Tyson Foods Inc. Reports Operating Results (10-Q)
Tyson Foods Inc. Cl A has a market cap of $6.89 billion; its shares were traded at around $18.62 with a P/E ratio of 9.9 and P/S ratio of 0.2. The dividend yield of Tyson Foods Inc. Cl A stocks is 0.9%.
Highlight of Business Operations:Market environment Our first quarter of fiscal 2012 was the Pork segments second best quarter in history due to strong demand and less domestic availability of pork which created a favorable pricing environment. Our Prepared Foods segment grew operating income, primarily as the result of less input cost volatility. Driven by reduced industry supplies, domestic chicken market conditions improved in the first quarter of fiscal 2012 compared to the second-half of fiscal 2011. This created better pricing conditions allowing the Chicken segment to return to profitability. While our Beef segment remained profitable in the first quarter of fiscal 2012, we were challenged by volatile market conditions which made it difficult to pass along increased input costs. The beef industry also experienced lower availability of live cattle supplies.
In fiscal 2012, overall domestic protein (chicken, beef, pork and turkey) production is expected to decrease. Because exports are likely to remain strong, we forecast total domestic availability of protein to be down 2-3% compared to fiscal 2011, which should continue to support improved pricing. The following is a summary of the fiscal 2012 outlook for each of our segments, as well as an outlook on sales, capital expenditures, net interest expense, debt and liquidity and share repurchases:
Chicken For fiscal 2012, we expect industry production will decrease approximately 4% from fiscal 2011, which should further gradually improve market pricing conditions. Current futures prices indicate higher feed costs in fiscal 2012 compared to fiscal 2011. We expect to offset the increased feed costs with pricing and mix improvements as well as operational efficiencies expected to result in additional savings of $125 million in fiscal 2012. Our Chicken segment returned to profitability in the first quarter of fiscal 2012 and we expect it to strengthen throughout the year.
Beef We expect to see a reduction in fed cattle supplies of 1-2% for the remainder of fiscal 2012 as compared to fiscal 2011. Although we generally expect adequate supplies in the regions we operate our plants, there may be periods of imbalance of fed cattle supply and demand. We anticipate beef exports will remain strong in fiscal 2012. While our Beef segment remained profitable in the first quarter of fiscal 2012, we were challenged by volatile market conditions which made it difficult to pass along increased input costs. We have seen difficult margin conditions early in the second quarter of fiscal 2012, but expect them to recover throughout the second-half of the fiscal year. For fiscal 2012, we believe our Beef segment will be profitable, returning to our normalized range in the second-half of the fiscal year.
Sales and Operating Income We increased operating income, despite an increase of raw material costs of $37 million and lower sales volumes, due to mix changes and increased average sales prices. Additionally, input costs were less volatile in the first quarter of fiscal 2012 as compared to fiscal 2011. Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through increased pricing. However, there is a lag time for price increases to take effect, which is what we experienced during the first quarter of fiscal 2011.
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