Miscellaneous Notes 5.12.16

Third Point Reinsurance’s (TPRE) Dan Loeb on Q1 2016 Results

We’re seeing some opportunities in distressed debt

“we’re seeing opportunities in distressed debt. So I want to stress. We’re not in a credit cycle where I think there’s going to be massive opportunities due to a slowing economy and large defaults. But we are seeing a lot of dislocations in various credits and we have been scooping up some very attractive names in – we’ve talked about this in the past, some fulcrum securities in energy companies. On the sovereign debt front, we’ve talked about Argentina. And there are a couple of distressed situations out there that we have been buying. I think structured credit is also – it was really off only for liquidity reasons, not for fundamental reasons. So we feel good about that portfolio. And I think the most interesting space right now is just in equities that are getting oversold or just underappreciated and under-owned that are in the industrial sector.”

Sotheby’s (BID) CEO Tad Smith on Q1 2016 Results

Do not expect art markets to return to 2014 or 2015 levels this year

“On our last earnings call, we said that we did not expect sale levels for the full year 2016 to reach the annual held levels of 2014 or 2015. And as of right now our view remains unchanged. However as I just outlined, recently, we observed the number of positive indicators most notably our Hong Kong sales series which was up 17% year-over-year. Of course our most significant data points for the second quarter kicked off tonight, with a number of important auctions to follow in the coming days so the next two weeks should provide all of us with a lot of good market intelligence. Until then we will remain cautiously optimistic.”

Dean Foods (DF) Gregg A. Tanner on Q1 2016 Results

See favorable supply/demand dynamics in dairy with supply outgrowing demand

“We expect global dairy fundamentals to continue to be overall supportive to our business as production growth continues to outpace demand. In the U.S., we continue to see domestic supply growth. Total U.S. milk production increased 1.8% year-over-year in March with production in the Midwest, Northeast and Northwest more than offsetting the continued decline in California. In addition, dairy herd continues to grow both sequentially and year-over-year. The current USDA forecast calls for 2016 milk production to increase 1.5% year-over-year. On the global supply front, the EU remains a leading contributor as their milk production has increased more 5% year-over-year. In contrast, we look at the continued decline of production in New Zealand. It has had minimal to no impact on the global markets. With U.S. butter and cheese prices remaining uncompetitive versus the international market, we continue to see a decline in overall U.S. dairy exports. Despite the temporary increase we saw in exports in January and February, the USDA published March data showing a decline of over 21% with the major drop in non-fed dry milk driving the decline. These supply and demand factors should continue to contribute to a relatively benign dairy commodity environment over the short term.“

Tyson Foods (TSN) Donald J. Smith on Q2 2016 Results

Low grain costs have helped us outperform

“ Obviously, our grain position is favorable this year with the low end of what we expect the five-year range of grain to be, and that helps over-deliver a bit.
And if you look going forward at what might cause any dip, it’s that level of fundamentals, primarily driven around the grain. But I tell you, we’ve done a very good job of utilizing the price discovery mechanisms afforded to us to be able to take a lot of the grain volatility out of our business. We’ve priced much more of our products off in some kind of a grain-based mechanism

Tyson Foods FY 4Q15 Earnings Call Notes

Tyson Foods’ (TSN) CEO Donnie Smith on Q4 2015 Results

Big decline in cattle futures at the end of the fiscal year

“in the last couple of weeks of the fiscal year, there was an unprecedented decline in the live cattle futures market, resulting in $70 million in losses from mark-to-market positions and an LCM inventory charge.”

Pork volume up as pricing down

“In the retail channel, we are seeing increase featuring of Pork as pricing has come down. For the most recent year-over-year comparison, fresh Pork volume was up 6% on 2% lower pricing. ”

Beef margins will be pressured because low cattle supply but excess industry capacity

“You’ve got relatively low cattle supply, you’ve got too much — well, not to say too much, probably not the right way to say it, but you’ve got excess industry capacity. And that limits our ability to drive margins above the 1.5% to 3%, we think. ”

We feel good about pork but there is competition from forex impacts

“We feel very good about pork. There’s going to be good hog availability which by the way provides good cheap raw materials for our Prepared Foods business. But this is just a cautionary note on exports and the high dollar and competition from other regions in the world for some primary markets. So that’s the cautionary note there. If some of that changes, then obviously there’s upside in our Pork segment.”

Tyson Foods 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

We don’t depend on high chicken prices and low feed costs to do well

“An important report to remember about our chicken business is that we have a diversified value-added portfolio and we don’t require record chicken prices and cheap corn to do well. We use our buy versus grow strategy to take advantage of pricing when there is more chicken on the market and we do expect more supply in 2016 but we’ll need it to meet demand. Our strategy is steady growth, not a commodity roller coaster ride. With our business model we don’t view increased supply as a problem.”

Bacon demand is relatively inelastic

“As the supply of hogs tightened this past year it demonstrated the relative inelasticity of certain type of our pork bellies [ph] for bacon.’

Lower gas prices will boost consumption

“If past consumer behavior remains the same and we believe it will, the recent drop in gas prices will put more money back into consumer wallets which will result in increased meals away from home.”

Chicken demand up next year, beef supply down

“We think chicken demand will be up at least 3% next year and I would think again in ’16 because we already know that beef supply, the beef herd is going to be down another 4% which portends pretty high beef prices again into the future.’

Millenials eat a lot of chicken

“So we think that is a strong demand signal for chicken. And also there is the generational issue that we are beginning to see in the marketplace with Millennials entering the marketplace and they index quite high versus chicken and so we think that is also going to be driving consumer demand for chicken out front.”

Tyson Foods 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“We continued to see a shift away from foodservice into retail, reflecting the overall economy.”

“We’re also seeing more bifurcation among consumers between those choosing higher-priced value-added products and those moving down the value stream to save money.”

“By separating our poultry and Prepared Foods division, we are sharpening our focus on these 2 crucial growth areas.”

“Our buy versus grow strategy continues to work for us. By keeping our production short of demand, we can make opportunistic purchases on the open market for breast meat used and value-added products, while keeping our late quarter inventories in check. We will maintain this strategy into fiscal 2014 as it allows us to be responsive to customer needs and market shifts.”

“we like the way that the chicken supply and demand fundamentals are setting up. We’ll continue to get some tailwinds from grain, moving on through our Q1 and then into Q2.”

“So if you’re a QSR, in the last couple of years, you’ve been running chicken promotions, it’s going to be really hard to comp a chicken promotion with a beef promotion. So — and that’s more likely than not, that would dominate the feature activity. So the great thing about chicken is it carries a lot of flavors, shapes and forms, and I don’t see any fatigue at all at QSR for chicken. So here’s kind of the way we think about it: So beef and pork prices ought to be pretty high, beef prices particularly, which sets up a pretty good halo in chicken, relatively speaking is a very good value when compared to those high beef prices. So we continue to think you’ll see a demand shift. In some of the numbers that we talked about, you got chicken pounds up 2% on 7% increase in pricing year-over-year. And what we saw was the beef pounds kind of struggled a little bit as they reached some pricing elasticity. Now the key thing about us in the beef and pork deal has been around where the animals are. And we’re very well positioned from a supply base around a lot of the feedlots — that are high-volume, high-capacity feedlots. So we like the way our Beef business is set up this year.”

“the tough thing about FY ’13 was the financial impact on our business. We were — about half of our production is in company-owned — or company-controlled birds now. And our cost structure in those houses is really effective. So we can’t get our land-use rights and can’t get these farms built fast enough for our taste.”

“[In China] The thing we have seen is the importance of the supply chain that we’re developing. And what we’ve seen in ’13, although it’s not been great for us financially, it has validated our business model. So we think having a supply chain that is from pullet to plate is very consistent with a lot of cost controls and a lot of bio-security controls is going to be very good for us in ’15 and beyond”

“Hope you’ll have a happy Thanksgiving. And, hey, eat some chicken, beef and pork instead of turkey this year, would you?”