Tyson Foods earnings hurt by mad cow bans
- Tyson Foods earnings hurt by mad cow bans
Monday, May 02, 2005 2:05:51 PM ET
By Bob Burgdorfer
CHICAGO (Reuters) - Top U.S. meat company Tyson Foods Inc. on Monday
posted lower quarterly earnings due to trade bans related to mad cow
disease, but shares rose as the results beat expectations.
Also, company officials expect the struggling beef unit to post a
profit during the second half of the fiscal year as an increasing
supply of cattle should lower costs and summertime cookouts should
lift sales of steaks and hamburgers.
Higher prices for its beef, chicken, pork, and prepared or processed
foods resulted in better revenue during the quarter even as volume was
Springdale, Arkansas-based Tyson, which leads the nation in beef and
chicken production and is No. 2 in pork, said earnings fell 36 percent
to $76 million, or 21 cents per share, for the fiscal second quarter
ended April 2, from $119 million, or 33 cents per share, a year earlier.
Wall Street analysts on average had expected earnings of 17 cents per
share, according to Reuters Estimates.
"We believe the company's strong performance in chicken (low grain
costs, stable chicken pricing) provided most of the upside relative to
consensus estimates for the quarter," Pablo Zuanic, food analyst with
JP Morgan, said in a research note.
The chicken unit had an operating profit of $143 million compared with
$189 million a year earlier.
The slippage in profit for Tyson's chicken unit was due in part to
lower volume and losses in grain hedging. Lower feed-grain prices
offset some of the pressure.
"Chicken profitability looks strong through the balance of the year,
with low feed costs adequately offsetting the tough comparisons in
commodity breast meat markets," David Nelson, Credit Suisse First
Boston analyst, said in a research note.
The beef unit, Tyson's largest segment, had an operating loss of $19
million, compared with a prior-year loss of $2 million. But those
results beat the company's expectations.
"That was more largely due to March being better than what we
anticipated," Dick Bond, Tyson president, said of the beef segment
during a conference call with analysts.
Beef unit results should improve later in the year as supplies of
domestic cattle increase, the company said.
"I expect it (beef) to be profitable in both Q3 and Q4 on an operating
earnings basis," Bond said.
The United States has banned Canadian cattle since May 2003 because of
a mad cow case there, cutting off cattle that Tyson had used to supply
U.S. beef is still banned by many countries, including once top-buyer
Japan, due to the U.S. case of mad cow disease in December 2003.
The company on Monday trimmed its fiscal year 2005 earnings forecast
to $1.05 to $1.20 per share from a previous $1.05 to $1.30, because it
does not now expect an immediate resumption of beef exports to Japan
or the importation of cattle from Canada.
"Our current guidance assumes neither one of those (Canadian cattle or
Japanese market) will open this fiscal year and as a result we lowered
the top end of the range," Louis Gottsponer, Tyson vice-president for
investor relations, told Wall Street analysts during a conference call.
Pork sales increased, but operating profit slipped to $19 million from
$34 million a year earlier, as high hog prices hurt results.
Tyson said overall second-quarter revenue rose to $6.36 billion from
Tyson shares were up 44 cents, or 2.61 percent, at $17.33 Monday on
the New York Stock Exchange.