Tyson Foods posts loss on meat oversupply
Tyson Foods Inc., the world's largest meat
processor, has posted a loss for its fiscal second quarter due to an oversupply
that led to lower prices, but it said the impact of the glut should diminish
later in the year.
Tyson Foods and
other meat companies, such as Smithfield Foods Inc and Pilgrim's Pride Corp
, warned recently that an abundance of meat has hurt
earnings. The glut has been blamed in part on bird flu overseas hurting US
chicken exports and export bans on US beef lasting longer than
Springdale, Arkansas-based Tyson, which produces beef,
pork, and chicken, reported a quarterly loss of $127 million, compared with
earnings of $76 million a year ago.
"This quarter's results reflect
the depressed markets and the oversupply of all proteins. The beef segment
suffered from low capacity utilisation and declining boxed beef prices. The
negative effect of high live cattle prices and lower sales prices was made worse
by interruptions in export markets," Chief Executive John Tyson said in a
Tyson's revenue for the period ended April 1 fell 1.8
percent to $6.25 billion, compared with $6.36 billion a year ago.
beef unit, Tyson's largest, had an operating loss of $188 million for the
quarter, compared with a year-ago loss of $19 million.
poor results the company sounded more optimistic about easing protein supply in
general, and about chicken margin trends," said Pablo Zuanic, JP Morgan food
analyst, in a research report. "Recent data seems to imply leg quarter prices
Leg quarters are a popular export item and industry
analysts have said prices for those had been pressured by the recent slowdown in
exports due to bird flu overseas.
Tyson's chicken sector had a
quarterly operating profit of $9 million, compared with $143 million a year
Also, the U.S. chicken industry appears to be slowing
production, with output projected to be "flat to slightly down in the coming
months," Bond said.
Higher fuel and energy costs also hurt the
company's results, with those costs $44 million higher during the quarter
compared with the year-ago period, he said.
The large meat supply and
higher operating costs affected the pork segment, which had an operating profit
of $9 million, compared with $19 million a year ago, the company
"The impact of the oversupply of protein is expected to
diminish in the second half of the year. We expect the third and fourth quarters
to be better as demand improves, but they still will be difficult," said
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