Profit worry sends Tyson shares down 9%

Investors respond to glut of chicken and concern about feed costs

July 03, 2002|By BLOOMBERG NEWS

NEW YORK - Tyson Foods Inc. shares had their biggest decline in more than a year yesterday on concern that higher costs for animal feed and a glut of chicken may trim profit for the world's biggest meat processor.

Tyson shares fell $1.39, or 9.2 percent, to $13.79, the lowest closing price in two months. The decline was the largest since June 2001.

Still, Tyson stock is up 48 percent over the past year. The company has benefited from its purchase last year of beef and pork processor IBP and increased its emphasis on higher-margin branded meat products, such as heat-and-serve roasts.

U.S. poultry supplies have increased 25 percent in the past year after production rose and Russia banned U.S. imports of the meat in March and April. Russia may reinstate the ban Aug. 1 amid concern about safety certifications, Prudential Securities Inc. analysts Jeff Kanter and John McMillin said in a report yesterday.

"Another Russian poultry ban appears in the offing," Kanter and McMillin said in the report, in which they lowered their rating on Tyson to "hold" from "buy." "Dark-meat supplies should begin to build, which may put some pressure on white meats."

Kanter and McMillin didn't return a phone call seeking comment.

The analysts also reduced their estimate for Tyson's profit in its next fiscal year, which begins in October, to $1.40 a share from $1.45. A survey of five analysts by Thomson/First Call showed an average estimate for the period of $1.37 a share.

Russia, the world's top poultry importer, halted U.S. imports in early March, noting concern over the safety of disinfectants used in processing and the adequacy of testing for certain bacteria, such as salmonella. Shipments have been slow to resume since the ban was lifted April 15, contributing to an abundance of meat.

U.S. poultry supplies totaled 1.42 billion pounds at the end of May, up 3 percent from a month earlier and up 25 percent from a year earlier, the Agriculture Department said last month. The total U.S. supply of beef, pork and poultry was up 26 percent from a year earlier at 2.37 billion pounds.

Much of Russia's poultry imports are dark-meat leg quarters. Wholesale leg quarters were 21 cents a pound yesterday, down 33 percent from a year earlier.

Springdale, Ark.-based Tyson, the world's largest chicken producer, exports at least 10 percent of its annual output of about 8 billion pounds, analysts estimated.

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