050823 Tyson Foods Reports Lower Profit

Chicago - Top U.S. meat processor Tyson Foods Inc. said quarterly profit fell nearly 19% on weaker results in its beef business and charges related to a settlement with hog farmers and poultry plant closings.

The company also trimmed its full year earnings outlook. Tyson expects difficulty in its beef and pork businesses in the fourth quarter, executives told analysts during a conference call. Its stock fell 3.7%.

Tyson and other U.S. beef processors have had to contend with high cattle prices, lower domestic cattle supplies, a loss of key export markets, and restrictions on imports of Canadian cattle.

In the quarter, the company's pork operations were weighed down by the settlement charges, but chicken results were a bright spot, helped by low feed costs.

"When you are not hitting on all cylinders, you want to be hitting on at least one of them. Chicken really helped to make up for the weakness in beef and pork," said Todd Duvick, Banc of America analyst.

Tyson posted a profit of $131 million, or 36 cents a share in the fiscal third-quarter ended July 2, compared with $161 million, or 45 cents a share, a year earlier.

Results included charges of 8 cents per share for a settlement with hog farmers who sued after Tyson restructured its hog operations in 2002, and for the closing of some poultry plants.

Excluding those charges, it earned 44 cents per share. Wall Street analysts on average had forecast a profit of 37 cents a share, according to estimates.

Sales rose 1% to $6.7 billion.

Tyson now expects fiscal 2005 earnings of 95 cents to $1.05 a share. In May, it had estimated earnings per share of $1.05 to $1.20.

The forecast "factors the 8 cents in charges but also lower than previously projected pork margins and an apparent slower recovery in beef," Pablo Zuanic, analyst with J.P. Morgan, said in a research report.

The beef unit, Tyson's largest, had operating earnings of $36 million, down from $118 million a year ago.

Its chicken operations, the largest in the country, had operating earnings of $198 million, up nearly 37% from the year ago period, despite lower sales.

Pork sales were down and the unit posted a $19 million operating loss versus a $34 million gain a year ago.

On the conference call, Tyson officials said they expect a resumption of U.S. beef exports by late this year to Japan and South Korea. Exports had been halted since late 2003 by the discovery of mad cow disease in the United States.

Jim Robb, an economist with the Livestock Marketing Information Center, said the export forecast may be optimistic. But he said if exports resume, they will likely be small.

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