Tyson Foods Inc., the world's largest meat processor, warned
Monday that rising corn prices could mean U.S. consumers
will have to pay more for chicken, beef and pork next year
as it ended its fiscal year with a third straight quarterly
The Springdale, Ark.-based company forecast a return to
profitability in the new fiscal year, which started Oct. 1,
as it gets a grip on costs and focuses on more efficient
operations. Its shares rose nearly 4 percent in midday
"The best thing I can say about fiscal 2006 is, it's
over," Richard L. Bond, president and chief executive
officer, said in a statement.
Bond said the price of corn, which is used to feed
chicken and livestock, is going up due to demand from
ethanol plants that are springing up to provide alternative
fuel sources to oil.
Corn prices recently reached 10-year highs.
"I believe the American consumer is going to have to pay
more for protein. We are at new levels on corn that are not
likely going to be retrenching back to '06 levels," Bond
said in a conference call with analysts.
Bond said meat producers, processors and retailers will
have to pass the higher grain price on to consumers because
they cannot absorb it in their profit margins.
Bond did not provide more details but suggested the
higher consumer prices could come when meat demand typically
increases during the spring and summer.
"Quite frankly the American consumer is making a choice
here. This is either corn for feed or corn for fuel, that's
what's causing this," Bond said.
Tyson said the loss for the quarter ended Sept. 30 was
$56 million, or 17 cents per share, compared with a profit
of $117 million, or 33 cents per share, during the same
period a year earlier.
Fourth quarter revenue was flat at about $6.5 billion in
Analysts polled by Thomson Financial expected a loss of 4
cents per share for the fourth quarter on revenue of $6.47
Results were hurt by charges of 6 cents per share related
to tax and accounting changes and 4 cents per share related
a previously announced cost-cutting program.
Tyson said in July it would cut $200 million in costs,
including slashing 420 mainly managerial jobs and not
filling 430 open positions in its total workforce of about
110,000. It also said it would focus on value-added
products, international expansion and improving operational
"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," Bond said in a statement.
"Despite some continuing problems in the protein sector,
during the quarter our core business showed improvement and
continued to strengthen."
Tyson said it expects fiscal 2007 earnings per share in a
range of 50 cents to 80 cents.
Analysts' consensus estimate for fiscal 2007 earnings is
69 cents per share.
Its shares rose 54 cents, or 3.8 percent, to $14.89 in
midday trading on the New York Stock Exchange.
Prudential Equity Group analyst John M. McMillin said he
does not expect Tyson earnings to rebound to over $1 per
share until at least fiscal 2009.
"One of these years Tyson Foods just might earn in the
range of $1.00-$1.30 per share, but with higher corn prices
it is unlikely to be any time soon as management gives
fiscal 2007 guidance in the $0.50-$0.80 range," McMillan
said in a research note.
Bond said he is "very confident" the company will be
profitable again starting in the current quarter. He said
the full-year forecast was conservative after the company
had to lower its guidance three times during fiscal 2006.
"We missed guidance a number of times on fiscal '06 and
our intent is not to do that again in fiscal '07," Bond told
Tyson saw fourth quarter losses in three of its four
segments -- beef, chicken and prepared foods. Only the pork
business, which accounted for 12 percent of sales, posted an
operating profit, thanks to low prices for live animals.
The chicken and beef businesses were hurt by a glut of
meat on the market, a problem the industry has faced all
Agricultural economists have blamed the meat glut on a
range of factors, including shifting consumer diets, beef
and chicken health scares overseas that reduced U.S.
exports, and overproduction after high market prices for
animals in the past two years.
Tyson is the world's largest chicken producer and also
the world's largest meat processing company. Tyson breeds
its own chickens but gets other meat from independent