(Rewrites throughout, adds details from media call)
By Devika Krishna Kumar and Lisa Baertlein
May 5 Tyson Foods Inc on Monday reported
weaker-than-expected quarterly profit on higher expenses and
weak China results, sending shares down more than 9 percent.
The largest U.S. meat processor raised its full-year sales
forecast by $1 billion to $37 billion. It also expects feed
supplies to increase, which should lower its costs.
Still, many uncertainties remain and shares in Tyson, which
had chalked up a year-over-year gain of 73 percent as of Friday,
tumbled 9.2 percent to $38.75 in midday trading.
Tyson said unusually inexpensive domestic pork in China has
been taking a bite out of chicken sales there. Separately, it
expects this year's pork supplies to be down as much as 4
percent, slightly more than previously thought, due to a deadly
piglet virus outbreak.
Continued weakness in China, where Tyson is making
significant investments to build poultry operations, accounted
for most of the $30 million loss in the company's international
business during its second quarter that ended March 29.
"For the first time that I can remember, domestic pork
prices (in China) are actually cheaper than imported pork prices
would be," Tyson Chief Executive Donnie Smith said on a
conference call with reporters.
Cheap pork, which is a preferred meat in China, is weighing
on chicken sales there, said Smith, who added that he believes
the worst is over in China.
The porcine epidemic diarrhea virus (PEDv) reduced hog
supplies in Tyson's latest quarter, but that was partially
offset by heavier animal weights, Smith told analysts.
Tyson expects PEDv to peak in August and to begin to ease in
October, Smith said.
PEDv was first being identified in the United States a year
ago. More than 4,000 outbreaks have been seen in at least 30
U.S. states, four Canadian provinces and several areas of
The virus causes diarrhea, vomiting and severe dehydration,
and is transmitted orally and through pig feces. While older
pigs have a chance of survival, the virus kills 80 percent to
100 percent of piglets that contract it.
The quarterly results from Tyson landed as U.S. consumers
grapple with sky-rocketing prices for beef and pork and are
shifting their purchases to lower-priced chicken.
Tyson warned that overall domestic protein production for
the year ending September would decrease about 1 percent, mostly
due to lower hog supplies.
In the latest quarter, beef sales volumes slipped 1.8
percent, hurt by reduced export sales.
Tyson said it expected to see a reduction of industry-fed
cattle supplies for beef of 3 percent to 4 percent in fiscal
Beef prices have been spiking on rising feed costs and the
decline of the U.S. domestic cattle herd, now the smallest since
1951. The average price for beef was up 13 percent in Tyson's
latest quarter, slightly more than the 12.5 percent increase in
Pork sales rose about 13 percent to $1.49 billion, helped by
Increased demand for chicken helped send Tyson's chicken
sales up about 4 percent to $2.84 billion in the latest quarter.
Net income attributable to Tyson jumped to $213 million, or
60 cents per share, for the second quarter, from $95 million, or
26 cents per share, a year earlier.
(Reporting by Devika Krishna Kumar in Bangalore and Lisa
Baertlein in Los Angeles; Editing by Kirti Pandey, Don
Sebastian, W Simon and Marguerita Choy)