Tyson Foods returns to 1Q profit on turnaround

NEW YORK -- Tyson Foods Inc. said Friday it returned to a profit in its fiscal first quarter as tough conditions in the meat industry eased. Its chicken segment improved markedly, and its beef and pork units also made money.

Shares rose nearly 7 percent on the better-than-expected results, briefly reaching a 52-week high.

Tyson CEO Donnie Smith said sales to restaurants remain weak but are improving.

"Consumers are still worried about the economy and unemployment although our research indicates they're starting to feel a little better about their economic situation and aren't hardly as concerned about limiting their restaurant visits," he said in a call with analysts.

"Food service demand is forecasted to be down again this year but with a smaller decline than last year, so we're hoping we're seeing the light at the end of the tunnel."

The meat producer's chicken unit continued its turnaround. The quarterly profit was its third straight. After facing a glut in supply and a consumer spending slowdown, the industry is improving on falling commodity costs and production cuts, which bolster prices.

The company earned $160 million, or 42 cents per share, in the quarter ending Jan. 2. In the same period last year the company lost $102 million, or 27 cents per share.

Sales of Tyson's products rose slightly to $6.63 billion.

The performance handily beat analysts' expectations for a profit of 18 cents per share on revenue of $6.58 billion.

Tyson said pricing was up 2.8 percent in the quarter for chicken, while volume rose 5.6 percent due to acquisitions. Others in the industry, including other major player Pilgrim's Pride Corp. have been trimming production to weather the downturn.

Prices for beef and pork both fell more than 6 percent. The amount of beef sold rose, but pork fell. and pork's volume was down. Those two meats are pricier than chicken and demand for them has fallen in the recession as diners cut back on their spending.

Pricing fell nearly 6 percent in the prepared foods segment, where the company is competing more as it looks to win sales from shoppers who are eating from grocery stores.

The company sounded a positive note for the rest of the year. It expects demand to improve later in the year for chicken as the warmer months make more people want to eat the meat.

Smith said the second-quarter is a seasonally weak quarter for the company but said it is "off to a good start."

"We expect our beef and pork segments to be off slightly compared to our strong first quarter," he said. "Although higher pork prices will benefit Tyson overall, the increased input costs will have a negative impact on our prepared foods segment until price increases can take effect."

The chicken segment is expected to improve due to operational improvement and better industry fundamentals," he said.

Tyson, based in Springdale, Ark., also expects pricing to improve as it uses up its inventories and grain prices to fall, which will make the segment even more profitable. In the first quarter, its grain costs fell $84 million.

Shares rose 92 cents, or 6.5 percent, to $14.90 during morning trading, after earlier reaching a 52-week high of $14.92. The stock had traded between $7.51 and $14.38 over the past year.

The earnings came as China announced anti-dumping duties of up to 105.4 percent Friday on imports of U.S. chicken products, which is likely to raise Tyson's costs there.

However, Tyson isn't expected to pay the top rate. Companies that appealed the ruling will pay lower duties of 43.1 percent to 80.5 percent, the ministry said. Tyson Foods Inc. will be charged the lowest rate.

Smith said Tyson is "still assessing" the issue.