[Made in the USA]

Tyson Foods 1Q profit sinks
By CHUCK BARTELS
AP Business Writer

LITTLE ROCK, Ark. - Tyson Foods Inc., the world's largest meat producer, reported Monday its first-quarter profit slid 40 percent, withdrew its earnings guidance for the year and said it will hike prices largely to offset rising costs of commodities used to feed cattle, chickens and pigs.

The company expects to face more than $500 million in additional grain costs for fiscal 2008, which CEO and President Dick Bond said is well above the $300 million increase it had expected in November.

"Because of these unanticipated and extraordinarily high corn and soybean meal costs, we have no choice but to raise prices substantially," Bond said.

"For the foreseeable future, consumers will pay more and more for food, especially protein, because grain represents a proportionally higher percentage of input costs compared to other foods," he said.

Bond said in a conference call with analysts that the company is looking at shorter time frames for fixed prices for sales to restaurants and retailers.

Its shares rose 50 cents, or 3.8 percent, to $13.76 in late morning trading Monday. They are still closer to the lower end of their 52-week range of $12.81 to $24.32.

The Springdale-based company said it earned $34 million, or 10 cents a share, in the period ending Dec. 29, down from $57 million, or 16 cents a share, in the year-ago quarter.

The quarter included an $18 million one-time gain and a $6 million charge. Analysts polled by Thomson Financial had forecast earnings of 4 cents per share. Those estimates typically exclude one-time items.

Tyson had sales of $6.8 billion for the quarter, up from $6.6 billion a year ago.

Because of "extremely volatile and fluctuating" commodity markets, Bond said the company was temporarily withdrawing its prior earnings guidance.

The company had projected it would earn between 30 cents per share and 70 cents per share for fiscal 2008. Analysts polled by Thomson expected earnings of 42 cents per share.

Bond said the company is well positioned as some consumers turn away from beef because they will turn to Tyson's chicken and pork lines.

Beef accounts for nearly half of Tyson's sales and the segment lost $85 million for the company in the first quarter. The company says it was hurt by higher prices for live cattle, higher costs and inefficiencies. The company said the pressures were eased somewhat by higher average sale prices.

Bond said that he is optimistic that beef will be out of its slump in fiscal 2009. He said he expects the export situation to improve, with dollar still weak and world demand continuing to rise.

"At some point, the pricing will catch up to the feed," Bond said. "I have a lot of optimism as we look forward. I think we have a short-term situation."

On Friday, Tyson announced the elimination of 1,500 jobs at a beef plant at Emporia, Kan., where the company is ceasing slaughter operations. Bond said there is still more slaughter capacity than available cattle.

Chicken, representing close to a third of Tyson's sales, also saw increased grain costs, though the segment made $35 million largely due to higher average sales prices. Last year Tyson raised chicken prices after going to an all natural labeling and dropping use of any human antibiotics. The segment was hurt by $107 million in additional grain costs.

Pork, at 12 percent of sales, turned in a solid quarter by earning $76 million, led by strong export sales. Prepared foods, 10 percent of sales, made $32 million, helped by lower pork costs.

The company is exploring pork sales to China. Bond said beef could improve if the government can negotiate the reopening of the South Korean market and expand sales to Japan. He said he's also looking for improvement in Russia.

Expansion of corn-based ethanol production has driven up corn prices and is a key reason for higher costs for Tyson and other food producers.

"It just seems it's not a prudent use of corn as it has affected food and food inflation," Bond said, calling for the government to lift its mandates on ethanol production.

Bond told analysts that he saw no way the company could offer earnings guidance considering the volatile market situation.

"Quite frankly, I apologize for having to withdraw the guidance," Bond said. "We do feel we are in a very good position going forward."