Tyson reports drop in earnings
The two halves of the pending US meat industry merger, Tyson and IBP both posted part-year financial results last week, with Tyson recording a 52% drop in third-quarter earnings and IBP a 9% drop in its second quarter net income.
Problems with its swine division meant Tyson’s earnings were limited to $19.4 million or 9 cents a diluted share. This compares with $40.5 million or 18 cents figure recorded during the same period last year. IBP’s second quarter earnings meanwhile fell from $42 million to $40 million – the main reason being an a US federal government accounting charge designed to bring the company’s results into line with standard US accounting procedures.
Of the two businesses, IBP turned in the healthier performance since without the accounting charge, its earnings would have been $52 million – 9% up on the year-previous figure.
Though Tyson’s sales topped $1.89 billion in the second quarter from the $1.81 billion figure recorded the year before, heavier than expected operating costs meant operating income fell from $87.8 million to $54.4 million year-on-year, with net income falling from $40.5 million to $19.4 million. The situation was not helped by a 32.4% decline in swine sales and a $7.7 million fall in the contribution made by the swine division, though this was partly explained by the sale of the company's North Carolina swine operations.
Though the 9 cents per share figure was at the upper end of Wall Street’s expectations, Chairman John Tyson was clearly not satisfied. "We simply have to get more money to the bottom line," he said.
With earnings of 40 cents per share, IBP also matched consensus forecasts. Net sales increased to $4.4 billion in the second quarter from $4.3 billion a year ago with net sales for the first half of the year climbing $8.5 billion versus $82 billion for the same period in 2000. Net earnings for the first half totalling $62 million or $0.58 per diluted share, versus $107 million or $0.97 per diluted share last year. Operating earnings for IBP's combined fresh meat business rose to $114 million in the second quarter from $98 million a year ago.
With regard to the acquisition, John Tyson said he expected closure ‘within two months’. Though this is outside the August 3 deadline set for Tyson’s cash tender offer, it nevertheless shows the deal is progressing and follows on from a Delaware judge’s ruling in June, compelling Tyson to go through with the purchase.
