April 29, 2008

Tyson expects input costs to rise US$1 billion
 

Tyson Foods has posted a US$5 million loss in its second quarter on rising input costs that could swell by an additional US$1 billion this year from 2007.

Tyson suffered the losses despite an increase of second quarter revenues to US$6.6 billion from US$6.5 billion on-year. The loss is also a contrast to last year's second quarter net earnings of US$68 million. Tyson had also taken US$47 million charge for restructuring.

Of the US$1 billion in additional costs, US$600 million would be due to rising corn and soymeal costs, while the remaining consists of breading, cooking oil and other feed ingredients cost, according to Richard Bond, CEO of Tyson.

Tyson's chicken line lost US$61 million in the quarter as increases in chicken sales price failed to keep up with rising feed-grain costs. However, the company has said that it would not be reducing chicken production.

Tyson's beef line also reported a US$11 million loss in the second quarter. However, operating results improved by US$74 million from the first quarter, and Tyson has taken a US$25 million charge to restructure its beef segment.

Tyson's pork line brought in an operating profit of US$63 million, up from US$35 million in the same quarter last year. Strong pork exports and low hog prices have widened processor margins, said Bond.

Bond expects the pork segment to continue its good performance for the rest of 2008, although not as well as the second quarter because hog prices may increase when supply declines.