(Recasts, adds closing share price)
By Bob Burgdorfer
CHICAGO, July 28 Tyson Foods Inc (TSN.N), the
leading meat producer in the United States, said on Monday its
quarterly profit fell 92 percent because of the price of
poultry feed, and warned that rising grain costs could lead to
more losses in its chicken unit.
The chicken unit had a $44 million loss in the fiscal third
quarter, compared to a $95 million profit a year ago, as prices
for corn and soybeans skyrocketed after flooding damaged crops
and delayed plantings in the U.S. Midwest.
Tyson said it paid $140 million more for grain during the
quarter to feed its chickens compared to a year ago, and that
it expected grain costs to be up $550 million this fiscal
The company said in a statement that its chicken unit was
still under pressure from higher costs.
Tyson buys cattle and hogs for its beef and pork
operations, but it raises its chickens and consequently has to
pay to feed them.
During Tyson's third quarter, corn soared to $7.60 per
bushel in Chicago futures trading compared with $4.26 per
bushel a year ago. Prices were pushed higher by demand from
biofuel producers and the worst flooding in 15 years in
Chief Executive Richard Bond said in a conference call with
analysts that overall fourth-quarter results should be better
than the third quarter because the company expects profits in
its beef, pork and processed food segments to offset losses in
the chicken unit.
Tyson, based in Springdale, Arkansas, said its profit for
the third-quarter ended June 28 was $9 million, or 3 cents per
share, compared with $111 million, or 31 cents, a year
The results included $13 million, or 2 cents per share, in
charges for flood damage at a Wisconsin prepared foods plant
and impairment of unimproved property in Tennessee.
Analysts on average had expected net earnings of 12 cents
per share, according to Reuters Estimates.
Revenue for the quarter was $6.85 billion, compared with
$6.62 billion a year earlier.
Wachovia analyst Jonathan Feeney said the results were not
particularly bad because some of the pressure on earnings was
due to hedging-forward pricing losses in beef.
The company said it would add provisions to sales contracts
to pass on higher costs to its customers because previous
increases had not completely offset higher grain costs.
Paul Aho, an economist with Poultry Perspective, said that
Tyson and other chicken companies were also affected by chicken
breast meat prices lagging seasonal norms.
On average, breast meat is selling wholesale at about $1.05
per pound, while chicken companies need $1.50 or more to break
even, he said.
Aho speculated that there was too much beef, pork, and
chicken on the market and that consumers were buying less
because of higher food prices and overall increases in the cost
Tyson's beef unit, its largest unit, earned $3 million
versus $36 million a year ago. The decline was largely due to
$75 million in losses on cattle hedging activity and forward
Earlier this year, Tyson ended cattle slaughter at its
Emporia, Kansas, beef plant because it was not operating at
During the call, Bond said Tyson had begun shipping beef to
South Korea and that more shipments were scheduled. South
Korea, once a major importer of U.S. beef, had banned it
because of concerns over mad cow disease. It only recently
started buying U.S. beef again.
The pork unit earned $54 million, up from $37 million a
year earlier, due in part to lower hog prices, higher pork sale
prices, and exports.
Bond said pork exports were very strong, especially to
Japan and Mexico.
Tyson's prepared foods unit earned $6 million, down from
$26 million a year ago, partly because of higher costs for
wheat, dairy products and other cooking ingredients.
Tyson shares closed down $1.14, or 7.02 percent, at $15.09
on the New York Stock Exchange.
(Editing by Toni Reinhold)