Poultry and meat processor Tyson Foods has reported reduced earnings for the second quarter and trimmed its forecast for the full 2006 fiscal year, as a result of tough market conditions and the cost of plant closures.
The Arkansas-based company posted a preliminary GAAP loss of around US$0.38 per diluted share in the second quarter and a preliminary GAAP loss of approximately $0.27 per diluted share for the first half of the fiscal year. The company said volatile markets and continuing overcapacity of all protein markets contributed to the significant deterioration of margins during the second quarter. The second-quarter figures also include an $0.08 per share charge in respect of the recent closure of two Nebraska beef plants and a $0.03 per share charge relating to the closure of two Iowa processed meat facilities.
Tyson added that bird flu outbreaks in other parts of the world had reduced US chicken export prices more than expected. Meanwhile, cattle supplies are gradually increasing and cattle prices are declining, and box beef prices are also falling, putting continued pressure on beef margins. Certain key beef export markets, notably Japan and South Korea, had remained inaccessible for longer than anticipated, the company said.
Pork operations were hit by continued over-supply in the marketplace, while Tyson said it was also being negatively affected by increased corn and diesel fuel expenses.
“While we expected tough and uncertain conditions in the protein market, it has been far more difficult than we previously projected,” said Tyson chairman and CEO John Tyson. “Protein supplies have remained more burdensome than anticipated and will continue to put pressure on product price recovery. We still expect an improved performance in the last half of fiscal 2006; however it will not be of the magnitude originally projected. Despite these challenging conditions, we remain confident in our business strategy to create more value-added products, improve operational efficiencies and expand our international presence.”
Tyson Foods said that given the oversupply across protein sectors and an anticipated lack of price recovery for the remainder of the year, it was reducing its GAAP earnings guidance for fiscal 2006 to a range of $(0.25) to $0.10 per diluted share, inclusive of charges relating to the plant closures in Nebraska and Iowa.
The company said it planned to publish its final second-quarter results on 1 May, as scheduled.