Shares of Tyson Foods tumbled after a surprise loss and lowered revenue forecasts

(Reuters) – Shares of Tyson Foods Inc (TSN.N) fell 16% to a three-year low on Monday, as the US meatpacker posted a surprise second-quarter loss and cut its full-year revenue forecast after lower prices. Beef and pork.

Weaker-than-expected results suggest cash-strapped consumers are reducing their spending on meat in an environment of hyperinflation, while a shrinking livestock herd is forcing Tyson to pay more for livestock, eroding margins.

Chief Executive Donnie King, who is seeking to cut costs, said Tyson is still in the unusual position of meeting challenges in the beef, pork and chicken businesses at the same time. The company lowered its forecast for fiscal year 2023 sales to $53 billion to $54 billion from $55 billion to $57 billion.

“This quarter was definitely tough,” King said on the conference call.

Average selling prices for beef and pork fell 5.4% and 10.3%, respectively, in the quarter ended April 1 after meatpackers raised prices last year to offset inflation.

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Sales volume in Tyson’s beef segment also fell 3% in the quarter, sending overall sales down 8.3% at $4.62 billion.

Rising feed costs and an American drought prompted livestock producers to send animals to slaughter rather than keeping them for breeding.

Costs to purchase live cattle increased $305 million, Tyson said, and he reported operating margins of 0.2% for the beef business, down from 12.7% a year earlier. The company pegged full-year beef margins at negative 1% to positive 1%, compared to its previous forecast of 2% to 4%.

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JPMorgan analysts said beef margins were the worst since 2015, while pork margins were the worst in more than two decades at -2.2%. In Tyson’s chicken business, margins were negative 3.7% as feed costs jumped $145 million.

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“Industry fundamentals would have suggested much better numbers,” JP Morgan analysts said. They said the high feed costs in the chicken business were a “particular disappointment”.

Tyson posted an adjusted loss of 4 cents per share, compared to analyst expectations of an 80 percent profit.

“Many of the headwinds seen in the remainder of the fiscal year are likely to continue,” said Chief Financial Officer John R. Tyson.

Additional reporting by Grant Vanek in Bengaluru; Editing by Shilpi Majumdar

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