NEW YORK – Tyson Foods’ acquisition of Don Julio Foods, a Utah-based tortilla and snacks manufacturer, may be just the start of a series of acquisitions for the company, said Dennis Leatherby, chief financial officer.
“A couple of weeks ago we announced an acquisition of the assets of Don Julio, a tortilla and salty snack manufacturer,” Mr. Leatherby said. “It is an example of small regional acquisitions we have talked about in the past that will be a good fit for us. Tyson is already the second-largest tortilla manufacturer in the United States with a focus on the food service channel, and Don Julio offers inroads into retail distribution with a respected brand.
“We are glad to have Don Julio as part of the Tyson team and this should be the first of what we anticipate to be a series of small acquisitions that will help us grow our Prepared Foods and value-added poultry businesses.”
Mr. Leatherby was speaking at the Goldman Sachs Agribusiness Conference on Feb. 26. He noted that in the past few years Tyson Foods has shed its image of a commodity protein company.
“That is not our goal, nor is it our destiny,” he said. “Value-added is currently about a third of our sales, and keep in mind that includes food service as well as retail, branded products.”
Looking ahead to 2014 he said Tyson Foods expects to grow its total sales by 3% to 4% annually and value-added sales by approximately 6% to 8%. During fiscal 2012, ended Sept. 29, 2012, Tyson Foods had revenues of $33,278 million.
Jim Lochner, chief operating officer, gave an update on the beef market, which has been affected by high feed costs due to the drought and the smallest U.S. cattle herd since the 1950s.
“Looking specifically in the last couple of weeks we have had margin compression, even though we have had very positive news in January where a competitor did announce that they would be shuttering a plant in West Texas,” he said. “And Japan is opening up beef, extending it to 30-month versus 20-month (and down) cattle.
“The plant closing should eventually mean that a reduced slaughter capacity would allow for more efficient capacity utilization. We have not seen signs of that yet, as margins have been compressed through the last month as the value of beef has fallen more than the price of cattle. In the spread business, this causes margins to compress.
“Historically the revenue and cattle costs relationship corrects to provide a margin over time. We run our plants for margin, not market share.”
Mr. Lochner added that because of the challenges the company is dealing with in beef he anticipates the second quarter of fiscal 2013 being softer than he believed a month ago.“But we feel very good about the rest of the fiscal year and as a whole into 2014,” he said. “As Dennis said, we are not a commodity protein company. Tyson is a multi-protein, multi-channel, multinational food company with a broad product portfolio and we are poised to grow in less than ideal market conditions.”