Tyson Foods Inc. will shut down four additional chicken facilities after fiscal third-quarter sales trailed even the lowest of analyst estimates.
Production from the facilities, which are based in Arkansas, Indiana and Missouri, will be moved to other locations as the meat supplier seeks to boost capacity utilization and reduce costs, according to Chief Financial Officer John R. Tyson.
“It’s a difficult decision,” the executive said in an interview. “But for the long term future of Tyson, this is the right choice to make.”
Net income for the three-month period ended July 1 was 15 cents per share, down 92% from a year earlier, the company said in a statement. That compares with an analyst average estimate of 26 cents per share. Sales were down roughly 3% from a year earlier, trailing even the lowest analyst estimate.
Shares of Tyson, the biggest US meat company, fell 7.9% as of 8:01 a.m. in New York before the start of regular trading hours.
An unusual combination of headwinds including tight cattle supplies, high feed costs, and a chicken and pork supply glut sent meat producers’ profits plunging this year. Even before Monday’s announcement, the Springdale, Arkansas-based company had moved to cut corporate staff and shut two under-performing operations as part of efforts to slash costs.
“Quarter over quarter, the market conditions have not really changed materially. We recognize we’re not where we need to be,” John Tyson said in the interview. On the flip side, the CFO said he’s really pleased with the performance of Tyson’s brands, particularly in retail.
The average price for pork fell 16.4% from a year earlier in the quarter, with prices for chicken shrinking 5.5%, the company said. Volumes were down for both beef and pork. Tyson also wrote down a combined $448 million in its chicken and international businesses.
Tyson’s chicken losses contrast with results from Pilgrims’ Pride Corp., which reported a better-than-expected profit for the quarter and signaled improving conditions.
Read More: Pilgrim’s Pride Signals Worst Is Over for Chicken Suppliers
Tyson shares have slumped almost 30% in the past 12 months through Friday’s close.
(Updates with more details starting in eighth paragraph.)
Author: Gerson Freitas Jr.