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SPRINGDALE -- Tyson Foods Inc. on Tuesday reported "solid" fourth quarter earnings amid ongoing trade disputes that drove sales prices down for beef, pork and chicken.

"We faced several hurdles in fiscal 2018," Noel White, Tyson's president and chief executive officer, said in his first conference call with analysts as Tyson's leader. Hurdles like "freight costs, trade disputes, market volatility, pricing pressures and demand shifts" took a toll on the nation's largest meat company for the quarter ending Sept. 29.

Tyson reported sales of $9.99 billion, a 1.4 percent decline from $10.15 billion posted in last year's fourth quarter. Negative price changes in the company's meat and poultry businesses ate into the quarter's earnings, particularly in pork.

Tyson's pork prices were 14.5 percent lower in the fourth quarter compared to a year ago, leading to a 16.7 percent drop in total pork sales of $1.134 million, down from $1.362 million posted the same period last year.

"The supply-demand imbalance of hogs that we spoke of last quarter continued the first several weeks of our fourth quarter, but improved with the seasonal increase of hog supplies," White said.

The Springdale-based company finished fiscal 2018 with higher profits than 2017's fourth quarter and fiscal year results. Tyson's quarterly income surged 35.6 percent to $537 million, or $1.47 per share, up from $395 million, or $1.07 per share, a year ago.

Although sales were down, Chad Hart, a professor of agricultural economics at Iowa State University, said Tyson "was able to capture good income from that" in the beef and chicken segments. Beef and chicken sales volumes increased while pork and prepared foods volumes declined in the fourth quarter compared to the same period a year ago.

"Arguably, the trade disputes are what's going into the sales numbers," Hart said. "What they saw was a relatively small volume change."

Tuesday's results surpassed Wall Street expectations, even after Tyson lowered its outlook for the year in July as markets reacted negatively to the president's trade disputes with China, Canada and Mexico. Tyson's quarterly profit beat investment firm estimates of $1.33 per share from Chicago-based Zacks Investment Research and $1.42 per share from Little Rock's Stephens, Inc.

Tyson spurred demand by "discounting" domestic product as international trade softened, Hart said. In his eyes, pork has been hit the hardest by this year's trade squabbles.

Tyson shares fell $3.44, or 5.6 percent, to close Tuesday at $58.17. They have been as high as $84.65 per share and as low as $56.79 the last 52 weeks.

Alan Ellstrand, associate dean of the Walton College of Business at the University of Arkansas said earnings overall looked pretty strong amid trade concerns.

"I noticed sales were down particularly for pork and prepared foods, but earnings were strong for beef," Ellstrand said. "One of the things I always monitor is prepared foods, and sales in prepared foods were down, but earnings were up. I guess if I had one or the other, I'd have earnings."

Tyson's prepared foods segment, which encompasses Jimmy Dean breakfast sandwiches and Ball Park hotdogs, has historically been the company's anchor, so Ellstrand said he was surprised when the company posted a decline in sales volume year-over-year.

Cheaper beef in the quarter sparked demand, which squeezed chicken prices lower to compete, Hart said. Cheaper fresh meat and poultry prices, in turn, competed with items like breakfast sausages and hot dogs.

"I think that's where prepared foods saw the biggest hit," Hart said.

Despite numerous hurdles, Tyson reported overall earnings growth year-over-year. The company reported total sales of $40.05 million in fiscal 2018, up from $38.26 million last year. Tyson posted total income of $3.03 million, or $8.19 per share, almost doubling its results of $1.778 million, or $4.79 per share, a year prior.

"[It] was a challenging but productive year as we executed our strategy and built on the solid foundation of our diversified model and growth strategy," White said during the call.

Lower tax rates enacted by the president bolstered the company's quarterly and yearly results by 20 cents and 78 cents, respectively. Tyson made three acquisitions this year, completed four divestitures of non-protein assets and is working to integrate its new businesses, White said.

"We're [also] ready to hit the ground running with Keystone," he said.

Tyson reached an agreement to acquire Keystone, a major chicken supplier to McDonald's, from Brazil's Marfrig global for $2.16 billion in cash. Keystone has domestic and international operations in the Asia-Pacific region, India and Australia.

During the call with analysts, Heather Jones of the Vertical Group asked about the long-term "potential implications" for Tyson from the current swine flu outbreak in China.

"The effect at this point is unknown," White said. "It has the potential to be a significant event. The fact that it's now in China and it appears to be fairly widespread has the potential to make a significant impact. But we have not seen that at this point."

Based on current assumptions, Tyson posted a fiscal 2019 outlook that is similar to this year's.

"We expect another good year, but not without challenges," White said.

Graphs showing Tyson Foods fourth quarter information.

Business on 11/14/2018

Print Headline: Tyson reports solid 4th quarter

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