Tyson Foods Earnings Drop, As Expected

CHICAGO – Tyson Foods Inc., the largest U.S. poultry producer, said on Monday that fiscal third-quarter earnings fell sharply, as expected, pressured by weak foreign currencies and promotional expenses in a tough chicken market.

Tyson, in the process of acquiring pork and beef processor IBP Inc., reported earnings of $19.4 million, or 9 cents a diluted share for the quarter ended June 30, compared with $40.5 million, or 18 cents a share, a year ago.

Analysts' estimates ranged from 6 cents per share to 10 cents, with a consensus at 7 cents, according to market research firm Thomson Financial/First Call.

Springdale, Arkansas-based Tyson said in April it expected earnings per share of 6 cents to 10 cents for the third quarter.

Third-quarter sales rose to $1.89 billion, compared with $1.81 billion a year ago.

Currency exchange cut $1.4 million from third-quarter earnings after adding $1.8 million a year ago, Tyson said.

``While our performance was at the high end of our previous guidance, we clearly did not perform to our potential,'' Chief Executive John Tyson said in a statement.

Food-service sales rose 2 percent in the third quarter to $853.6 million, but profit from the segment fell, mainly due to increased promotional spending. Food service is the largest part of Tyson's business.

Consumer products sales dipped slightly to $579.7 million from $580 million, but profits sank from a year ago due to different emphasis on products. International sales rose to $219.9 million from $141.9 million a year ago.

``It seems pretty consistent with trends we are seeing in the industry regarding very strong demand for (chicken) wings and a strong export market,'' said Christine McCracken, Midwest Research food analyst. ``Unfortunately, breast meat markets don't show much of an improvement. There seems to still be an issue of too much chicken in inventory.''

Tyson agreed in June to a cash and stock deal of about $2.7 billion for IBP, which will form the largest U.S. meat company -- ending an often contentious, on-again off-again dance.

Tyson outbid rival Smithfield Foods Inc. for IBP, but tried to back out of the deal in March, alleging numerous breaches of the agreement including accounting irregularities at an IBP subsidiary. A judge forced the parties back together in June.

Shares of Tyson closed at $10.40 on the New York Stock Exchange last Friday, down 19 cents. The shares have fallen 18 percent since the start of the year, during which time they have underperformed the Standard & Poor's 500 index by about 14 percent.