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Tyson Foods (TSN) Q1 Profit Rises 11%, Beats Estimates

 February 01, 2013 08:26 AM

(By Mani) Tyson Foods, Inc. (NYSE: TSN) reported 11 percent rise in its first-quarter profit, which also topped Street view, on lower interest expense. The company also guided its fiscal 2013 sales above estimates, sending its shares up about 3 percent in the pre-market hours.

For the first quarter, Tyson Foods earned $173 million, or 48 cents a share, higher than $156 million, or 42 cents a share, in the same quarter last year. Quarterly sales increased to $8.40 billion from $8.33 billion a year-ago.

Analysts, on average, polled by Thomson Reuters expected earnings of 42 cents a share on revenue of $8.60 billion.

Net interest expense fell 23 percent to $36 million. Liquidity totaled $1.9 billion at Dec. 29, 2012, well above the company's goal to maintain liquidity in excess of $1.2 billion.

In its Chicken segment, sales volumes fell despite increased domestic and international production due to reduced open-market meat purchases, planned inventory build to meet forecasted customer demand and mix of rendered product sales.

Meanwhile, Fed cattle supplies dropped, driving up average sales price and livestock cost. Sales volumes decreased due to a reduction in live cattle processed as a result of soft domestic demand for beef products and outside tallow purchases.

Live hog supplies increased which drove down average sales price and livestock cost. Sales volumes fell on balancing supply with customer demand.

For fiscal 2013, Tyson Foods expects overall domestic protein production (chicken, beef, pork and turkey) to decrease approximately percent from fiscal 2012 levels. The recent drought conditions have reduced expected grain supplies, which will result in higher input costs as well as increased costs for cattle and hog producers.

The company projects fiscal 2013 sales to approximate $35 billion mostly resulting from price increases related to expected decreases in domestic availability of protein and increased raw material costs. Analysts expect sales of $34.65 billion.

Tyson estimates capital expenditures at about $550 million, while net interest expense is expected to be about $140 million.

Current USDA data shows U.S. chicken production to be relatively flat in fiscal 2013 compared to fiscal 2012. Based on current futures prices, the company sees higher feed costs in fiscal 2013 compared to fiscal 2012 of about $600 million. The company expects its Chicken segment to return to normalized ranges in the second-half of fiscal 2013.

Tyson Foods expects to see a reduction of industry fed cattle supplies of 2-3 percent in fiscal 2013 as compared to fiscal 2012, with the reduction predominately in the second half of fiscal 2013. However, it anticipates beef exports will remain strong in fiscal 2013. For fiscal 2013, the Beef segment is expected to remain profitable, but could be below its normalized range of 2.5-4.5 percent.

The company anticipates industry hog supplies to be flat with last year and pork exports to remain strong in fiscal 2013 but less than fiscal 2012. For fiscal 2013, Pork segment should remain at or above its normalized range of 6.0-8.0 percent.

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