May 5, 2009

Tyson Foods Inc. (TSN) reported a sharply widened second quarter loss amid tax and restructuring-related charges and despite an increase in chicken sales.

Chief Executive Leland Tollett, meanwhile, said "it is too soon" to predict the impact of the swine-flu outbreak on the world's largest meat processor.

Investors last week punished Tyson shares over worries that a deadly outbreak of swine flu in the US could hurt consumer demand for meat in general, though there is no evidence yet that pigs in this country have contracted the virus and health officials have said the flu is not transmitted by eating meat.

JPMorgan Chase cut its earnings estimate for Tyson, saying a panic over the flu - which rarely is passed from pigs to humans - could cause the company to swing to a per-share loss for the year. Tyson predicted in January that efforts to fix its chicken business - including a 5 percent output reduction in December - would return the meat company to profitability within two quarters.

The meatpacker has been hurt in recent quarters by weak demand, partially due to recession-hit restaurants' woes, and hedging losses on falling prices. It announced in March it would close an Oklahoma meat-processing plant. Internal tension at Tyson about how to navigate the meat-industry slump led to changes at the helm, with former CEO Tollett taking back the reins on an interim basis in January.

For the period ended March 28, Tyson's loss widened to US$104 million, or 28 cents a share from US$5 million, or 2 cents a share, a year earlier. Excluding items, including a 17-cent impact from a change in the way the company estimates taxes, the loss from continuing operations was 5 cents.

Sales fell 0.5 percent to US$6.31 billion.

Analysts surveyed by Thomson Reuters were looking for a loss, excluding items, of 6 cents a share, on revenue of US$6.64 billion.

Gross margin fell to 4 percent from 5 percent.

Chicken sales rose 9.4 percent amid a 15 percent jump in volume, but the segment's loss remained steady. Beef sales fell 11 percent on a 3.2 percent volume decline, but profit more than quadrupled. Pork and prepared-food revenue rose 2.4 percent and 7.9 percent, respectively, as profits fell 58 percent and 21 percent.

Shares closed Friday at US$10.56 and were inactive premarket. The stock is up 21 percent this year.