Tyson Foods Inc., the largest U.S. producer of beef, chicken, and pork, said on Monday fiscal second-quarter results turned to a profit as sales rose sharply, boosted by its acquisition last year of top meatpacker IBP Inc.
Tyson shares closed up 80 cents at $13.00 (€14.4), a rise of 6.6 per cent, on the New York Stock Exchange on Monday. Since Tyson bought IBP last September, its shares have outperformed the Standard & Poor's 500 index by more than 20 percent.
"We are seeing good growth in the key drivers for growth for Tyson, which is value-added meat," said David Nelson, analyst for Credit Suisse First Boston.
Net income at the Springdale, Arkansas-based company rose to $65 million, or 18 cents a share, in the quarter ended March 30, from a loss of $6 million, or 3 cents a share, a year earlier. Earnings matched Wall Street expectations.
The added revenue from the IBP operations saw second-quarter sales jump to $5.84 billion from $1.86 billion last year. Operating income was $179 million, up from $23 million in the same quarter last year. A year ago IBP reported sales for its January-March quarter of $4.1 billion.
The rise in Tyson's earnings comes despite abundant U.S. meat supplies, recent declines in U.S. beef exports to Japan and Russia's month-long ban on U.S. poultry imports.
"We are seeing less of an impact than we might have feared from the excess chicken supplies," Nelson said of Tyson's earnings.
Competitor Hormel Food Corp. last week warned of an earnings shortfall, blaming the Russian ban, which has led to U.S. market oversupply of chicken and turkey and lower prices in supermarkets.
"It is a very difficult protein environment," said John McMillin, Prudential Securities food analyst, who rates Tyson a "strong buy."
"I think Tyson appears more in control of their destiny than they did a few years ago due in part to their broader portfolio," McMillin said.
The IBP purchase expanded Tyson's offerings to include beef and pork from primarily chicken.
The company said it expects fiscal third-quarter diluted earnings per share in a range of 24 to 28 cents, and it backed its prior outlook for fiscal 2002 diluted earnings per share in a range of $1.10 to $1.20.
Beef segment second-quarter sales totaled $2.59 billion, including beef case-ready sales of $174 million and international beef sales of $331 million. Beef segment operating income totaled $14 million.
Tyson's beef division was hurt in part by seasonally weak domestic sales and poor demand from Japan.
Chicken segment second-quarter sales totaled $1.80 billion compared with $1.74 billion a year ago, an increase of 3.1 percent from a year ago. International market pressures, such as the Russian ban on U.S. poultry imports, hurt results by creating a glut of chicken in the U.S. market.
Results in Tyson's chicken operations exceeded expectations, McMillin said.
"There are abundant supplies but thankfully retailers and restaurants are pushing chicken," he said.
Chicken segment operating income jumped by $89 million to $114 million. Prior-year costs were hurt by weather problems.
Exports of beef to Japan and chicken to Russia are poised to improve, Tyson officials said during a conference call on Monday.
"We are off double digits on volume to Japan on beef and have been since early fall," said Greg Lee, Tyson's co-chief operating officer and group president of international and food service. "We think it has bottomed out. We think we will see some improvement."
Beef exports to Japan, the top importer of U.S. beef, dropped late last year after the discovery of mad cow disease there hurt beef consumption.
Russia, the top overseas buyer of U.S. poultry, suspended imports of U.S. chicken in March amid concerns about the meat's safety. It lifted the ban earlier this month, but shipments have been slow to resume.
"Russia has in fact started issuing import permits and we are geared to load boats this week," Lee said.