000802 Tyson Profits Down on Poultry Oversupply

Springdale, AR - Tyson Foods Inc. said its quarterly earnings fell 41%, in line with lowered expectations, hurt by oversupply in the poultry industry.

The company also said that earnings could be even worse in the future, with the fourth-quarter possibly coming in at half the third quarter results.

The Springdale, Ark.-based company said it earned $40.5 million, or 18 cents per diluted share, in the fiscal third quarter ended July 1, compared with $68.4 million, or 30 cents a share, in the year-earlier period.

Tyson shares were down 1/8 to 9-3/8 in early afternoon trading on New York Stock Exchange, just above the 52-week low of 8-8/16 and below the 52-week high of 18-8/16.

In May, Tyson said it might have trouble meeting earnings forecasts for fiscal 2000 due to large poultry supplies and low prices. Last month it said third-quarter earnings would be 18 to 20 cents per share.

Before the company's earnings warning, analysts had expected Tyson to earn 26 cents a share for the third quarter, according to First Call/Thomson Financial. After the warning, analysts cut their consensus forecast to 18 cents a share.

Third-quarter sales were $1.81 billion, down 3.9% from $1.88 billion last year. Comparable sales, excluding the company's seafood business sold in the fourth quarter last year, decreased 1.6%.

“The burdensome industry supply continues to create a difficult operating environment that unfortunately will take more time to resolve,” John Tyson, chairman, president and chief executive of Tyson, said in a prepared statement.

In a conference call with analysts, Steve Hankins, chief financial officer, warned of worse earnings in the fourth quarter, typically a slower period for Tyson.

“We probably wouldn't be surprised to see ourselves at half the level of what we were in the third (quarter),” Hankins said in a conference call with analysts. “We don't expect the first (quarter of fiscal 2001) to be as good as the fourth (quarter of fiscal 2000)”.

The consensus analysts estimate calls for fourth quarter earnings to be 21 cents a share, according to First Call/Thomson Financial. Company officials said they were being conservative with their estimates in a poultry market that is hard to forecast.

The company said it had improved its product mix since initiating production cuts last fall and would continue to manage costs aggressively and work to increase market share in the value-added segment of the business. Tyson officials also said the company could cut production more in the holiday period than normal.

“If we do our job, we will be better positioned when the industry returns to more normal market conditions,” Tyson said.

Third-quarter sales in the food service division, the company's biggest segment, fell 4.1% from a year earlier, to $836.8 million.

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com