'Back to Basics' Approach is Working for Tyson

US - A return to the fundamentals is helping Tyson Foods' chicken business to improve profitability, according to the company's president and CEO.
calendar icon 14 May 2009
clock icon 3 minute read

A 'back to basics' approach has helped the chicken segment of Tyson Foods, Inc. return to profitability, Tyson Foods interim President and CEO, Leland Tollett, reports.

"Our efforts to improve our operational efficiencies and the product mix in our chicken business are paying off," Mr Tollett told investors and analysts at the BMO Capital Markets 2009 Agriculture, Protein & Fertilizer Conference in New York City.

Poultry market fundamentals have also improved. Pullet placements, an indication of future broiler supplies, have been down the past five months compared to the same period last year. Egg sets continue to run six percent or more below year ago levels and cold storage inventories of poultry have declined about 20 per cent since peaking in November 2008.

Jim Lochner, Senior Group Vice President of Tyson Fresh Meats, also addressed the conference, noting Tyson's beef and pork segment generated financial returns at or near normalized levels during the second quarter of fiscal 2009.

"While changes in supply and demand have created challenges for our business, we believe we've done a good job of managing the spread between what we pay for livestock and the price we receive for our finished products," Mr Lochner said.

In beef, he noted cattle hide and beef tallow prices have been weak, demand for expensive cuts has been soft and excess beef trim supplies have put downward pressure on pricing. However, he also reports live cattle values have generally reflected the revenue decline.

Mr Lochner expects adequate supplies of fed cattle for the summer and fall, and anticipates dressed beef carcass weights to continue to be above year-ago levels and the five-year average. Because demand does not appear to support last year's volumes, he predicts weekly slaughter rates will remain below year ago levels.

Tyson has been successfully 'managing the spread' in its pork operations during fiscal 2009, generating an operating income of $84 million in the first six months of the year. The results have been positively affected by an increase in pork prices, but offset by higher average live hog prices and decreased sales volume.

"We will continue to closely monitor hog supplies as well as pork demand, and make the appropriate adjustments to effectively manage our margins," Mr Lochner said.

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