January 31, 2014 / 1:45 PM / 6 years ago

UPDATE 3-Tyson results beat estimates on higher chicken, beef sales

Jan 31 (Reuters) - Tyson Foods Inc, the largest U.S. meat processor, on Friday said higher beef prices and robust chicken sales helped quarterly profits grow more than Wall Street expected, sending shares up nearly 10 percent.

The company’s shares rose 9.6 percent to $37.81 in midday trading after Tyson also reaffirmed its sales and meat production forecast for fiscal 2014.

Chicken sales rose $61 million, or 2 percent, to $2.98 billion, while beef sales increased $249 million, or 7 percent to $3.73 billion in the fiscal first quarter ended Dec. 28.

Springdale, Arkansas-based Tyson said stronger demand resulted in higher prices on its beef sales.

“Record high beef prices should continue to 2014, meaning fewer beef promotions and retail and food service,” Tyson’s President and Chief Executive Donnie Smith said on a conference call with analysts.

“Chicken should continue to be the winner,” Smith said, referring to buyers’ tendency to switch to lower-cost poultry when beef prices rise.

Total revenue increased nearly 5 percent to $8.76 billion.

Net income attributable to Tyson rose to $254 million, or 72 cents per share, from $173 million, or 49 cents per share, a year earlier.

Analysts on average were expecting a profit of 63 cents per share, on revenue of $8.75 billion, according to Thomson Reuters I/B/E/S.

U.S. meat producers last year struggled as rising feed costs crimped margins and forced them to raise prices.

Tyson said that it expects grain supplies to increase this year, reducing its costs.

The company reaffirmed its sales forecast of about $36 billion for fiscal 2014 and said it still expects a 1 percent rise in overall domestic production of chicken, beef, pork and turkey in fiscal 2014, which ends in September.

Pork sales were up $61 million, or 4.5 percent, to $1.4 billion during the latest quarter.

Executives said the Porcine Epidemic Diarrhea virus (PEDv) will decrease pork production by 2 percent to 4 percent.

PEDv is a piglet-killing virus, which causes diarrhea, vomiting and severe dehydration in hogs. It has turned up in 23 of the 50 states since its discovery in the United States last April.

The virus, which is already established in Europe and Asia, poses no threat to humans and is not a food safety risk. In Canada, it has been contained in Canada to southern Ontario farms.

Disappointing results from China, where Tyson is making significant investments to build poultry operations, accounted for most of the $28 million loss in the company’s international business.

Smith said concerns about the return of avian flu in China threatens to further hamper demand, which is still weak due to a softening economy, food safety concerns and an outbreak of the disease that scared Chinese buyers away from chicken last year.

“Demand hasn’t recovered, which has led to a substantial oversupply of chicken,” Smith said, who said on a call with reporters that demand is down as much as 30 percent in China.

Due to that, the company is slowing construction of chicken farms until market conditions improve.

Smith said Tyson no longer expects its China operations to break even by the end of fiscal 2014.

“I think it will take longer,” he said.

Tyson shares have risen more than 50 percent in the last 52 weeks.

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