Three of the four operating segments of Tyson Foods produced returns in fiscal 2009 at or above normalised levels, while its chicken business made significant improvement from the first to the second half of fiscal 2009, according to Ted Jones, Tyson’s vice president and treasurer.
Jones, speaking at the Bank of America Merrill Lynch Credit Conference, predicted further progress in fiscal 2010.
“Our chicken segment’s operating margin improved from -7.2% in the first half of fiscal 2009 to 3.5% in the second half,” Jones said. “We are still working to get chicken where it should be, but we’re starting the new fiscal year strong. We’re about two-thirds into our first quarter, and we’re pleased with how we’re doing.”
In addition to positive industry fundamentals, Tyson is starting to see benefits from operational efficiencies, including better capacity utilisation, better yields, reduced freight, improved flexibility in processing plants and cost reductions, according to Jones. He added that Tyson has shortened the length of its customer contracts, which allows a quicker response to input cost fluctuations.
“We also have a great new leadership team in Donnie Smith and Jim Lochner,” Jones said.
Donnie Smith, who headed Tyson’s Poultry & Prepared Foods Group, was named president and chief executive officer on November 19. Jim Lochner, head of Tyson Fresh Meats, was named chief operating officer.
Fresh meats – Beef and pork performed well
Tyson Fresh Meats, which comprises the company’s beef and pork segments, performed very well in 2009, with pork achieving its second best year ever and beef achieving its third best year, excluding a goodwill impairment, Jones said.
The beef and pork business model is based on the spread between revenue, the cutout value of the carcasses and the cost of livestock. Although cattle and hog supplies are expected to tighten in 2010, Tyson expects there will be adequate supplies to run its plants efficiently.
Jones said one of the company’s key financial goals for 2010 is to reduce net debt. Tyson bought back $293 million of its bonds in fiscal 2009 and in 2010 will be opportunistic in purchasing bonds when they become more reasonably priced.