NEW YORK – Tyson Foods Inc.’s multi-protein business model is the right approach because the company’s Chicken, Beef, Pork and Prepared Foods operating segments need not provide normalized returns at the same time for Tyson to be successful, according to Donnie King, senior group vice president of poultry and prepared foods for Tyson. King was speaking to investors at the JPMorgan 2012 Global Protein Conference.
"Although there's variability, and sometimes volatility, among the segments, the total company operating margin has remained solid under the current management team," King said. "It's good when all four segments are within their normalized ranges, but it isn't a requirement in order for our company to perform well as a whole."
He gave as an example the company’s Chicken segment performance in 2011. Earnings for the segment provided positive results during extremely difficult economic conditions due to operational improvements.
"Since 2008 through 2011, we've achieved $800 million in operational efficiencies, and we're on track to achieve an incremental $125 million this fiscal year," King said. "We generated positive earnings in fiscal '11, which was possibly the worst year in chicken industry history."
King said currently, pricing for meat and poultry has improved on declining supplies and rising international demand. Another factor weighing on beef prices is the fallout from the lean finely textured beef controversy. Tyson released a statement outlining the adjustments the company will make since BPI’s decision to close three of its four processing plants.
“Our company is one of many beef processors that sell beef trimmings to BPI. The reduction of BPI’s operations means less lean meat will be recovered and more of the beef trimmings will be converted into lower-value products,” according to the statement. “We’re making some modifications in our production processes to adjust for this change.
“We’re also making adjustments to accommodate our customers that no longer want BPI’s Lean Finely Textured Beef in their ground beef,” Tyson said.
Tyson declined to comment on the financial impact BPI’s decision will have on the company.
“We will say we believe the decrease in BPI’s production will result in less lean beef available in the market and may result in higher consumer prices,” the company said. “Alternatively, we believe there may be an increase in the supply of some of the raw materials used to produce ground beef, and this may result in lower values that could ultimately affect livestock prices.”