SPRINGDALE, ARK. – Tyson Foods, Inc. plans to close three prepared foods plants in the United States. The plants are located in Cherokee, Iowa, Buffalo, N.Y., and Santa Teresa, N.M. The company also has entered into an agreement to sell its poultry operations in Mexico and Brazil to JBS S.A., Sao Paulo, Brazil.
The U.S. plant closures are due to a combination of factors including changing product needs, the age of the Cherokee facility and the prohibitive cost of its renovation, and the distance of the Buffalo and Santa Teresa plants from their raw material supply base in the Midwest. The Cherokee plant is scheduled to close Sept. 7 while the two other plants will cease operations during the first half of 2015. The decision will affect approximately 950 people, according to the company.
Tyson Foods will receive approximately $575 million from JBS for the two businesses. The Mexican business will be acquired through Pilgrim’s Pride, which is based in Greeley, Colo., and majority owner by JBS.
“Although these are good businesses with great team members, we haven't had the necessary scale to gain leading share positions in these markets,” said Donnie Smith, president and chief executive officer of Tyson Foods. “In the short term, we'll use the sale proceeds to pay down debt associated with our acquisition of Hillshire Brands. Longer term, we remain committed to our international business and will continue to explore opportunities to extend our international presence.”
The company will continue to supply the Mexican market with poultry produced in the United States and through a co-packing arrangement with Pilgrim’s Pride.
Tyson Foods also announced its financial results for the third quarter ended June 28. The company recorded net income of $260 million, equal to 75c per share on the common stock, and an increase compared to the same period during the previous year when the company earned $249 million, equal to 73c per share.
Sales for the quarter were $9,682 million compared with $8,731 during the previous year.
“Overall, our results were in line with our expectations,” Mr. Smith said. “The Chicken segment could have performed better had it not been for isolated issues at a couple of plants. The Beef segment finished the quarter remarkably well after a difficult start. The Pork segment had a record third quarter despite tight hog supplies due to the PED virus. The Prepared Foods segment had a disappointing quarter primarily due to the continued run up in pork raw material inputs.”
