Tyson’s sales jumps as margins widen

Tyson Foods Inc.’s earnings surged 89% to a new record as margins widened at the meat-processing company’s beef, pork and chicken operations over the third fiscal quarter.

Tyson Foods, based in Springdale, Arkanses USA cited improved efficiency for the earnings growth. Tyson closed down noncompetitive plants between 2006 and 2008, and cut labour costs by laying off hundreds of workers, setting up the company to benefit as meat and poultry prices recovered when the economy improved.

Tyson’s chicken sales rose 4.6% in the quarter. For the fiscal third quarter ended July 3, Tyson reported a profit of $248 million, or 65 cents a share, up from $131 million, or 35 cents, a year earlier. Revenue jumped 12% to $7.44 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of 58 cents on $7.26 billion in revenue. Gross margin rose to 10.1% from 7.1%.

Rising grain prices could affect Tyson and other meat producers, but the company said it was unconcerned about higher feed costs. Noting the jump in wheat prices following Russia’s export ban, CEO Jim Lochner said that there’s been “a tremendous amount of buying the rumor, and I think we’re going to see some selling the fact.”

Analysts have questioned whether increased production by competitors such as Pilgrim’s Pride Corp. and Sanderson Farms Inc. will again saturate the market, which experienced a glut when demand plunged during the recession.

Pilgrim’s Pride plans to increase production by 10% over the next two years as it reopens two or three plants.

Tyson officials said that the availability of meat, including pork, beef and turkey, will likely remain tight. The domestic availability of meat will largely be determined by export demand, which they expect to increase.

Russia effectively banned U.S. chicken Jan. 1 by prohibiting importation of poultry that is processed with chlorinated rinses, a sanitization method used by all major U.S. processors at the time. In a deal announced by the Obama administration June 24, the U.S. Department of Agriculture agreed to certify that chicken sent to Russia wouldn’t go through the rinses.

But resuming exports to Russia won’t happen immediately, after Russia has issued a new demand to conduct lengthy audits of U.S. chicken processing plants.