Tyson Foods Results Hit by Bird Flu

20/04/06 Tyson Foods the world’s largest processor and marketer of chicken, beef, and pork has reported preliminary second quarter 2006 results and substantially reduced earnings guidance for fiscal 2006. Volatile markets and the continued oversupply of all proteins contributed to the significant deterioration of chicken and beef margins during the second quarter of fiscal 2006 and resulted in a preliminary GAAP loss of approximately $(0.38) per diluted share in the second quarter and a preliminary GAAP loss of approximately $(0.27) per diluted share for the first half of the fiscal year. The preliminary second quarter results include an $0.08 per share charge for the recent closing of two Nebraska beef plants and a $0.03 per share charge for the closing of two Iowa processed meats facilities.

Tyson said that this oversupply across all proteins and a forecasted lack of price recovery for the remainder of the fiscal year has prompted the company to significantly reduce its fiscal 2006 GAAP earnings guidance to a range of $(0.25) to $0.10 per diluted share. This estimate also includes the charges relating to the plant closings in Nebraska and Iowa.

The discovery of H5N1 avian influenza in other parts of the world has reduced U.S. chicken export prices more than expected. Unprecedented leg quarter inventories have delayed the recovery of these export prices. It has also put pressure on an overabundant, domestic white meat market, and subsequently contributed to historically low breast meat prices.

Cattle supplies are gradually increasing and cattle prices are declining, however, box beef prices are also declining, putting continued pressure on beef margins. Key beef export markets have remained inaccessible longer than anticipated. South Korea, which many expected to reopen to U.S. beef in early spring, is still closed. The Japanese market opened briefly then reinstituted a U.S. beef ban. It is uncertain when either of these markets will reopen. Improvements in the beef segment are still expected in the last half of fiscal 2006, but not at the level previously forecasted.

Tyson’s pork operations also continue to be challenged by the abundance of competing proteins in the marketplace. Meanwhile, the company has also been negatively affected by increased corn and diesel fuel expenses.

“While we expected tough and uncertain conditions in the protein market, it has been far more difficult than we previously projected,” said John Tyson, Tyson chairman and CEO. “Protein supplies have remained more burdensome than anticipated and will continue to put pressure on product price recovery. We still expect an improved performance in the last half of fiscal 2006; however it will not be of the magnitude originally projected. Despite these challenging conditions, we remain confident in our business strategy to create more value-added products, improve operational efficiencies and expand our international presence.”