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Tyson Says China Chicken Unit to Benefit After Bird Flu Outbreak

Tyson Foods Inc. (TSN), the largest U.S. chicken producer, said its poultry business in China will benefit in the long-term as the bird-flu outbreak focuses attention on its food-safety procedures.

Tyson’s chicken production in China hasn’t been directly affected by avian influenza, also known as the H7N9 virus, according to the Springdale, Arkansas-based company. Tyson is “getting recognition” for its food-safety measures as chicken demand has dropped temporarily industrywide in China, Chief Executive Officer Donnie Smith said during a call with analysts yesterday after reporting fiscal second-quarter earnings.

“The avian influenza outbreak in China is troubling and is detrimental to protein consumption in the short run,” Smith said. “The one thing that this unfortunate event has done is absolutely validated our model for extreme biosecurity.”

Tyson is increasing the number of company-owned birds it processes in the country as consumers there eat more chicken, Smith said. While many chickens in China are still raised by small farmers, Tyson is bringing technology and practices common in the U.S. to the Asian country.

To keep birds healthy, Tyson uses ventilation systems in the houses, mills its own feed, controls access to farms and requires anyone entering or leaving the buildings to shower, Smith said. Customers in the region will pay for the added food safety Tyson provides, Chief Financial Officer Dennis Leatherby said on the call.

Tyson reported fiscal second-quarter earnings excluding one-time items of 36 cents a share in the three months through March 30, compared with the 45-cent average of 11 estimates compiled by Bloomberg. Tyson took a $56 million impairment in China during the quarter related to an older poultry complex and not connected to the bird flu outbreak, the company said. Revenue in the fiscal year through September will be about $34.5 billion, down from a February forecast of $35 billion, the company said in the statement.

Tyson fell 3.3 percent to close at $24.10 yesterday in New York, the biggest drop since Feb. 26. The shares have gained 24 percent this year.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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