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Tyson Foods profit down on higher feed costs
August 8, 2011 / 11:53 AM / in 6 years

Tyson Foods profit down on higher feed costs

CHICAGO (Reuters) - U.S. meat producer Tyson Foods Inc (TSN.N) reported a lower quarterly profit due to higher feed costs for its chickens, while strong pork exports helped results beat estimates.

The company has been raising meat prices to offset higher costs and predicted meat prices will continue higher in the coming year when there will be less beef, pork, and chicken.

Despite higher prices, its chicken unit may lose money in the current quarter, which runs through September, as corn prices have more than doubled from a year ago.

Tyson raises its own chickens, while it buys cattle and hogs for its beef and pork plants. Cattle and hog prices have been record high this year, due in part to strong beef and pork exports.

Tyson has coped with these higher costs by cutting expenses, offering a variety of higher-priced prepared foods, and through the benefit from the strong beef and pork exports.

The largest U.S. meat processor earned $196 million, or 51 cents per share, for the third quarter ended on July 2, compared with $248 million, or 65 cents a share, a year earlier.

Excluding an unusual reduction in income tax expense, the results were 46 cents per share. Wall Street, on average, forecast 40 cents, according to Thomson Reuters I/B/E/S.

Revenue rose to $8.25 billion from $7.44 billion.

Its chicken unit earned $28 million for the quarter ended July 2, compared with $186 million a year earlier.

“(Tyson’s chicken unit) wasn’t great but it was better than what people expected. It was definitely better than what the rest of the industry is doing,” said Kelly Wiesbrock, managing director of Harvest Capital Strategies, an investment company that has $1.2 billion under management

Pilgrim’s Pride Corp PPC.N and Sanderson Farms Inc (SAFM.O) each posted losses in their most recent quarters.

DOMESTIC DEMAND WEAK, EXPORTS STRONG

While the weak economy weighs on domestic meat sales, beef and pork exports have thrived and helped Tyson raise prices. Beef prices were up 13.5 percent, pork up 9.4 percent, and chicken up 10.2 percent.

Despite the higher prices operating income dropped in all three meat segments because of higher costs.

“We expect our chicken segment will likely experience a loss for the fourth quarter of fiscal 2011,” the company said.

Previously, the company has predicted chicken would be profitable in every quarter this fiscal year.

Chicken producers have been cutting production, but Tyson said that should not affect supplies until late in the current quarter.

Tyson shares fell to the lowest of the year on Monday, pulled down by declines in the broader market. At midday, they were down 26 cents at $16.05, after earlier being up 51 cents at $16.82. The broader market was down 4 percent.

Additional reporting by Phil Wahba; Editing by Lisa Von Ahn and Derek Caney

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