Tyson Foods to Raise Prices As Profit Suffers.

[joedales]

UPDATE: Tyson Foods To Raise Prices As Profit Suffers

January 28, 2008: 01:57 PM EST


SAN FRANCISCO (Dow Jones) -- Tyson Foods Inc. reported Monday its quarterly profit fell 40% from a year ago, dragged down by wider losses in its beef business and surging grain and fuel costs.

Near record-level costs for corn and soybean meal is taking its toll, and Tyson said it plans to raise costs for its chicken and beef products that account for 78% of its total sales.

"We have no other choice but to raise prices substantially," CEO Richard Bond said in a conference call. "We are raising prices because we can't absorb these costs. Despite concerns about the economy, people have to eat, and they will continue to eat protein."

Tyson boosted its fiscal 2008 grain-cost forecast to more than $500 million, 67% higher than its prior outlook issued in November. Demand for corn-based ethanol used as an alternative for gasoline is hurting Tyson's profit. It's a situation the company hasn't faced before. In the past, higher grain prices were due to supplies and were short-term, Bond explained.

The Springdale, Ark.-based company (TSN) will stop offering financial forecasts, calling the commodity markets too "volatile" to make accurate predictions.

For the quarter ended Dec. 29, Tyson said it earned $34 million, or 10 cents a share, down from $57 million, or 16 cents, in last year's same period.

Sales rose 3% to $6.8 billion in the fiscal first quarter.

Tyson said higher average selling prices for chicken and beef helped offset lower shipment volumes. Pork sales were lifted by strong exports and Tyson said global demand for chicken and pork is increasing as the standard of living in the developing countries improves.

Meanwhile, the company is facing more beef slaughter capacity than available cattle as well as sluggish demand for U.S. beef overseas. It plans to cease slaughter operations at its Emporia, Kansas, beef plant in the next few weeks, resulting in 1,500 lost jobs.

In its fiscal first quarter, Tyson's beef unit reported an operating loss of $ 85 million, wider than the loss of $23 million a year ago. The company's overall gross profit margin fell to 4.5% of sales, from 5.1%, hurt by rising grain costs and lower sales volumes.

Tyson shares rose 3.5% to $13.72 in late morning trading.

[per]

Numbers are useful tools to manipulate your point by being there and by omission. Tyson will produce just enough to make a point. Interesting that although profit fell (still profit) to 4.5% of gross sales, sales rose by 3%. Profit is not illegal or even a dirty word. The trick is to not be one of the tools used in others profitability. The raw material supplier and the end user are the profit drivers for Tyson here.

[kato]

Wouldn't it be nice to be able to raise our prices because our profit wasn't high enough? Not because we're losing money, but because the profits aren't as high as we'd like.

Let us all shed a tear for these poor people and their plight.

[farmers_son]

For more information see:

http://ir.tyson.com/phoenix.zhtml?c=65476&p=irol-newsArticle&ID=1100522&highlight=

[farmers_son]

This is a rather long paste but I thought it was important. Quite a few U.S. packing plants depend upon Canadian live cattle to maintain slaughter numbers. Most of those plants will decide, some have already announced, they will no longer slaughter Canadian because of COOL. The obvious result will be more U.S. packing plants closing due to not enough cattle just like the Tyson plant at Emporia, Kansas.

http://ir.tyson.com/phoenix.zhtml?c=65476&p=irol-newsArticle&ID=1100259&highlight=

SPRINGDALE, Ark., Jan. 25, 2008 (PRIME NEWSWIRE) -- As part of a strategy to optimize its commodity meat business, Tyson Foods, Inc. (NYSE:TSN) is restructuring operations at its Emporia, Kansas, beef plant, Tyson officials announced today.

Beef slaughter operations will cease within the next few weeks. However, the facility will still be used as a cold storage and distribution warehouse and will process ground beef. In addition, the Emporia facility will help enhance efficiencies at some other Tyson plants by taking over the processing of certain commodity and specialty cuts, which have typically slowed production at those other locations. The company has no present plans to use the slaughter area of the Emporia plant; however, the equipment there will be left intact.

"This is an extremely difficult decision, given the great team of people who work there and our investment in the plant," said Dick Bond, president and CEO of Tyson Foods. "However, we must make changes to our commodity business model to effectively manage through challenging market conditions.

"There continues to be far more beef slaughter capacity than available cattle and we believe this problem will continue to afflict the industry for the foreseeable future," said Bond. "We estimate the current slaughter overcapacity in the industry to be between 10,000 and 14,000 head of cattle per day."

"This imbalance is especially a problem for Emporia," he said. "Cattle production has moved from eastern to western Kansas over the past twenty to thirty years, and the Emporia plant is no longer centrally located in relationship to where most of the cattle it slaughters are raised."

In addition, the U.S. cattle herd is not growing. Tyson sees no signs of appreciable growth in the fed cattle supply over the next two to three years, which is consistent with the opinions of various industry analysts. The rising price of grain, caused in part by the use of corn for ethanol, has put pressure on feed costs, land costs and the use of farm ground. Further, the number of cows being retained for calf production continues to decline.

"At a time in the cattle cycle when cattle numbers should be at or near their highest, the level of production is not approaching its historic peaks and we do not see any increases in fed cattle production in the foreseeable future," said Jim Lochner, senior group vice president of Tyson Fresh Meats.

"In light of the slaughter overcapacity and the outlook for fed cattle inventories, we have reviewed the operations of each of our facilities, their location relative to available cattle supplies, and have determined slaughter operations at the Emporia facility should be discontinued," Lochner said. "By making this change, we'll be able to divert more cattle to our other facilities, which are more strategically located, and improve their capacity utilization."

The discontinuation of slaughter operations will result in the elimination of approximately 1,500 of the 2,400 jobs currently provided at the Emporia plant. This will include people employed in first and second shift slaughter, as well as second shift processing.

Affected workers will continue to be paid and receive benefits for 60 days. Tyson Human Resources representatives will begin meeting with them next week to discuss other employment opportunities within the company. The workers will be encouraged to consider transferring to other Tyson locations, such as company beef facilities at Finney County, Kansas; Dakota City and Lexington, Nebraska; and Joslin, Illinois. The company will offer cash relocation incentives for qualified workers. Those who transfer will retain their seniority as it relates to the accrual of benefits, including vacation time, as well as wage increases.

Tyson will also work cooperatively with the Kansas Department of Labor to help provide workers with information about unemployment benefits and help in finding employment outside the company.

The Emporia plant has been part of Tyson Foods since the company's purchase of IBP, inc. in 2001. IBP bought the plant from Armour & Co. in late 1967 and began production in 1969 after the facility had been extensively remodeled and expanded.

In addition to Emporia, Tyson's U.S. beef plants are located in Amarillo, Texas; Dakota City, Nebraska; Denison, Iowa; Finney County, Kansas; Joslin, Illinois, Lexington, Nebraska and Pasco, Washington. The company also has a beef complex in Canada, and is involved in a vertically integrated beef operation in Argentina.