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Tyson Foods Inc. stock fell 16% Monday after the meat producer swung to a surprise second-quarter loss and lowered its sales guidance, hurt by charges stemming from plant closures and job cuts, as well as weak demand for meat.
The stock
TSN,
was on track for its biggest one-day percentage decline since it fell 23.6% on Nov. 11, 2008. Volume of more than 8 million shares traded by midmorning was almost three times the daily volume over the past 65 days. It was the company’s fourth straight quarterly earnings miss and second consecutive sales miss.
On the company’s call with analysts, Chief Executive Donnie King said the market remains challenging and the company is pushing ahead with actions to improve performance and expand capacity in the right areas.
“I can’t remember a time when our business faced the highly unusual situation that we’re currently seeing, where all three of our core protein categories, beef, pork and chicken, are experiencing market challenges at the same time,” he said, according to a FactSet transcript. ” This unusual confluence of issues continued in the second quarter and directly impacted our results.”
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Tyson lost $49 million, or 28 cents a share, in the quarter to April 1, after earning $1.16 billion, or $2.28 a share, in the year-ago quarter. Excluding one-time items, the company’s adjusted loss was 4 cents a share, falling well short of the Wall Street estimate for earnings of 79 cents a share.
Revenue edged up to $13.13 billion from $13.12 billion, but missed the analyst forecast of $13.62 billion. Looking ahead, Tyson Foods expects fiscal 2023 revenue of $53 billion to $54 billion, also short of the Wall Street forecast of $55.2 billion.
King said the company’s core chicken business remained under pressure from challenging market conditions.
Commodity prices for most chicken cuts were much lower than in 2022, he said, with boneless breast meat, tenders and wing prices down more than 50%. “While we’re not fully exposed to commodity markets, we are not immune to their dynamics,” he said.
See: Food prices fall on world markets but not on kitchen tables
Feed prices, meanwhile, rose by $145 million, while the company took a roughly $135 million unfavorable derivative impact caused by volatility in grain prices.
And while the current avian flu outbreak has not impacted the company’s live operations, key export markets remain closed, King said.
“We are focused on the things we can control,” he said.
These included converting two plants from bone-in to boneless chicken, to cater to an important customer base, he said. The company also rationalized assets, SKUs (shopkeeping units) and inventory, reducing inventory pounds by nearly 20% in the quarter.
The company closed two of its less productive chicken plants and took charges that were booked in the quarter to lay off the roughly 1,700 workers.
In April, The Wall Street Journal said Tyson had also eliminated 15% of its senior leadership positions and 10% of corporate roles, citing a memo sent to employees that it obtained.
Sales at the chicken business rose 8.4%, but the segment had an operating loss of $258 million, after a profit of $198 million a year ago.
In beef, sales fell 8.3% as prices slumped by 5.4%, hurt by reduced domestic demand and softer export markets. Volume fell 2.9% amid shrinking herds after years of drought conditions, that has made it more expensive to buy livestock, Chief Financial Officer John Tyson told analysts on the call.
“Live cattle costs increased approximately $305 million on a like-for-like volume in the quarter as the reduction in the beef cattle herd continues to tighten supply and increase competition for cattle,” he said.
In pork, sales fell 9.2% as a volume gain of 1.1% driven by higher hog availability was offset by a 10.3% decline in average selling prices due to the soft demand environment, said Tyson. The segment posted an operating loss of $31 million after income of $59 million a year ago.
On a brighter note, the prepared foods segment, which includes the Tyson, Hillshire Farm and Jimmy Dean brands, adjusted operating income came to $252 million, down from $263 million a year ago.
King said that segment is expected to play a key role in driving growth.
“Branded Food is our best opportunity to drive faster growth, higher margins and stronger results,” he said.
Tyson stock has fallen 18% in the year to date, while the S&P 500 index
SPX,
has gained 8%.
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