Due to continued strong performance by its beef and pork segments, Tyson Foods is still on track to deliver the second-best annual earnings per share in company history despite depressed chicken pricing, input costs at or near record levels and a sluggish economy, according to Donnie Smith, president and CEO of Tyson Foods Inc. Smith made his comments at the Barclays Capital 2011 Back to School Consumer Investor Conference.

"The efficiency improvements we've made over the past several years have made our operations very competitive and delivered sustainable earnings improvement," Smith said.

To illustrate the turnaround in Tyson's chicken business since 2008, Smith said the chicken segment's 1% return on sales would have been nearly 10% had it not been for $250 million in additional grain and feed ingredient costs in the company's fiscal Q3 2011 vs. Q3 2010, and holding other factors equal. That would have been a record quarter, despite unusually low chicken prices.

"That's how much better we are as a producer, but it's hard for you to see because input costs outstripped those gains," Smith said. "However, industry fundamentals are beginning to improve, and that should support the pricing we need to offset our higher inputs."

Tyson will continue reinvesting in operational efficiencies to further improve the chicken segment's cost structure and competitive position, much like it did with its beef and pork segments. "I have to believe, given the economics of the chicken industry, we're the only company putting this kind of CapEx back into our business," Smith said. "When supply and demand get back in balance and this thing turns around, we're going to be in a great position. You have yet to see what our better, more efficient chicken business is capable of accomplishing in a favorable environment. Everything we've achieved, we achieved while running uphill against the wind."


Source: Tyson Foods Inc.