Tyson Foods was cautiously optimistic about its near-term prospects during an earnings call Friday, as it revealed a strategy to better supply the foodservice industry. The president and CEO, Donnie Smith, expressed confidence in Tyson's ability to capitalize on growth trends in the market.
Investment for Case-Ready Meat
Smith announced that $40 million is being invested into four production facilities. The plants in Sherman, Texas and Goodlettsville, Tenn. are currently under redevelopment. An expansion at Tyson's Glen Allen, Va. plant was finished recently. And a subsidiary, The Bruss Company, has just opened a second plant in Jacksonville, Fla.
"Our strategy is to accelerate our growth in domestic value-added poultry and Prepared Foods, as well as international poultry, and we're executing that strategy," said Smith. "Some of the steps we're taking to grow our domestic value-added sales include expanding 3 plants."
The Sherman and Goodlettsville plants are part of a "case-ready meats" initiative, producing beef and pork. Consumer demand has driven a need for meats that are cut, packaged, and ready to be sold in a grocer's meat case. Preparing the factories involves installing new equipment and production lines. The Glenn Allen and Jacksonville plants produce chicken and steak, respectively.
Tyson could invest $7.7 million and hire up to 100 new employees in Tennessee, while the Virginia plant will receive $5.6 million in upgrades and hire 70 people. Florida's plant could add 490 new jobs to the state.
Meat Trends, Lowered Output
Independent restaurants and small chain stores are expected to struggle this year due to rising costs spurred by lower meat production, according to Smith. A rise in feed costs due to droughts in the Midwest has been a factor in lowered output this year.
Smith mentioned a potential consumer shift to chicken as a cheaper alternative to red meat. Tyson's capability in producing diverse meat products could help it to capitalize on these trends.
Exports Boost Sales
Although the weak economy is slowing domestic sales, a foreign exports have balanced the revenue. The recent loosening of Japan's import ban on U.S. beef beginning Feb. 1 is expected to provide further growth in that area. Japan will increase the maximum restricted age of imported cattle to 30 months, from a previously-stringent 20 months.
However, there are some challenges that remain in foreign markets, such as the new Russian ban on meats containing ractopamine, which U.S. producers use to promote lean meat growth.
Tyson reported an 11% profit increase from the previous year. Any decrease in sales are expected to be countered by the rising price of meat, driving 5% revenue growth to $35 billion for the current fiscal year.
