"We produced solid results in our fiscal third quarter despite softer than expected domestic demand for protein," said Donnie Smith, president and chief executive officer of Tyson Foods.
"I am especially pleased with the performance of our Chicken and Prepared Foods segments. Our Beef and Pork segments have been operating in very difficult market conditions that will result in our earnings for fiscal 2012 coming in lower than we previously projected.
"Grain costs have been increasing significantly and rapidly, largely as a result of the on-going US drought. While we ultimately expect to pass along rising input costs, these costs, coupled with continued soft demand, are likely to pressure earnings in 2013.
In fiscal 2013, Tyson Foods expects overall domestic protein production (chicken, beef, pork and turkey) to decrease slightly from fiscal 2012 levels.
The recent drought conditions have reduced expected grain supplies, which will result in higher input costs as well as increased costs for cattle and hog producers. The following is a summary of the fiscal 2013 outlook for each of Tyson’s segments:
“Current USDA data shows U.S. chicken production to be relatively flat in fiscal 2013 compared to fiscal 2012. However, changing crop conditions and pricing could change this estimate. The capital investment and significant operational improvements we have made in our Chicken segment have better positioned us to adjust to rising grain prices and remain profitable. Due to the current run up in grain prices, we will be challenged in fiscal 2013, but anticipate our Chicken segment will remain profitable.”
Tyson expects to see a reduction of industry fed cattle supplies of 1-2% in fiscal 2013 as compared to fiscal 2012, with the reduction predominately in the second half of fiscal 2013. “Although we generally expect adequate supplies in 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 2013. For fiscal 2013, we believe our Beef segment will remain profitable, but could be below our normalized range of 2.5%-4.5%.”
“We expect industry hog supplies in fiscal 2013 to be up 1-2% compared to fiscal 2012 and we expect pork exports to remain strong in fiscal 2013. For fiscal 2013, we believe our Pork segment should remain at or above our normalized range of 6.0%-8.0%.”
“We expect operational improvements and increased pricing to offset increased raw material costs. 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. For fiscal 2013, we believe our Prepared Foods segment should remain in its normalized range of 4.0%-6.0%.”