* Tyson will “most likely” lose money in Q1
* “Significant losses” seen in chicken in Q1
* Tyson Q4 earnings up 50 percent on strong beef, pork
* Shares tumble 10 percent on outlook (Adds details in second paragraph, adds closing share price)
By Bob Burgdorfer
CHICAGO, Nov 10 (Reuters) - A $91 million operating loss in Tyson Foods Inc’s (TSN.N) chicken business plus a forecast that the company will “most likely” post a loss for the current quarter sent shares of the U.S. meat giant lower on Monday.
The company reported a smaller-than-expected fourth-quarter profit on Monday, hurt by the chicken results while beef and pork were profitable.
“It will be a negative quarter in chicken and most likely a negative quarter overall for our results,” Tyson Chief Executive Richard Bond said of the current quarter, which ends in December.
Wall Street analysts on average had expected a $41.7 million profit for the fiscal first quarter, according to Reuters Estimates.
Tyson and other chicken producers have been hurt this year by higher feed costs and the inability to raise chicken prices fast enough to offset those costs.
“Given where leg quarter prices are and breast meat prices are, we are going to lose some significant dollars in Q1,” Bond told analysts on a conference call.
MORE CHICKEN REDUCTIONS NEEDED
Tyson would not say if it will cut chicken production from current levels, as other producers have done, but said more reductions by the industry may be needed to bring supplies in line with demand.
Tyson’s net profit for its fiscal fourth quarter ended Sept. 27 rose to $48 million, or 13 cents per share, compared with $32 million, or 9 cents, a year earlier.
The results included one-time charges totaling $10 million, or 2 cents per share, for asset impairment.
Minus those charges, earnings would have been 15 cents a share. On that basis Wall Street analysts expected a profit of 19 cents per share, according to Reuters Estimates.
Sales for the period were $7.2 billion, up 9.6 percent from the $6.57 billion a year earlier.
The loss on chicken and the outlook for further losses have raised worries that Tyson may have trouble meeting its debt obligations, similar to what competitor Pilgrim’s Pride Corp PPC.N faced, said Ann Gilpin, analyst at Morningstar.
Pilgrim’s Pride, the largest U.S. chicken producer, recently needed two waivers in order not to violate credit covenants on its debt.
“Given the combination of challenges currently facing the protein industry, management’s outlook in the press release was more bearish in tone, making no reference to potential favorable offsets from supply-side cutbacks,” Barclays Capital analyst Christopher Bledsoe said in a research note.
CHICKEN LOSES, BEEF AND PORK GAIN
The chicken unit, the nation’s second-largest behind Pilgrim’s Pride, had an operating loss of $91 million, compared with a year-earlier profit of $63 million.
Tyson said it had $230 million of additional grain costs during the quarter versus a year earlier.
Operating profits for beef and pork were $159 million and $75 million, respectively, compared with year-ago results of $5 million and $27 million. Higher beef and pork prices, benefits from hedging activities, and exports helped those businesses.
Prepared-foods lost $5 million, versus a year-earlier profit of $7 million, hurt by higher raw material costs.
The company said on the conference call it expected fiscal-year 2009 revenue of $28 billion to $29 billion compared with 2008 revenue of $26.86 billion.
Tyson’s shares ended down 77 cents or 10.3 percent at $6.69 on the New York Stock Exchange on Monday, off an earlier low at $6.05. (Reporting by Bob Burgdorfer, editing by Matthew Lewis)