By Granth Vanaik and Tom Polansek
(Reuters) – Tyson Foods beat market expectations for first-quarter revenue and profit on Monday, as the company said cost-cutting decisions to shutter U.S. chicken plants were paying off.
Shares of the Springdale, Arkansas-based company rose about 5%.
Tyson has shut five chicken processing plants over the past year and two facilities where workers cut and packaged beef. It expects to close another chicken plant later this year, after previously slating it for closure.
More shutdowns are still possible, Tyson Chief Financial Officer John R. Tyson said in an interview.
“Achieving a great result in Q1 and our business results influence our thinking. But we continue to evaluate all options,” he said.
Tyson’s overall adjusted operating income was down 9.2% in the quarter.
Adjusted income in Tyson’s chicken business rose by almost 150% from a year earlier to $192 million. The company’s average prices dropped about 4% while sales volumes declined 1.5%, after some prices hit record highs at U.S. grocery stores last year.
“We are realizing the results of getting our footprint where we want it to be,” John R. Tyson said.
Customers had reined in spending on expensive meat last year as inflation remained high. Beef prices continue to climb after ranchers slashed their cattle herds because a drought reduced the amount of land available for grazing.
The beef segment – Tyson’s largest – posted an adjusted operating loss of $117 million in the quarter, compared with an adjusted operating income of $129 million from a year earlier.
Sales in the segment were up 6.3%, backed by prices that jumped 10.5%. Sales volumes were down 4.1%.
“The beef segment margin was slightly disappointing, though not enough to offset healthy results elsewhere,” JPMorgan analyst Ken Goldman said.
Volume in Tyson’s pork business was up 7.7% from a year earlier, while prices sank 8.5% amid plentiful hog supplies.
The company posted adjusted earnings of 69 cents per share, compared with analysts’ estimates of 41 cents. Net sales rose 0.4% to $13.32 billion, beating analysts’ estimates of $13.27 billion, based on LSEG data.
(Reporting by Granth Vanaik in Bengaluru and Tom Polansek in Chicago; Editing by Krishna Chandra Eluri and David Evans)