Tyson Foods cuts annual-profit forecast

Higher feed costs, lower beef, chicken prices noted

August 31, 2004|By BLOOMBERG NEWS

SPRINGDALE, Ark. - Tyson Foods Inc. reduced its forecast of annual profit yesterday because of higher costs for feed grain and a drop in beef and chicken prices. Tyson's shares fell the most in more than a year.

The world's largest meat processor said its profit will be $1.08 to $1.15 a share in the year that ends Oct. 2.

Excluding expenses related to mad cow disease and plant closings, the company said it will earn $1.26 to $1.33. On that basis, analysts expected $1.45 a share.

The forecast comes after Tyson Foods said July 26 that its fourth-quarter profit would fall because of a slump in U.S. meat exports.

More than 40 nations banned U.S. beef after a lone case of mad cow disease in December, and the three largest importers of U.S. chicken, Russia, China and Hong Kong, banned the meat after an outbreak of avian flu.

"This year's commodity market was very difficult," said Ephraim Bernstein, a retail analyst at Highline Capital Management in New York, which manages $680 million.

Shares of Tyson plunged $1.47, or 8.3 percent, to close at $16.26 on the New York Stock Exchange, the company's biggest one-day decline since March 6 last year. The stock has dropped 16 percent in the past week.

Last week, Sanderson Farms cut its fiscal-year forecast, blaming a drop in the price of chicken breasts to $2 a pound within a week of a July 4 price of $2.56. Prices fell to $1.75 as of Aug. 24, according to Urner Barry Publications products.

Sanderson's forecast led to a 24 percent decline in the company's stock and sparked declines in shares of Tyson and Pilgrim's Pride Corp., the second-largest U.S. poultry producer after Tyson.

Tyson Foods Chief Executive John Tyson also blamed "unfavorable results from grain hedging activity" as part of the reason for the lower forecast. He didn't elaborate. The price of corn, a primary feed ingredient, rose to a seven-year high in April and has since plunged 32 percent.

Company spokesman Gary Mickelson said prospects for a record corn crop "caused prices to fall and affected the value of our hedges."

The hedging costs are "the nature of the commodity business, but it's a near-term issue for Tyson," Bernstein said. Corn and soybean prices probably will be lower in coming months because the United States is expected to harvest record or near-record crops, he said.

Tyson Foods will report earnings Nov. 15.

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