Tyson Foods Posts 1Q Profit

SPRINGDALE, Ark. -- Tyson Foods Inc., the world's largest meat producer, posted its first profitable quarter in a year Monday but warned that a "dramatic rise" in corn prices caused by new demand for ethanol will raise the cost of poultry and livestock fed with the grain.

Tyson said profit in its fiscal first quarter, which ended Dec. 30, climbed 46 percent with the help of higher chicken sales and lower costs.

The results beat Wall Street expectations, and the company shares rose more than 4 percent in morning trading.

Merrill Lynch called the results a "solid start" and maintained a "buy" recommendation for Tyson stock.

"Poultry results were ahead of our expectations and solidly profitable, while beef posted an operating loss and was a bit weaker than we had been looking for. It (beef) did show a sequential improvement," Merrill Lynch analyst Diane Geissler said in a research note.

But other analysts said the profit increase was helped by $44 million in savings as part of a cost-cutting program.

"Bottom line, we believe Tyson was a great food stock to own in the 1980s (as Burger King and McDonald's added chicken to menus), but for the last 10-15 years it has mostly lagged, and despite new management (new CFO from Procter & Gamble) we simply do not see a major turn here yet," Prudential Equity Group analyst John McMillin said in a research note, keeping a rating of "neutral weight."

Wade D. Miquelon became Tyson's executive vice president and chief financial officer last summer.

Tyson confirmed its annual per-share guidance of 50 cents to 80 cents. But Chief Executive Dick Bond cautioned that increased demand for corn and other crops increasingly used to make fuel is driving up the price for those commodities, which means costlier feed for poultry, cattle and hogs.

"Companies will be forced to pass along rising costs to their customers, meaning consumers will pay significantly more for food," Bond said.

He said the "dramatic rise" in the price of corn has Tyson Foods and others in the industry concerned.

"As the food versus fuel debate unfolds, we must carefully consider the negative and unintended consequences of overusing grains," Bond said.