Profits for Tyson Foods but weak outlook for '08

US - The world's largest meat company, Tyson Foods has reported a fiscal fourth-quarter profit compared with a loss of a year-earlier. However, forecasts for fiscal 2008 are poor and have knocked values off company shares.
calendar icon 15 November 2007
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Tyson profits for the chop? 2008 outlook is gloomy, say analysts.

High feed grain prices, tight cattle supplies and a slow recovery in beef exports are expected to plague the company well into 2008 and the company forecast fiscal-year 2008 earnings in a range of 30 to 70 cents per share. This compares with 75 cents for the just-completed year. And analysts expect a $1.10 average for fiscal 2008, says reports.

Tyson is the second-largest chicken producer, behind Pilgrim's Pride. It estimates feed costs alone will increase by about $300 million in fiscal 2008 which will have a marked effect on company profits.

As the largest buyer of US corn it has felt the blow of massive price hikes in corn prices this year. And like all livestock producers, it is battling to secure stocks against a trend that is sucking more grain into biofuel ethanol production.

Tyson says feed costs have increased by about $3 million for every one cent increase in the per bushel price of corn.

Losses all round
Tyson's beef unit, America's largest, posted an operating profit of $1 million versus a loss of $34 million a year earlier. The profit in beef was surprising as livestock analysts had estimated operating margins for the beef sector as being in the red for much of the quarter.

Tyson's chicken sector had an operating profit of $51 million versus a $20 million loss a year earlier. Its pork business earned $24 million versus $15 million a year earlier and prepared foods earned $4 million versus a $1 million loss.

While the 2008 outlook was disappointing, it remains better than that of fiscal 2006, when the company lost $196 million, or 58 cents a share. Since then, Tyson's cost-cutting drive has saved $250 million, but has meant the closure of a number of processing plants and a streamlining operations. It continues to tighten spending in a bid to head off further losses.

Tyson stock was down 5.6 percent, or 83 cents, to $13.92 during midday New York Stock Exchange activity, yesterday. Earlier, shares dipped to $13.62, the lowest price in more than a year.

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