Tyson Foods, the largest US meat company, reported disappointing quarterly results and says it expects sales volume to fall in the second half of the year and costs to rise as it contends with the coronavirus pandemic.
The company said on Monday it had experienced an “unprecedented” decline in meat demand from food service markets, such as restaurants and schools, while retail sales increased as consumers stock up on food to ride out residential lockdowns.
But the jump in retail will not be enough to offset the food service losses, prompting Tyson to project lower sales volumes in the six months to September.
Noel White, Tyson Foods chief executive, said: “The direct impacts of the virus have created operational challenges, including absenteeism, reduced production speeds and selected idling of plants.”
The company also said it expected to continue to experience lower productivity and higher production costs “until the effects of Covid-19 diminish” and that it was unable to “provide segment adjusted operating margin guidance”.
Last week, Tyson Foods warned of shortages for consumers, saying the country’s complex food chain was “breaking” as it shut slaughterhouses. Fears over food scarcity prompted US president Donald Trump to issue an executive order to force meat-processing factories to remain open despite the recent Covid-19 outbreaks at several big plants.
The fiscal-second quarter results showed a 4 per cent year-on-year rise in sales to $10.9bn, which missed analyst expectations for $11bn.
Beef and pork sales volumes rose 2.7 per cent and 2 per cent respectively, while chicken sales volume fell 1.5 per cent. Overall, sales volume grew 2.6 per cent, while prices rose 1.6 per cent.
Tyson said its net income slid to $364m, or $1 a share, down from $426m, or $1.17 a share, in the same quarter a year ago. Adjusted earnings of 77 cents a share missed analyst expectations.
Analysts at JPMorgan were struck by the tone of the release. “It’s not often that when we ask our companies to be more balanced, it’s because they’re being overly pessimistic,” Ken Goldman, analyst at JPMorgan, said.
In particular, he pointed to commentary on chicken pricing, noting that pricing at Urner Barry, a food price information service, had been “on an unprecedented positive run”. Mr Goldman also wondered why Tyson had not acknowledged that “industry beef packing and pork processing spreads are at record highs”.
Tyson shares closed 7.8 per cent lower in New York on Monday.