earned $156 million, or 42 cents a share, for the three months ended April 3. That reverses a net loss of $119 million, or 32 cents a share, a year earlier.

Revenue climbed 10 percent to $6.92 billion from $6.31 billion.

Dark chicken hits highs

Tyson's chicken division, which has been hit by oversupply and consumer spending cuts, reported $2.49 billion in revenue, compared with $2.36 billion a year ago, on increased average prices. Grain costs rose by $19 million in the quarter.

The company noted that dark meat chicken is selling at highs never seen before in the U.S. Spokesman Gary Mickelson said the company is producing a wider variety of dark meat products, such as boneless thigh meat.

Beef revenue climbed to $2.76 billion from $2.42 billion, helped by higher export sales volume and better operating margins. For pork, revenue increased to $929 million from $844 million partly on improved operating margins.

Smith said the company is seeing more demand from restaurants, particularly for expensive items such as beef tenderloin. Casual dining restaurants are a major outlet for that cut, and so seeing it rebound shows people are becoming more confident in spending money in restaurants, he said.

The prepared foods unit also posted better revenue, as sales climbed to $734 million from $684 million on improved sales volume and increased average prices.

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