090121 Interim CEO Says Poultry A Priority for Tyson Foods

January 12, 2009

Springdale -- Tyson Foods' interim CEO Leland Tollett -- who returned to lead the company just five days ago -- told employees that reversing the company's poultry losses would be his first priority.

Tollett was chosen by Tyson Foods' board of directors to replace Dick Bond, who served as CEO from May 2006 until his abrupt resignation on Monday. Analysts speculate that the board of directors wanted to take the company in a new direction, but neither Bond nor the company have elaborated on the management change.

In a presentation to Tyson employees on Friday, Tollett said the chicken division is being streamlined and eliminating a limited number of corporate positions, though no major layoffs are planned.

A news release was short on specifics. Analysts anticipate the Springdale-based meat giant will likely cut production, a 180-degree turnaround from the strategy followed in 2008, when poultry losses totaled $118 million.

"Whatever it takes is how long I'll be here," Tollett said in the release.

The 71-year-old Tollett worked as CEO at Tyson Foods from 1991-98 and served on the board of directors until last year.

"Though he did not make any substantial profits for the company during his former tenure, Tollett's experience and knowledge of the company's business make him a logical choice to serve in the interim," said Tim Ramey. "Obviously the Tyson family trusts Tollett's wisdom." Ramey is an independent analyst with D.A. Davidson & Co.

Shares of Tyson Foods Inc. rallied to gain 3.8 percent on Friday, closing at $8.45, up 31 cents, while the broader markets posted declines.

Tollett said the company's beef, pork, international and renewable products divisions are all solid businesses that will continue to operate as usual, while he focused on reviving chicken profits.

Ironically, poultry processing margins have improved in the past few weeks -- as predicted -- from production cuts already made across the industry from other players.

According to Stephens Inc., the processing margin went positive in December as processors averaged about 6 cents per pound after 12 consecutive months of red ink.

The first week of January processing margins average 5 cents per pound, the industry's best New Year's start since 2004, according to Stephens.

Farha Aslam, a food analyst with Stephens, estimates Tyson Foods will cut production between 4 percent to 6 percent in the coming days as demand remains tepid in foodservice channels. (Stephens Inc. conducts investment banking services with Tyson Foods and is compensated accordingly.)

The company also said it intends to hire a permanent CEO as soon as possible and that the board of directors is focusing on internal candidates. The board chairman and other board members will work with senior managers in evaluating candidates, the company said.

"It's not surprising the company is choosing its new CEO from within, because of the difficulty level and specialties this job presents," said Ann Gilpin, independent analyst with Morningstar.com

Tollett told the group, "I'm not sure if I will be here three months or three years, but I certainly hope it's closer to three months."

Gilpin said Tollett's poignant comment was a testament to the job's difficulty level. She and Ramey said Tyson Foods is fortunate to have a number of employees with the necessary expertise on staff with the loyalty needed to work for a publicly traded company that is still family controlled, which creates a unique corporate culture.