Tyson Foods, Springdale, Arkansas, USA, told investors Feb. 25 that its second fiscal quarter has been more challenging than anticipated due to "margin compression" in its beef and pork segments but remains optimistic about its results for the full year.
Meanwhile, Tyson's chicken segment has continued to do well. The company said that it expects a strong performance, particularly in the second half of the fiscal year, leading to continued optimism that the company's full-year results will be better than fiscal 2012.
"Demand is strong, and we're seeing signs of consumers trading from beef to chicken," said Chief Operating Officer James Lochner. "Even with pricing up substantially year over year, chicken is a good value for consumers, and food service continues to promote chicken heavily."
Lochner announced that Tyson is launching a new line of all natural chicken under the NatureRaised Farms brand, which debuts in April. The line will include a variety of fresh products produced from cage-free chickens raised without the use of antibiotics or added hormones and fed a 100% vegetarian diet. There was no mention of any frozen versions in the pipeline.
"Margins have been compressed throughout the past month as the value of beef has fallen more than the price of cattle," said Lochner. "Historically, adjustments occur that allow for a spread between the revenue and the cattle cost. We run our plants for margin, not market share."
Tyson's pork business also experienced some margin compression in the current quarter, although there have been signs of improvement recently, Lochner told the 17th annual Goldman Sachs Agribusiness Conference. "We expect to continue our strong performance in the back half of the year."
