(Reuters) - Tyson Foods TSN.N beat Wall Street estimates for fourth-quarter profit on Monday, but faces rising costs for animal feed and uncertainty over labor as COVID-19 cases surge in the United States.
The pandemic has hurt the nation’s highest-selling meat company as demand has declined from restaurants, hotels and cafeterias. Virus outbreaks among plant workers this spring forced slaughterhouses to close, limiting supplies in grocery stores as consumers scrambled to stock up.
A sample of Tyson employees are now being tested weekly for COVID-19 to avoid more shutdowns and make workers feel safe, Chief Executive Officer Dean Banks said.
Employee absences remain elevated due to the pandemic, though, and will be a headwind for Tyson through the first half of 2021, he said.
Tyson spent $540 million on COVID-19-related costs in fiscal year 2020, including about $300 million on “thank-you bonuses” and other benefits for nervous employees.
The expenses should drop 39% in 2021, the company said, as Tyson will not need to repeat purchases of items like infrared temperature scanners it installed at plants.
“We are seeing the need to make sure that we compensate our team members to come in through the crisis,” Banks said.
Another challenge comes from surging prices for corn and soy, used for animal feed. Tyson said overall grain costs could be higher in 2021, after staying relatively flat in 2020. [GRA/]
“The feed cost tailwind will likely flip soon,” JP Morgan analyst Ken Goldman said.
Tyson’s shares, down about 32% this year, rose 3% in afternoon trading.
Sales volumes in its beef and pork businesses increased in the fourth quarter after declining for the first nine months of the year.
Total sales rose to $11.46 billion in the quarter from $10.88 billion a year earlier. Net income attributable to Tyson jumped about 88% to $692 million, or $1.90 per share.
Excluding items, Tyson earned $1.95 per share, according to IBES data from Refinitiv. Analysts on average expected a profit of $1.19.
Reporting by Praveen Paramasivam in Bengaluru and Tom Polansek in Chicago; Editing by Maju Samuel and David Evans
Our Standards: The Thomson Reuters Trust Principles.