Milling & Baking News Corporate Profiles - October 2011 - (Page 120)

Company Overview Tyson Foods, Inc. Beef and pork businesses perform well while chicken struggles S ince Springdale, Ark.-based Tyson Foods’ merger with IBP in 2001, which, at the time, made it the largest meat processor in the world, executives for the company have promoted the diversity of its product portfolio as one of its strengths. The beef, chicken and pork markets are cyclical and while one may face difficult market conditions the others often may be experiencing stronger positions. Such was the case in 2011 as Tyson’s Beef and Pork business units produced strong results while its Chicken business was facing significant challenges. Volatile input markets combined with low market prices for chicken caused Tyson’s earnings to slip during the third quarter of fiscal 2011. Net income during the quarter ended July 2 was $196 million, equal to 51c per share on the common stock, down 21% from income of $248 million, or 65c per share, in the same period a year ago. Sales for the quarter increased 11% to $8,247 million. Operating income by business unit during the quarter was $140 million for Beef, $124 million for Pork, $30 million for Prepared Foods and $28 million for Chicken. Noting the diversity of Tyson Foods’ product portfolio, with 41% of the company’s sales in beef, 35% in chicken and the rest in pork and prepared foods, Donnie Smith, president and chief executive officer, said he sees additional opportunity in the Prepared Foods segment. Speaking at the Barclays Capital Back to School Consumer Conference in early September, he said Tyson is the nation’s second-largest tortilla and chip manufacturer; one of the nation’s leading pizza topping manufacturers; and has a good presence in soups and sauces. He said Tyson Foods is expanding its Council Bluffs, Iowa, processing facility. The $48 million renovation is part of Tyson’s effort to help meet total demand in the markets for pepperoni and pizza toppings. The production of flavored tortillas is also on the radar of the company as well as the opportunity to wrap those tortillas around protein products manufactured by Tyson Foods. “One of our new items this year in our Any’tizer line is our fully cooked retail bag line with Quesa Dipper, which has a sauce, which we make; a tortilla, which we make; and a meat product, which we make,” he said. Mr. Smith also cited the cooked meats category as an area of opportunity. The challenge facing the company, like many other food and beverage processors, is input costs. “From the late ‘70s, which would be sort Donnie Smith of the modern corn era, through 2005, $2 to $3 (per bu) cost the vast majority of corn trade,” Mr. Smith said. “During that time period, the average cost of a live chicken, and that would be a chicken delivered to plant, would have been about 25c a lb, okay?” Since the renewable fuels standard in 2005, Mr. Smith said that during the first four years the cost of corn per bu shifted up to a range of $3 to $5. “But look where we are today,” he said. “I mean, today these corn futures are trading at about $7.50.” That increase has had a dramatic increase on the cost of a live chicken delivered to a facility, with the cost rising from 25c per lb to 46c to 47c per lb today. CP F ast acts Input costs and market prices negatively affected the Chicken business unit. A $48 million investment will expand a Council Bluffs, Iowa, meat processing facility. Competition for inputs with the bio-fuels industry is causing a “structural shift” in the meat industry. 120 \ October 2011 Milling & Baking News • Food Business News • Baking & Snack • Meat & Poultry Corporate Proﬁles

Table of Contents for the Digital Edition of Milling & Baking News Corporate Profiles - October 2011

Milling & Baking News Corporate Profiles - October 2011