Tyson Foods Inc., the largest U.S. chicken processor, said the primary effect of the current avian influenza outbreak has been lost export sales and that the company can cope with the resulting change in poultry supplies.
Chief Executive Officer Donnie Smith said Monday that bans imposed by some importing nations following the U.S. outbreak have meant extra domestic supplies of chicken-leg quarters.
That’s the dark meat that domestic consumers typically shun in favor of white meat. U.S. producers usually try to export the dark meat, though Smith said that in the last three years Tyson has reduced the production of leg quarters for export by 30 percent.
As a result, Springdale, Arkansas-based Tyson isn’t producing leg quarters it can’t sell and is working to use more dark meat in processed chicken dishes for both retail and food- service customers, Smith said said on a conference call with reporters.
The bird flu outbreak, which may be the worst in the U.S. since the 1920s, has mostly affected turkeys and egg-laying hens in the upper Midwest and so far hasn’t spread through the Southeast, the hub of the chicken industry. Still, chicken shipments to foreign buyers will drop to an eight-year low in 2015, according to government forecasts.
As new bird flu cases continue to be reported, the timeframe for the lifting of the import bans gets pushed out further, Smith said. Tyson forecasts more leg-quarter “pricing softness” in the second half of the financial year, he said.
The company posted second-quarter earnings of 75 cents a share, beating the 72-cent average of 11 analysts’ estimates compiled by Bloomberg, after its prepared-foods business benefited from last year’s acquisition of Hillshire Brands Co.
Tyson said it’s ahead of schedule in achieving a target of more than $225 million of cost savings from the deal during fiscal 2015 and raised the goal to more than $250 million.
The company also predicted domestic protein production -- including chicken, beef, pork and turkey -- will increase about 2 percent from fiscal 2014. Grain supplies are expected to rise, which should cut costs, it said.
The shares rose 1.6 percent to $41.13 at 11:53 a.m. in New York.
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