000501 Tyson Profits Drop 45%May 8, 2000Springdale, AR - Tyson Foods Inc. said its fiscal second-quarter earnings fell 45% as it struggled with oversupply and low prices. Tyson also said it may have trouble meeting Wall Street earnings forecasts for the remainder of the fiscal year because of heavy poultry production which has led to low prices. The Springdale, Ark.-based company said it earned $35.7 million or 16 cents per share in the second quarter ended April 1, down from $64.6 million or 28 cents per share in the same period a year ago. Excluding a $24.2 million charge to cover its exposure to AmeriServe, the food distributor that filed for bankruptcy in February, second-quarter earnings would have been $51.2 million, or 23 cents per share. Total second-quarter sales for fiscal 2000 were $1.79 billion, down from $1.84 billion last year, a decrease of 2.7%, with a 2.3% decline in unit volume. Analysts had expected a second-quarter profit of 14 cents per share, according to First Call/Thomson Financial, which tracks earnings estimates. The stock gained 1/8 to 10 9/16 in late afternoon New York Stock Exchange trading, near the low end of its 52-week range of 8 1/2 to 23 3/4. “In the past quarter we made tough decisions which resulted in our 3% cut in live production, improvements in our product mix and expansion of our dominant value added business,” John Tyson, chairman and chief executive officer, said in a statement. “We focused on reducing capital expenditures and continued to pay down debt,” he said. “However, oversupply of chicken continues to depress prices. Lack of production discipline in our industry slowed expected seasonal price rebounds and we are going to be challenged to achieve analyst estimates for the remainder of this year.” Analysts were expecting a full-year profit of $1.09 per share, compared with $1.20 a share in the prior year, according to First Call/Thomson Financial. David Nelson, food industry analyst with Credit Suisse First Boston, said he lowered his fiscal 2000 earnings estimate to 90 cents per share from $1.16 on Monday. “The chicken market isn't getting any better,” Nelson said. “Usually there is a little bit of improvement seasonally as we move into May,” he said. “We're continuing to see more supply than demand despite weak margins.” Nelson said he did not think that other poultry producers would cut back on production, following Tyson's lead. “We haven't seen any evidence or inclination of that (production cutbacks),” Nelson said. “We have a lot of people who still like to go for (market) share” at the expense of margins. Leonard Teitelbaum, food industry analyst with Merrill Lynch, lowered his fiscal 2000 estimate to a range of $1.00 to $1.05 per share from $1.10-$1.15. He lowered his fiscal 2001 estimate to $1.25-$1.35 per share from $1.35-$1.40. “Due to poor industry dynamics lasting longer than we had thought, we are lowering our earnings per share estimates for this year and next,” he said in a research note. “At current levels we see limited downside risk and are maintaining our intermediate and long-term accumulate opinions.”
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