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Tyson Foods Reports Higher Gross Profit in Latest Quarter

04 February 2014

US - In its first quarter results, Tyson Foods reports sales to 28 December of $8.761 billion, up from $8.366 billion the previous year. While the cost of sales was also higher - up from $7.827 billion to $8.076 billion - gross profit reached $685 million compared to $539 million in the same quarter in 2012.

In its report for the first quarter, Tyson Food highlights an increase of 47 per cent in Earnings Per Share (EPS) to $0.72, up from $0.49 in first quarter of prior year.

Sales of $8.8 billion are forecast, an increase of 4.7 per cent over first quarter of prior year, while operating income increased 36 per cent to $412 million. Overall operating margin was 4.7 per cent.

Chicken segment operating income was a record at $225 million, with an operating margin of 7.5 per cent.

Pork segment operating income was $121 million with an operating margin of 8.5 per cent.

The Company re-purchased 4.6 million shares for $150 million, and its liquidity totalled $1.8 billion on 28 December 2013.

CEO's Comments

President and CEO of Tyson Foods, Donnie Smith, commented: "I'm very pleased with our strong first quarter results, and I'm confident in my expectations for the full year. 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.

"We're in a position any company wants to be in, which is being able to make deliberate, long-term decisions to create shareholder value. But we're maintaining our sense of urgency, our flexibility and our opportunistic mindset. We're generating momentum that will take us into 2015, 2016 and beyond."

Segment Performance Review


First quarter of fiscal 2013 reflects a discontinued operation which was part of Tyson's Chicken segment.

Sales volumes grew due to increased international production and mix of rendered product sales. The decrease in average sales price was primarily due to lower feed ingredient costs and volatile markets in our international operations, partially offset by mix changes.

Operating income was positively impacted by increased sales volume, operational improvements and lower feed ingredient costs of $170 million. These increases were partially offset by losses of approximately $28 million in our international operations and decreased average sales price.


Sales volumes increased due to better demand for our beef products. Average sales price increased due to lower domestic availability of fed cattle supplies, which drove up livestock costs.

Operating income increased due to improved operational execution, less volatile live cattle markets and improved export markets, partially offset by increased operating costs.


Sales volumes decreased as a result of balancing the Company's supply with customer demand and reduced exports. Average sales price increased primarily due to mix changes and lower total hog supplies, which resulted in higher input costs.

While reduced compared to prior year, operating income remained strong despite brief periods of imbalance in industry supply and customer demand. The Company reports it was able to maintain strong operating margins by maximising revenues relative to live hog markets, partially due to operational and mix performance.

Prepared Foods

Sales volumes increased as a result of improved demand for our prepared foods products and incremental volumes from the purchase of two businesses later in fiscal 2013. Average sales price grew due to better product mix and price increases associated with higher input costs.

Operating income decreased, despite increases in sales volumes and average sales price, as a result of higher raw material and other input costs of approximately $40 million and additional costs incurred as we invested in our lunchmeat business and growth platforms. Because many of its sales contracts are formula-based or shorter-term in nature, the Company is typically able to offset rising input costs through pricing. However, there is a lag time for price increases to take effect.


In fiscal 2014, Tyson Foods expects overall domestic protein production (chicken, beef, pork and turkey) to increase approximately one per cent from fiscal 2013 levels. Grain supplies are expected to increase in fiscal 2014, which should result in lower input costs.

The following is a summary of the fiscal 2014 outlook for each segment, as well as an outlook on sales, capital expenditures, net interest expense, debt and liquidity and share re-purchases:


The company expects domestic chicken production to increase around three per cent in fiscal 2014 compared to fiscal 2013. Based on current futures prices, it expects lower feed costs in fiscal 2014 compared to fiscal 2013 of approximately $600 million. Many sales contracts are formula-based or shorter-term in nature but there may be a lag time for price changes to take effect. Due to the relative value of chicken compared to other proteins, demand is likely to remain strong in fiscal 2014.

Tyson Foods believes its Chicken segment will be in or above its normalised range of 5.0 to 7.0 per cent for fiscal 2014.


The Company expects to see a reduction of industry fed cattle supplies of two to three per cent in fiscal 2014 as compared to fiscal 2013. Although it generally expects adequate supplies in regions where it operates plants, there may be periods of imbalance of fed cattle supply and demand.

For fiscal 2014, the Beef segment's profitability is expected to be similar to fiscal 2013 but could be below its normalised range of 2.5 to 4.5 per cent.


Industry hog supplies are expected to decrease around three per cent in fiscal 2014 compared to fiscal 2013, offset by increased average live weights.

For fiscal 2014, its Pork segment is forecast to be in its normalised range of 6.0 to 8.0 per cent.

Prepared Foods

Tyson Foods' operational improvements and pricing are expected to offset increased raw material costs. Because many of its sales contracts are formula-based or shorter-term in nature, the Company is typically able to offset rising input costs through increased pricing.

As it continues to invest heavily in its growth platforms, the Prepared Foods segment could be slightly below its normalised range of 4.0 to 6.0 per cent for fiscal 2014.


Fiscal 2014 sales are forecast to approximate $36 billion as the Company continues to execute a strategy of accelerating growth in domestic value-added chicken sales, prepared food sales and international chicken production.

Capital Expenditure

Tyson Foods expects fiscal 2014 capital expenditures to approximate $700 million.

Further Reading

You can view the full report by clicking here.

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