Tyson posts loss of $97M for 2Q

Shares finish day down 16%

FILE - A Tyson Foods, Inc., truck is parked at a food warehouse on Oct. 28, 2009, in Little Rock. (AP Photo/Danny Johnston, File)
FILE - A Tyson Foods, Inc., truck is parked at a food warehouse on Oct. 28, 2009, in Little Rock. (AP Photo/Danny Johnston, File)

Tyson Foods posted a second-quarter loss Monday morning as it continues to struggle and implement cost-cutting measures.

Sales were nearly flat compared with the second quarter last year and the company posted a $97 million loss, surprising analysts.

"As you've heard today, this is a challenging moment," Donnie King, president and chief executive officer of Tyson Foods, said during a Monday morning conference call with analysts. "But my optimism about the future has not changed."

Tyson's shares fell sharply after the report was released and ended the day at $50.72, down $9.96, or 16%, in trading on the New York Stock Exchange. Shares have traded as low as $50.25 and as high as $99.77 over the past year.

In the call with analysts, King said the second quarter was tough -- as he had predicted earlier in the year -- noting Tyson faced a rare cycle where the company's key meat segments -- chicken, beef and pork -- all were doing poorly and all at the same time. He said the company faces broad economic challenges including inflation and a softer export market.

King said the quarter wasn't the first time Tyson had faced downturns during its 90-year history and the company was well positioned to come out the other side stronger than ever -- what he called accelerating out of a curve.

"What we can do is control what we can control," King said.

In a research brief, analyst Ben Bienvenu of Stephens Inc. said Tyson's second-quarter results were much weaker than expected with the company's downturn more severe than anticipated.

The meat giant has struggled in recent quarters with reduced profits and a sagging stock price. Over the past few months, it changed top executives in key positions as it worked to cut costs and improve productivity.

During the call, King said he had confidence in the company's leadership and Tyson Foods' plans to both grow and at the same time "right size" its operations to improve efficiency.

In April, the company said it would cut 10% of its corporate jobs and reduce senior leadership roles by 15%. In mid-March, Tyson said it would close a chicken processing plant in Van Buren that employs about 950, as well as a plant in Virginia with nearly 700 workers, in a move to optimize its operations. Both plants are expected to close May 12.

Tyson's $97 million loss equaled 28 cents per share for the quarter that ended April 1, compared with a year-ago profit of $829 million, or $2.28 a share. A consensus of nine analysts had anticipated profits of 80 cents per share for the quarter, according to Yahoo Finance.

Tyson Foods booked revenue of $13.13 billion for the quarter, up slightly from $13.12 billion for the year-ago quarter. A consensus of eight analysts had predicted revenue of $13.62 billion for the quarter.

In response to emailed questions, Alan Ellstrand, professor of management and associate dean of programs and research at the Walton College of Business at the University of Arkansas, said Tyson's situation -- where several of its key meat segments are under pressure at the same time -- is indeed rare but understandable considering wide-ranging economic challenges the company faces from pressure on the consumer due to inflation to the war in Ukraine.

"Due to the sustained period of inflation over the past couple of years, consumers are price sensitive and that seems to have taken its toll on protein sales," he said. "We have not seen this type of general price pressure in over 40 years (since the early 1980's), so this is unusual in recent years."

While it's hurting Tyson currently, he said, the company's diversification across chicken, beef and pork segments typically is a strength.

"This time all segments are under pressure, but their related diversification should benefit them going forward," Ellstrand said.

The company lowered its sales guidance and some margin expectations for 2023. Tyson Foods is now projecting sales of $53 billion to $54 billion for fiscal 2023, down from $55 billion to $57 billion. That's a prediction of flat to 1% sales growth compared with 3% to 7% previously anticipated. Tyson Foods said operating margins for the chicken segment will be negative 1% to 1%, down from 2% to 4%; beef margins are expected to see a range of negative 1% to 1%, down from 2% to 4%; pork margins are predicted from negative 2% to flat compared with flat to 2%; and prepared foods margins are expected to be 8% to 10%, unchanged.

For the second quarter, Tyson's beef segment saw sales of $4.6 billion, down from $5 billion for the same period last year. The company said the beef segment suffered from a softer export market and higher cattle costs. Sales volume was down 2.9% while the average sale price was down 5.4%. Operating income was flat, down from $638 million for the second quarter of 2022, while the operating margin was flat, down from 12.71% a year ago.

Chicken sales were $4.4 billion, up from $4.1 billion in the second quarter of 2022. Sales volume was up 6.4%, while the average sale price was up 2%. Executives said operating income was down in part on higher feed ingredients costs of $145 million.The company posted a $258 million loss of operating income for the segment, down from $198 million in the year-ago quarter, while operating margins were negative 5.8%.

The pork segment posted sales of $1.4 billion, down from $1.57 billion a year ago. Sales volume was 1.1% up while the average sale price was down 10.3%. The company said volume was up on more hog availability but sale price was down on soft global demand. The segment posted $33 million loss of operating income compared with operating income of $59 million a year ago, while operating margins were negative 2.3%.

Revenue for the prepared foods segment was $2.4 billion, up slightly from $2.39 billion last year. Sales volume was down 0.4% with average sale price up 1.6%. The company said the segment's success was driven by strong performance in the company's retail brands. Operating income for the segment was $241 million, down from $263 million with an operating margin of 10%, down from 11% in the year-ago quarter.

The international/other segment posted revenue of $634 million for the second quarter, up from $565 million. Sales volume was up 8%, while the average sale price was up 4.2%. The segment posted operating income of $1 million, compared with a loss of $2 million a year ago.

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