August 7, 2012

Tyson Foods' Q3 net profit down 61% amid rising grain prices

Amid challenges at its beef and pork businesses as well as rising grain prices, Tyson Foods Inc. posted a 61% drop in fiscal third-quarter net profit as well as cutting its revenue forecast.

"Grain costs have been increasing significantly and rapidly, largely as a result of the on-going US drought. While we ultimately expect to pass along rising input costs, these costs, coupled with continued soft demand, are likely to pressure earnings in 2013," said President and Chief Executive Donnie Smith. "However, we still anticipate solid earnings for the year."

For the fiscal year, the company lowered its revenue estimate by U$1 billion and now expects US$33 billion.

Tyson's beef segment has seen lower consumer demand for beef products following a recent controversy over a ground-beef additive dubbed "pink slime" by its critics. Consumer concerns had appeared to be easing as some big supermarket chains have stopped buying the additive amid the negative publicity took some of the blame for weaker demand for beef products earlier this year.

In the latest period, earnings at the beef segment were down by 49% as higher prices weren't enough to offset slumping demand, with volume down 14% in the period.

The company's pork segment reported profits fell 44% as modest volume growth wasn't enough to offset falling prices, which were down 6.9%.

For the quarter ended June 30, Tyson Foods reported a profit of US$76 million, or US$0.21 a share, down sharply from US$196 million, or US$0.51 a share, a year earlier. The results were affected by US$167 million in early debt-extinguishment charges. Excluding these charges and other items, earnings were US$0.50. Revenue increased 0.7% to US$8.31 billion.

Analysts polled by Thomson Reuters most recently projected earnings of US$0.54 on revenue of US$8.72 billion. Gross margin rose to 6.8% from 6.4%.