CHICAGO (Reuters) - Tyson Foods Inc TSN.N Chief Executive Dick Bond said on Monday he was leaving the world's largest meat producer, effective immediately, a move that surprised analysts and sent Tyson shares down 6 percent.
Bond, 61, had been president and CEO since May 2006 and had been a member of the board since 2001. Analysts were caught off guard, saying the company appeared well positioned to withstand the current pressures on the meat industry.
“The timing was a surprise. Though we expected Mr. Bond to retire at some point this year, we did not think his departure would be so sudden,” Ken Goldman, J.P. Morgan food industry analyst, said in a note to clients.
John Urbanchuk, food economist at the consulting firm LECG, said of Bond’s decision, “That is surprising. When there is that kind of abrupt change, that tells me that maybe something else is going on.”
In 2008, Tyson and other meat companies were hurt by high feed prices early in the year and, later, slowing economies around the world. Tyson’s earnings fell 68 percent to $86 million in the fiscal year ended in September.
Meat industry conditions appear to be improving, with feed costs down from the highs in early 2008 and producers cutting production, which should lift meat prices in 2009.
“While Tyson will likely report a very weak first quarter, we do not believe that Bond’s departure is related to near-term earnings...,” said Farha Aslam, Stephens Inc food analyst, said in a note.
FORMER CHAIRMAN, CEO BECOMES INTERIM CHIEF
Leland Tollett, 71, who was Tyson chairman and CEO from 1995 to 1998, will return as president and CEO on an interim basis until a successor to Bond is chosen, the company said.
Tyson shares were down 57 cents at $8.78 in afternoon New York Stock Exchange trading. Their 52-week high is $19.50.
“After seven years of helping lead or leading the world’s largest meat company, I have decided it is in both my best interest personally and the best interest of the company for me to move on and pursue other interests,” Bond said in a statement.
His contract was due to expire next December, according to documents filed last week with U.S. securities regulators. His salary for fiscal 2008 was $1.26 million, up from $1.22 million in the prior year.
Tyson’s weak results for the fiscal 2008 fourth quarter and an expected loss for the quarter ended in December may have hastened Bond’s departure, said Ann Gilpin, an analyst at Morningstar.
“I think the board was not pleased with the management and I think they also were probably a little spooked about what happened with Pilgrim’s Pride,” Gilpin said. “I don’t think this choice was unilaterally made by Dick Bond.”
Pilgrim's Pride Corp PGPDQ.PK, the largest U.S. chicken producer, filed for bankruptcy protection in last month.
CHICKEN A DISAPPOINTMENT
Analysts have expressed disappointment that Tyson has not cut chicken production, a move they believe was needed to increase prices and improve the company’s results.
Springdale, Arkansas-based Tyson is the leading U.S. beef producer and No. 2 producer of chicken and pork.
J.P. Morgan’s Goldman saw Bond’s departure as positive, saying the executive may have lost interest in running the company and that a new CEO may cut chicken production, “something the Street has clamored for.”
Other U.S. chicken producers have been reducing production, and the U.S. Agriculture Department forecasts 2009 chicken production will be down 1.3 percent from 2008.
D.A. Davidson analyst Timothy Ramey said that during a November 10 conference call with analysts, Bond adopted a strategy of promoting market share rather than profit margins.
“I know that if I was a Tyson family member I wouldn’t have liked that strategy,” said Ramey, who downgraded Tyson shares to “underperform” on Monday.
“We were disturbed by the way Mr. Bond seemed unconcerned with his risky strategy of continuing to overproduce poultry,” Ramey later said in a note.
Additional reporting by Brad Dorfman, editing by Andre Grenon and John Wallace
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