Tyson announces 4th quarter loss, sales up

by Bryan Salvage
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SPRINGDALE, ARK. — Tyson Foods Inc. announced it lost $455 million, or $1.22 per share, for the three months ended Oct. 3 compared to a profit of $48 million, or 13 cents per share, one year earlier. Excluding an impairment charge of $1.50 per share (relating to a one-time $560 million goodwill charge in its Beef segment), earnings were 28 cents per share. Sales increased slightly to $7.21 billion from $7.2 billion, with chicken sales up 11% to $2.64 billion from $2.38 billion.

For the year, Tyson reported a loss of $537 million, or $1.44 per share, compared with a profit of $86 million, or 24 cents per share, the year before. Adjusted earnings were 6 cents per share after removing the impairment charge. Sales for the fiscal year slipped 1% to $26.7 billion from $26.86 billion.

"We have made tremendous progress in a relatively short period of time," said Leland Tollett, who recently stepped down as interim president and chief executive officer.

"Our operating cash flow exceeded $1 billion in fiscal 2009, which helped us make progress on our debt level," said Donnie Smith, Tyson's new president and c.e.o. "All operating segments were profitable in the fourth quarter, with Beef, Pork and Prepared Foods within or above historical operating margin ranges, excluding the goodwill impairment. These three segments are operating very well, and measures are in place for more improvement in our Chicken segment."

Fiscal 2010 should be a much better year, said Jim Lochner, Tyson's new chief operating officer. "We think Beef, Pork and Prepared Foods will continue with a solid performance, and we expect the steps we've taken to improve Chicken will manifest themselves," he added. "Also, U.S.D.A. data point to lower overall protein supplies, and there is potential for good demand improvement as the global economy recovers."

Tyson expects demand for chicken will improve further into fiscal 2010 and the pricing environment to improve aided by cold storage inventories, which are down relative to the levels it has seen over the last several years. Tyson also expects to see grain costs down compared to fiscal 2009.

The company anticipates a reduction of cattle supplies of 1-2% in fiscal 2010 and does not expect a significant change in the fundamentals of its Beef business as it relates to fiscal 2009."We expect adequate supplies to operate our plants," Tyson said.

Tyson expects to see a gradual decline in hog supplies through the first half of fiscal 2010, which will accelerate into the second half of fiscal 2010, resulting in industry slaughter slightly higher than 2007 (or roughly 4% less than fiscal 2009).

In addressing Prepared Foods, the company said raw-material costs will likely increase in fiscal 2010, but it has made some changes in its sales contracts that move the company away from fixed-price contracts toward formula pricing, which will better enable Tyson to absorb rising raw material costs.

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