SPRINGDALE, Ark. — Net income at Tyson Foods, Inc. in the third quarter ended July 3 was $242 million, equal to 68c per share on the common stock, up 89% from $131 million, or 34c per share, in the third quarter of fiscal 2009. Sales were $7,438 million, up 12%.
“This was a fantastic quarter for Tyson Foods, with record earnings, sales and operating margin,” said Donnie Smith, president and chief executive officer. “With more than $600 million in operating cash flow, we were able to pay down debt by $400 million while continuing to invest in our business, bringing our debt to its lowest level since 2001.”
Improved results were not unexpected. At a conference earlier this year, Mr. Smith described favorable market conditions for its business and predicted that second-half results would be even better than improvements achieved in the first half of the year.
While the profits topped analysts’ guidance for the quarter, Tyson shares were weaker in trading on the New York Stock Exchange early Aug. 9, declining 4% to $16.47.
The largest contributor to the increased profits was improvements in Tyson’s Beef segment, but Chicken and Pork were strong as well.
Beef operating profit was $176 million in the third quarter, up $110 million, or 167%, from $66 million during the same period last year. Sales were $3,149 million, up 13%. Volume during the quarter actually was down 5%.
Higher selling prices were the driver of the Beef profits surge.
“We increased our operating margins by maximizing our revenues relative to the rising live cattle markets, as well as improved our operating costs in the nine months,” the company said.
Operating income of the Chicken segment was $186 million, up $43 million, or 30%, from $143 million in the third quarter of fiscal 2009. Sales were $2,527 million, up 4.6%. Volume was up 8%.
“Operating results were positively impacted by operational improvements, which included yield, mix and live production performance improvements; additional processing flexibility; and reduced interplant product movement,” Tyson said.
Results also benefited from a $15 million reduction in grain costs from the same period last year, the company said.
Operating income of the Pork segment was $125 million, up $97 million, or 246%, from $28 million in the third quarter last year. Sales were $1,249 million, up 32% with volume flat.
Like Beef, the Pork segment profit surge largely was due to rising live hog prices.
Operating margins widened for each of the three major segments in the third quarter, to 7.4% for Chicken (versus 5.9% in last year’s third quarter); 5.6% for Beef (2.4%); and 10% for Pork (3%).
The Prepared Foods segment had operating income of $22 million, down 45% from $40 million in the third quarter last year. Sales were $753 million, up 12%.
Tyson was guarded in its outlook for the Chicken segment.
“Current U.S. crop conditions are favorable,” the company said. “However, because of volatility in the world grain markets, grain costs could be higher in fiscal 2011 compared to fiscal 2010. Additionally, we will continue to focus on making operational improvement to help maximize our margins.”
The company said it does not expect any significant changes in the fundamentals of its Beef segment, and projected that pork exports will remain strong into fiscal 2011.
Tyson said it would take an opportunistic approach toward improving its balance sheet in the months ahead.
“We will continue to use our available cash to repurchase notes when available at attractive rates,” Tyson said. “We do not have any significant maturities of debt coming due over the next two years, as our 8.25% Notes due October 2011 balance was down to $327 million at July 3, 2010.”
For the nine months ended July 3, Tyson net income was $567 million, equal to $1.55 per share, versus a year-to-date loss of $90 million in fiscal 2009. Sales were $20,989 million, up 8%.