Tyson promotions good news for its chicken business

by Bryan Salvage
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SPRINGDALE, ARK. — Tyson Foods Inc.’s Nov. 19 announcement it had named Donnie Smith, 50, as the company’s new chief executive officer signals the mega-processor believes its chicken business is again profitable, according to The Associated Press. Tyson named Mr. Smith to replace interim president Leland Tollett, 72, who had been tapped in January to help lead the company following Dick Bond’s abrupt resignation.

Previously Tyson's senior group vice-president of poultry and prepared foods, Mr. Smith immediately took the reins from Mr. Tollett on Thursday. Tyson also promoted Jim Lochner, 57, to chief operating officer. Mr. Lochner currently serves as senior group vice-president of fresh meats. Replacements for both Mr. Lochner and Mr. Smith will be named in the next two weeks, Tyson said.

Mr. Tollett returned to the company he led from 1991 to 1998 in January to help guide the chicken business through a slump involving record-high prices for key ingredients, such as corn, and weak restaurant demand that hurt prices it could charge.

At the time Mr. Tollett stepped in earlier this year to help lead the company, it was unclear how long he would stay on. "That time [to step aside as interim president] is now, and our company has been profitable for an extended period of time," Mr. Tollett said on Thursday.

Although Mr. Tollett will assist the Mr. Smith during the transition period, he added he expects to significantly cut back on the time he spends on company matters.

Mr. Tollett joined Tyson Foods in 1959. When he was named interim c.e.o. to replace Mr. Bond earlier this year, Tyson said its board of directors would focus on internal candidates as a permanent replacement. Mr. Smith has been with Tyson since 1980 and has worked in areas such as purchasing, food safety and logistics.

Tyson is slated to release its fourth-quarter earnings on Nov. 23. The company posted a strong third-quarter profit in August that beat estimates. Tyson said at the time chicken prices were improving.

Mr. Smith’s and Mr. Lochner’s promotions were not a surprise because the chicken segment is so important to Tyson's performance, said Akshay Jagdale, KeyBanc Capital Markets analyst. The announcement is directly linked to the turnaround in the chicken segment, he wrote to clients, adding he expected it to be profitable in the fourth quarter.

"This announcement removes a source of uncertainty, in our view, but we believe what is most important for the stock is how Tyson's chicken segment performs over the next six to 12 months," Mr. Jagdale wrote.

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