As a result of a decrease in the price of its beef and pork, Tyson Foods Inc. (TSN.N) recorded a surprising second-quarter loss and lowered its full-year sales projection on Monday, sending the company’s shares plunging 16% to a three-year low.
The weaker-than-expected results show that consumers are reducing their meat purchases in an environment of high inflation, while a declining cattle herd makes Tyson pay more for livestock, eroding margins.
Tyson continues in an unusual position of confronting difficulties in its beef, hog, and chicken sectors at the same time, according to CEO Donnie King, who is looking to reduce costs. The business lowered its projected sales for the fiscal year 2023 from $55 billion to $57 billion to $53 billion to $54 billion.
“This quarter was definitely a tough one,” King said on a conference call.
After meatpackers raised prices last year to combat inflation, average sales prices for beef and pork decreased in the three months that ended on April 1 by 5.4% and 10.3%, respectively.
Tyson’s beef business saw a 3% decline in sales volumes for the quarter, bringing overall sales down to $4.62 billion, an 8.3% decrease.
Cattle farmers have sent animals to slaughter rather than holding them for breeding due to increased feed expenses and the U.S. drought.
Tyson reported operating margins of 0.2% for the beef sector, down from 12.7% a year earlier, and said expenditures to buy live cattle rose by $305 million. In contrast to its previous projection of 2% to 4%, the business estimated full-year beef margins at -1% to -1%.
