Industry News - PM

Tyson posts strong quarter; assesses bird flu, PEDv impact


By Michael Fielding on 1/31/2014

Tyson Foods Inc. posted its stronger-ever first-quarter sales on Friday while saying it would curb expansion in China due to the impact of avian influenza. Tyson also predicted the porcine epidemic diarrhea virus (PEDv) would reduce pork production.

The company said it will expand more slowly in China than previously planned because demand has not recovered from the avian influenza outbreak, creating an oversupply of chicken, Chief Executive Donnie Smith told analysts on a conference call.

“There has been a change in the market dynamics in China over the past year following widespread food safety concerns, an avian influenza outbreak and economic slowdown,” he said.  “And now there are new concerns about avian influenza.”

It will proceed more slowly in building new company-owned chicken farms following completion of those planned for this year. “We are not changing our path, just our pace,” Smith said.

Tyson now expects it will take longer to break even on its China investment than the end of the fiscal year, as it had previously forecast.

PEDv impact

PEDv is spreading to more states and will decrease domestic hog supplies by 2 percent to 4 percent this fiscal year, the company predicted.  Heavier weights will offset some of the head-count reductions, but wholesale price increases are expected. PEDv could be influencing up to 30 percent of the sow herd, the company said.

In the beef segment, Tyson said record high prices should continue through 2014. Chicken supplies are projected to rise2 percent for the last three quarters of the company’s fiscal year.

SNAP

Cuts to the U.S. supplemental nutrition assistance program (SNAP) could reduce total food sales growth by 1 percent, Smith said. Tyson is looking for ways to retain those shoppers as customers even as they have less money to spend, he said.

In response to a question about recent propane shortages due to record cold temperatures, Smith said Tyson bought propane in Houston this winter and transported it to its growers who needed it, mitigating risk to its business. “It has just been a heroic effort by a large group of people. I’m really proud of them for jumping in there and frankly coming to the rescue for some of our growers,” he said.

For the quarter ended Dec. 28, Tyson reported a profit of $254 million, or 72 cents a share, up from $173 million, or 48 cents a share, a year ago. Sales increased 4.7 percent to $8.76 billion.

Analysts expected 63 cents a share on revenue of $8.75 billion, according to Thomson Reuters.

Tyson forecast sales for the year of about $36 billion, up 5 percent.


 
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