Shares in Tyson Foods fell today (6 August) after the US meat giant lowered its forecast for annual sales and warned grain costs would weigh on profits in its next financial year.
Tyson, which reported mixed third-quarter results today, said it expected annual revenue to be around US$33bn, $1bn lower than its previous forecast amid "weak domestic protein demand".
The worst drought in 50 years in the US has hit corn and soybean yields and pushed up prices of the commodities. The US meat sector has warned of the impact of higher corn and soybean prices on profits. Tyson president and CEO Donnie Smith said today rising input costs and weak demand would "pressure" earnings in 2013.
However, the US Department of Agriculture has said it believes the rising costs of corn and soybeans could ultimately lead to more expensive meat and protein for consumers. Tyson said it predicted annual sales in its next financial year would be $35bn as it pushed through price increases.
Tyson's third-quarter net profit was down due in part to a debt charge. Operating profit was up and sales increased.
For the first nine months of the year, sales were higher year-on-year but operating and net profit were down.
Shares in Tyson were down 4.84% at $14.66 at 10:37 ET today.
Tyson Reports Third Quarter and Nine Months Fiscal 2012 Results
3rd quarter EPS was $0.21, which included a charge for the early extinguishment of debt totaling $167 million, or $0.29 per diluted share
-- Excluding the early extinguishment charge, 3rd quarter EPS was $0.50, as compared to $0.51 last year
Overall operating margin was 4.0%
-- Chicken operating income $153 million, or 5.3% of sales
-- Beef operating income $71 million, or 2.0% of sales
-- Pork operating income $69 million, or 5.1% of sales
-- Prepared Foods operating income $47 million, or 6.2% of sales
Successfully completed the refinancing of high yield debt
-- Proceeds from issuance of $1.0 billion 4.50% Notes due 2022 used for extinguishment of $810 million 10.50% Notes due 2014
-- Will reduce annualized interest expense by approximately $55 million
Liquidity totaled $1.8 billion at June 30, 2012
(in millions, except per share data) Third Quarter Nine Months
2012 2011 2012 2011
Sales $ 8,308 $ 8,247 $ 24,905 $ 23,862
Operating Income 336 312 916 1,113
Net Income 73 188 395 638
Less: Net Loss Attributable to Noncontrolling Interest (3) (8) (3) (15)
Net Income Attributable to Tyson $ 76 $ 196 $ 398 $ 653
Net Income Per Share Attributable to Tyson $ 0.21 $ 0.51 $ 1.07 $ 1.71
Third Quarter and Nine Months Fiscal 2012 - Included pretax charge of $167 million, or $0.29 per diluted share, from the early extinguishment of debt
"We produced solid results in our fiscal third quarter despite softer than expected domestic demand for protein," said Donnie Smith, president and chief executive officer of Tyson Foods. "I am especially pleased with the performance of our Chicken and Prepared Foods segments. Our Beef and Pork segments have been operating in very difficult market conditions that will result in our earnings for fiscal 2012 coming in lower than we previously projected.
"Grain costs have been increasing significantly and rapidly, largely as a result of the on-going U.S. drought. While we ultimately expect to pass along rising input costs, these costs, coupled with continued soft demand, are likely to pressure earnings in 2013. However, we still anticipate solid earnings for the year, and we are performing well during challenging circumstances. With our strong balance sheet, customer relationships, new product development capabilities, and efficient operations, we believe Tyson Foods is in the best position in our industry to succeed now and in the future.
"We're often faced with challenges in our business, but our strategy will allow us to manage through trying times for continued success. We are focused on growing our prepared foods, international poultry and value-added poultry businesses. We can't make it rain, but we can execute against our strategy by producing high quality foods using innovative and cost effective processes. It's tough right now, but I'm confident we will come out of this in even better shape than we are in today."
