BOCA RATON, Fla., Feb. 19, 2008 (PRIME NEWSWIRE) -- Despite the impact of escalating grain prices and other market-related challenges, Tyson Foods, Inc. (NYSE:TSN) is strategically positioned for future success, the company's president and chief executive officer reported today. Richard L. Bond spoke Tuesday at the annual Consumer Analyst Group of New York (CAGNY) Conference.
"We've accomplished a great deal in our efforts to make Tyson a stronger, more agile company and believe we have the right strategies in place to win," said Bond. "We're confident about our future because of our efforts to optimize our commodity businesses, create new products, expand our international presence and increase the value of our by-products."
Tyson experienced increased sales of $1.5 billion in fiscal 2007 and generated operating income of $700 million while incurring $300 million in additional grain costs. The company also reduced debt by $1.2 billion.
Corn-based ethanol is putting pressure on input costs for the food industry and companies like Tyson. Approximately 25% of the U.S. corn crop is expected to be used in 2008 to produce ethanol, compared to only 8% in 2002.
"We currently believe we'll experience almost $800 million in increased grain and related input costs in fiscal 2008," said Bond. Grain is a major expense in chicken production, representing almost half the cost of raising a live chicken. Higher grain prices also affect the cost of cooking oil, flour and other ingredients used to produce further processed and pre-cooked chicken products.
Tyson is working to offset the higher costs through its risk management activities and by increasing finished product prices. The company also continues to push for changes in the government mandate on corn-based ethanol and the removal of tariffs on sugar-based ethanol imports.
He added, "According to a recent report, even if the entire U.S. corn crop were turned into ethanol, it would displace only 3.5% of gasoline use."
Bond went on to describe Tyson's efforts to collaborate with retail and foodservice customers to meet consumer needs with innovative food solutions. He noted the success of the Tyson Discovery Center, the company's new food research and development facility, which includes an R&D team of 120 professionals, 19 research kitchens and a USDA-inspected pilot plant.
"Even with our long-standing customers, we've been able to increase the number of projects in the pipeline and speed up product launches," he said. Customers representing about half of the company's sales revenue have already been to the Discovery Center, which opened a year ago.
As part of the company's efforts to capitalize on consumer insights, Tyson has identified three consumer need states for meal preparation. They include:
* Homemade with Help(tm)- Tyson is addressing consumer desires
to serve their families home-cooked food by providing a few
short-cuts. An example is Tyson's "Trimmed and Ready" fresh
chicken, which has already been hand-trimmed for the consumer
and is ready to cook.
* Fast & Flexible(tm)- Because of the fast-paced lifestyle of
many consumers, Tyson has developed products such as pre-
cooked dinner meats and restaurant-style frozen snacks called
Tyson(r) Any'tizers(tm). These products can be heated and
served in a matter of minutes.
* Ready Now(tm)- 83% of consumers' main meals include ready-to-
eat foods. Tyson is helping expand the retail grocery deli
business with such products as prepared appetizers and gourmet
sandwich wraps.
Bond reported Tyson is expanding the success of its "Thank You Mom" advertising and promotion plan by tying it into the company's sponsorship of the 2008 and 2010 U.S. Olympic teams. The company also has successfully promoted Tyson consumer products through food donations made to families on the ABC-TV show "Extreme Makeover: Home Edition."
Product development and innovation also have been key to the success of Tyson Food Service. Examples include the 2007 reformulation of breaded products to zero grams of trans fat and the conversion of ready-to-cook chicken to "All Natural" with a 50% reduction in salt. The company used its Kid Tested, Kid Approved(tm) development process in the introduction of new products for school cafeterias.
Tyson continues efforts to maximize margins in its commodity businesses, according to Bond, by reducing non-value added costs, improving yields and pricing and optimizing product mix and services. This has included such measures as consolidating some of the company's beef operations, changes in bird weight and optimizing the number of value-added breast portions from each chicken.
Bond projects Tyson's international business will grow from $3 billion in annual sales to at least $5 billion by 2010. Driving this increase will be the expansion of the Tyson operations in other countries. Tyson has completed joint ventures in Argentina and China, hopes to expand operations in Mexico and is working on a potential acquisition in Brazil.
Tyson continues exploring ways to increase the value of its by-products, including the conversion of fat into fuel. In December 2007, Tyson and ConocoPhillips started turning beef tallow into renewable diesel fuel. Production started at 100 barrels a day and is now operating at 300 to 500 barrels a day. Tyson's alternative fuel joint venture, Dynamic Fuels, will convert low cost fat, grease and other feedstock into renewable synthetic jet fuel. A production facility is being constructed in Louisiana and is expected to begin production in 2010.
Tyson Foods, Inc. (NYSE:TSN), founded in 1935 with headquarters in Springdale, Arkansas, is the world's largest processor and marketer of chicken, beef, and pork, the second-largest food production company in the Fortune 500 and a member of the S&P 500. The company produces a wide variety of protein-based and prepared food products and is the recognized market leader in the retail and foodservice markets it serves. Tyson provides products and service to customers throughout the United States and more than 80 countries. The company has approximately 104,000 Team Members employed at more than 300 facilities and offices in the United States and around the world. Through its Core Values, Code of Conduct and Team Member Bill of Rights, Tyson strives to operate with integrity and trust and is committed to creating value for its shareholders, customers and Team Members. The company also strives to be faith-friendly, provide a safe work environment and serve as stewards of the animals, land and environment entrusted to it.
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Forward-Looking Statements
Certain information contained in the press release may constitute forward-looking statements, such as statements relating to expected increases in grain costs. These forward-looking statements are subject to a number of factors and uncertainties which could cause our actual results and experiences to differ materially from the anticipated results and expectations, expressed in such forward-looking statements. We wish to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Among the factors that may cause actual results and experiences to differ from anticipated results and expectations expressed in such forward-looking statements are the following: (i) fluctuations in the cost and availability of inputs and raw materials, such as live cattle, live swine, feed grains (including corn and soybean meal) and energy; (ii) market conditions for finished products, including competition from other global and domestic food processors, supply and pricing of competing products and alternative proteins and demand for alternative proteins; (iii) successful rationalization of existing facilities and operating efficiencies of the facilities; (iv) risks associated with our commodity trading risk management activities; (v) access to foreign markets together with foreign economic conditions, including currency fluctuations, import/export restrictions and foreign politics; (vi) outbreak of a livestock disease (such as avian influenza (AI) or bovine spongiform encephalopathy (BSE)), which could have an effect on livestock we own, the availability of livestock we purchase, consumer perception of certain protein products or our ability to access certain domestic and foreign markets; (vii) changes in availability and relative costs of labor and contract growers and our ability to maintain good relationships with employees, labor unions, contract growers and independent producers providing us livestock; (viii) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (ix) changes in consumer preference and diets and our ability to identify and react to consumer trends; (x) significant marketing plan changes by large customers or loss of one or more large customers; (xi) adverse results from litigation; (xii) risks associated with leverage, including cost increases due to rising interest rates or changes in debt ratings or outlook; (xiii) compliance with and changes to regulations and laws (both domestic and foreign), including changes in accounting standards, tax laws, environmental laws and occupational, health and safety laws; (xiv) our ability to make effective acquisitions or joint ventures and successfully integrate newly acquired businesses into existing operations; (xv) effectiveness of advertising and marketing programs; (xvi) the effect of, or changes in, general economic conditions; and (xvii) those factors listed under Item 1A "Risk Factors" included in the Company's September 29, 2007, Annual Report filed on Form 10-K.