Coming off a fiscal first-quarter income increase of 11 percent, Tyson Foods has announced plans of growth and expansion for the upcoming year.
The income growth was anchored by an increase in chicken and beef prices that exceeded analysts’ expectations. For the quarter ending December 29, Tyson earned $173 million, or 48 cents per share, which is up $156 million, or 42 cents a share.
“Forty-eight cents a share is a good start to the fiscal year, and was a little better than our expectations,” Tyson President and CEO Donnie Smith said during a shareholders’ conference call on February 1.
Smith noted that while higher prices helped profitability, the total pounds sold were down about 1.1 percent. He expects the upcoming months to see a flat retail demand. Overall domestic availability is projected at a three percent decrease in beef, but a 1 percent increase in both chicken and pork. While Smith acknowledges some demand estimates may be questionable as consumer behavior could be driven by fuel prices, taxes and confidence in the market, the company is moving full-steam ahead on expansion projects.
“We can’t wait for unemployment to improve or the economy to get better to grow our business, and I assure you that is not our plan,” Smith said. “Our strategy is to accelerate our growth in domestic value-added poultry and prepared foods, as well as international poultry, and we’re executing that strategy.”
Smith told earnings call participants about how the company has made capital investments in excess of $40 million on four of its plants.
The company is investing more than $27 million on expansion projects at its plants in Sherman, Texas; Goodlettsville, Tenn.; and Glen Allen, Virginia. The facilities in Texas and Tennessee produce case-ready beef and pork, while the Virginia plant produces highly-processed poultry products for foodservice customers.
The fourth project is at a Bruss Company facility in Jacksonville, Fla., which recently opened. Bruss is a subsidiary of Tyson, and that plant manufactures portion-controlled steaks and chops. Smith said a $13 million investment was made in that plant.
“All four of these plants are in great locations with an excellent work force. These are major investments to help support key customers and they’ll help create as many as 490 new jobs,” Smith said.
International growth plans
The company is also moving forward in terms of international growth. Smith reported that Tyson is accelerating international chicken production in both Mexico and China. Smith said there have been an encouraging growth in production in Mexico, which has offset losses in China.
However, Smith said the company sees promise in China, as they are building up chicken farms to supply their plants in China. Tyson is currently a third of the way toward their goal of growing their own birds, thus eliminating the need to buy market birds. Doing so will ensure more consistency and quality of the product, Smith said, as well as allow the company to work more efficiently.
Smith has also reported sales and prices up in Brazilian production.
Both Smith and the Tyson Chief Operating Officer said they see opportunities in the beef sector, as Japan has announced a move to import U.S. beef and Cargill has suspended production at its Plainville, Texas plant.