Why Tyson Foods, Inc. (NYSE:TSN) Projects Bigger Savings From Hillshire Brands Co.?

Tyson Foods, Inc. (NYSE:TSN) raised the guidance for savings from Hillshire Brands Co. as it works to reduce costs from the combined operations. The meat company acquired the Jimmy Dean sausage maker last year. The company now anticipates reducing total annual costs of almost $600 million by the time the two companies are fully integrated at the end of Tyson’s FY2017. The new estimate is almost one-fifth higher than the previous projections.

The scope

Donnie Smith, the CEO of Tyson, said that as the company have entered into the operations, it appears that Jimmy Dean sausage maker firm is every bit more than the expectations. He expressed his views during a conference call scheduled to discuss financial performance of 2Q ended March 28, 2015. In the quarter, the profit jumped 46% surpassing analysts’ expectations, though sales growth was below expectations due to lower prices for chicken and port. The sales in prepared-foods business almost doubled from a year ago, and it became possible due to the Hillshire deal.

The plans

Tyson is planning to make more profit from its acquisition deal of Hillshire. The deal was made for $7.7 billion, and many analysts termed it as overly expensive. Pilgrim’s Pride Corporation (NASDAQ:PPC) competed against Tyson in the battle to buy Hillshire. The poultry firm is assessing other takeover targets in order to extend its geographic reach.

The platform

Tyson Foods, Inc. (NYSE:TSN) plans to consider more strategic investment in the future. The bigger cost savings have resulted from combining infrastructure and shifting production measures between the two facilities. In July 2014, Tyson closed three prepared foods plants located in New York, New Mexico and Iowa, laying off almost 950 people. The additional savings are expected to result from streamlining logistics and investing in the unified prepared-foods segment. In the second quarter, the company recorded profit of $310 million, up from $213 million, a year earlier.

Scott Sally

Scott Sally

Sally joined the US Markets Daily News Team in April 2011 as a Multimedia Journalist.