Tyson CEO Outlines Financial Turnaround, Articulates Future Strategies ; Company also revises fiscal 2007 guidance to $0.72 to $0.80 per share
The President and Chief Executive Officer of Tyson Foods, Inc. (NYSE: TSN) today will describe how the company will achieve a $700 million increase in pre-tax earnings in fiscal 2007 after absorbing almost $300 million in additional grain cost, resulting in a $1 billion operational improvement over last year.
Richard L. Bond’s comments will be part of his scheduled presentation this afternoon at the Lehman Brothers Back-To-School Consumer Conference in Boston. During his talk he will also provide an updated perspective on the company’s fourth quarter financial performance and outline the company’s long-term strategic plan for success.
Despite a financial loss in fiscal 2006 and the absorption of increased grain costs, Tyson has experienced strong progress in 2007 with solid earnings in the first, second and third quarters. Market conditions have improved and some export markets have reopened, but the factors under the company’s control are where the biggest improvements have been, according to Bond.
Tyson rationalized three beef plants to improve capacity utilization, closed two prepared foods plants that didn’t fit the company’s business model, sold two commodity poultry plants and chose not to rebuild another poultry plant destroyed by fire. The company also cut costs significantly through a cost management initiative started in mid-2006, which is expected to result in an excess of $250 million in savings for fiscal 2007.
Diluted earnings per share through the first nine months of fiscal 2007 totaled $0.66 and all segments of Tyson’s business are expected to be profitable in the fourth quarter. “However, we are revising our fiscal 2007 guidance to $0.72 to $0.80 per share,” Bond reports. "The fourth quarter is turning out to be more challenging than expected. Our beef business has been affected by higher than expected live cattle costs and a decline in beef revenues due to a disruption in South Korean beef trade. Meanwhile, live hog prices were higher due to speculation about Chinese pork imports.
“In chicken, we successfully implemented price increases earlier in the year, but gave up some sales volume as a result,” he adds. “The company is now working through these larger quantities of higher valued inventories.”
Despite the fourth quarter, Bond says “I’m very excited and optimistic about the company’s long-term success because we’ve made a lot of changes in how we run the business, and we’ve reached a lot of milestones.”
Tyson officials believe the company’s long-term performance will be enhanced by some new product initiatives. Tyson’s new 100% All Natural(tm), Raised Without Antibiotics chicken, which was launched in the third quarter, has been very well received. It has generated expanded distribution with current customers and also resulted in new sales accounts. Tyson will also soon roll out advertisements to support a new line of restaurant-style frozen snacks called Tyson(r) Any’tizers(tm), which was successfully launched this summer. In addition, this past spring Tyson Food Service converted its entire line of marinated, uncooked chicken to 100% All Natural(tm) to meet growing consumer interest in all natural foods.
These product lines are examples of Tyson’s efforts to continue the creation of innovative and insight driven food solutions, which is one of the key business strategies Bond will outline in his presentation. Other strategic principles the company is implementing include optimization of commodity business models, building a multi-national enterprise and efforts to revolutionize the conversion of raw materials and by-products into high-margin initiatives.
“In the food business...you must continually innovate to survive and grow,” according to Bond. “This is why we finished building our new Discovery Center research and development facility at a time we were cutting costs elsewhere.”
Tyson management is also continuing efforts to improve the effectiveness of the company’s business structure. Bond will report Tyson has started a new initiative called FAST, which stands for focus, agility, simplify and trust. The goal is to place greater emphasis on doing only value-added activities and encouraging faster decision making.
The evaluation process, which is now underway and will continue through mid-October, is expected to help the company continue streamlining the way it does business. It is expected to involve modifying or reducing some layers of management and giving Team Members more decision-making authority.
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