CHICAGO (Reuters) - Tyson Foods Inc beat analysts' quarterly profit estimates on Monday (Aug 6) as the No. 1 U.S. meat processor reported a record operating income for its beef business due to increased exports and cattle supplies.
Stronger demand for beef offset weaker results in Tyson's pork and chicken units, which the company said were hurt by trade disputes between the United States and major importers such as Mexico and China.
Tyson shares rose 2.6 per cent to US$59.28 (S$81.11) in afternoon trading, but are still down 27 per cent for the year.
The maker of Ball Park hotdogs and Jimmy Dean sausages has come under pressure from trade spats that have disrupted US pork exports, increased domestic supplies and hurt prices. Tyson last week cut its full-year profit forecast, citing uncertainty in trade policies and tariffs from importers.
Sales volume for Tyson's beef rose in the third quarter due to a decline in prices fueled by increased cattle supplies, according to the company.
Those lower prices prompted some casual US restaurants to promote beef products instead of chicken, chief executive Tom Hayes said.
"Intertwined with uncertainty in trade policies and tariffs are increasing supplies of relatively low-priced beef and pork that are competing with chicken," he said on a conference call.
The shift away from chicken helped Tyson double its beef unit's operating income from a year ago to US$318 million, accounting for 40 per cent of its total for the quarter. Operating margins for beef jumped to 8 per cent from 3.7 per cent a year earlier.
In Tyson's chicken business, operating income fell 35 per cent to US$189 million. Margins dropped to 6.4 per cent from 10.2 per cent.
"Chicken margins came in well below forecast on a sharp decline in demand given the surge in competing red meat supplies," said Jeremy Scott, vice president of research for Mizuho Securities.
Tyson's pork unit saw operating income fall 51 per cent to US$67 million, while margins weakened to 5.6 per cent from 10.3 per cent a year earlier.
In a good sign for Tyson, pork margins improved in July, Scott said.
Net income attributable to Tyson rose to US$541 million, or $1.47 per share, in the quarter ended June 30, from US$447 million, or $1.21 per share, a year earlier.
Analysts on average expected earnings of US$1.40 per share on revenue of US$10.28 billion, according to Thomson Reuters I/B/E/S. Excluding certain items, the company earned US$1.50 per share.
The Arkansas-based company said sales rose 2 per cent to US$10.05 billion.