Tyson Foods posted a loss for the fourth quarter and full year yesterday (14 November), but predicted a return to profitability in the to be seen as early as the first quarter of 2007. The meat giant also predicted that meat prices will rise in the coming year on the back of higher grain costs.
In the quarter ended 30 September, the world’s largest meat processor reported losses of US$56m, or $0.17 per share, compared with profits of $117m, or $0.33 per share, the previous year. The group posted an operating loss of $20m, down from an operating income of $188m a year ago.
Sales were slightly down at $6.5bn, with stable beef, pork and prepared foods sales offsetting a 6% drop in chicken sales.
For the Fiscal year, Tyson reported a loss of $196m, or $0.58 per share, compared with a profit of $372m, or $1.04 per share, in fiscal 2005. Sales for FY2006 totalled $25.6bn, down $455m, or 1.7%, from $26bn last year.
“The best thing I can say about fiscal 2006 is, it’s over,” said Bond. “For most of the year, we were plagued by supply and demand imbalance as well as export market disruptions in our chicken and beef segments.”
However, Bond did say that the company had successfully positioned itself to take advantage of future opportunities in the coming year.
“Despite some continuing problems in the protein sector, during the quarter our core business showed improvement and continued to strengthen. In addition, we successfully launched several programs that will better position us for 2007 and beyond,” Bond said.
“We implemented a comprehensive cost management initiative to generate approximately $200m in annual savings. We also consolidated beef processing facilities, refocused on running cost-efficient and competitive operations and introduced price increases across retail and foodservice channels. Finally, we have enhanced our strong management team by adding several key executives in our finance, consumer products and international groups. I believe the solid execution of these and other initiatives by Tyson Team Members is favourably impacting our business.”
Speaking on a conference call to analysts, Tyson chief executive Richard Bond predicted that beef and chicken prices would rise in the US as a consequence of increasing feed prices and reduced production.
“In the long run, consumers will have to pay more for protein,” Bond said.
For fiscal 2007, Tyson predicted earnings between $0.50 and $0.80 a share. Bond said he expects each of the company’s segments to be stronger in 2007.
“We set a short-term goal to return to profitability, and based on our business performance to date, I am very confident we will achieve it in our first fiscal quarter of 2007,” Bond said.