Tyson Foods today (29 January) said that it has seen a return to profitability in its first quarter and confirmed its full year earnings guidance. However, the company warned that the continued rising cost of corn could spell long-term trouble for food manufacturers.

Tyson posted diluted EPS of US$0.16 for the first quarter of 2007, up from $0.11 per share for the same quarter the previous year, on the back of sales which had risen from $6.5bn to $6.6bn. Operating income was $145m compared to $110m, while net income was $57m compared to $39m.

"Our immediate goal was to return to profitability, and I am pleased to say we have accomplished our objective," said Richard Bond, president and chief executive officer. "We have put the $200m Cost Management Initiative into action while driving innovation and growth with our customers. As a result of our profitability and cash flow improvements, our debt is now below $3bn."

According to Bond, the US meat processor saw performance improvements across all of its businesses. "All of our segments showed substantial improvement over the fourth quarter of fiscal 2006. Chicken was profitable, and both Pork and Prepared Foods delivered margins in normalized ranges. Although not yet profitable, Beef showed meaningful improvement," he commented.

Looking to the full year, the company confirmed its FY target of an EPS range between $0.50 and $0.80.

"While we still anticipate the second quarter to be challenging, we expect it to be profitable," Bond said. "We remain on track to meet our earnings guidance for the year, but emphasize the dramatic rise in corn prices has become a major issue for us and others in the food industry. Companies will be forced to pass along rising costs to their customers, meaning consumers will pay significantly more for food.

"If left unaddressed, the bigger long-term issue will be the availability of US and global grain for protein and other foods. We fully support efforts toward renewable energy; however, as the food versus fuel debate unfolds, we must carefully consider the negative and unintended consequences of over-using grains."