Tyson Foods reported a $213 million quarterly profit as pork and beef prices climbed and the meat processor said it expects strong earnings to continue into 2011 as tight animal supplies and strong exports offset the sluggish economy.
While meat demand probably won’t decline next year, any growth is expected to be limited because of tight consumer budgets, Tyson executives said during a conference call with analysts following the release of financial results.
“The consumer is still conscious about the economy,” a Tyson executive said during the call.
Still, “it is shaping up to be a strong quarter and another good year,” Donnie Smith, Tyson’s chief executive officer, said in a statement today. “There are always challenging market conditions to manage. That's the norm in our business, and we're prepared to address them.”
As the country’s largest meatpacker, Tyson mirrors the U.S. beef and pork industries’ improved fortunes. After Tyson lost $547 million in 2009, the company’s profit soared this year on rising exports and higher prices for meat sold to restaurants and supermarkets.
Hog supplies next year are expected to be “comparable” to this year, Tyson said, with adequate animal numbers to operate the company’s plants. Strong pork exports are likely to continue into 2011, Tyson said.
Springdale, Ark.-based Tyson, also the largest U.S. poultry processor, expects chicken production to increase next year, according to today’s statement. Cattle supplies are expected to decline 1 percent to 2 percent, Tyson said, reiterating a previous forecast.
“However, we do not expect a significant change in the fundamentals of our beef business as it relates to the previous few quarters,” Tyson said. “We expect adequate supplies in the regions we operate our plants. We expect beef exports to remain strong.”
U.S. livestock producers cut herds after corn prices surged above $7 a bushel two years ago and the recession hurt demand. The total domestic cattle herd fell to a record low as of the middle of 2010, while hog inventories as of Sept. 1 were down 3 percent from a year earlier, according to government data.
While Tyson paid more for slaughter-ready animals, the higher costs were passed along to the company’s customers.
Tyson’s average pork prices rose 42 percent during the previous quarter, compared with year-earlier levels, the company said today. As a result, operating margins for the pork business doubled, to 9.9 percent from 4.9 percent. In beef, prices rose 14 percent.
Earlier this month, corn futures rallied to the highest levels in more than two years and soybeans also jumped, threatening profits for Tyson and other livestock feeders. While Tyson doesn’t raise cattle and feeds few pigs, the company operates more than 1,000 broiler facilities and processes 46 million chickens a week.
Corn prices may be the biggest “wild card” for the livestock industry next year, one analyst said today during the call.
Tyson today said net income for the three months ended Oct. 2, the company’s fiscal 2010 fourth quarter, was $213 million, or 57 cents a share. That compares to a net loss of $457 million, or $1.23 a share, during the same period in 2009. Sales rose 3.2 percent to $7.44 billion.
Excluding special items, Tyson earned 64 cents a share, about 8 cents above expectations. Tyson shares rose 59 cents, or 3.8 percent, to $16.23 in late-morning trading today. The stock is up 32 percent this year.