UPDATE: Tyson Foods To Raise Prices As Profit Suffers
January 28, 2008: 01:57 PM EST
SAN FRANCISCO (Dow Jones) -- Tyson Foods Inc. reported Monday its quarterly profit fell 40% from a year ago, dragged down by wider losses in its beef business and surging grain and fuel costs.
Near record-level costs for corn and soybean meal is taking its toll, and Tyson said it plans to raise costs for its chicken and beef products that account for 78% of its total sales.
"We have no other choice but to raise prices substantially," CEO Richard Bond said in a conference call. "We are raising prices because we can't absorb these costs. Despite concerns about the economy, people have to eat, and they will continue to eat protein."
Tyson boosted its fiscal 2008 grain-cost forecast to more than $500 million, 67% higher than its prior outlook issued in November. Demand for corn-based ethanol used as an alternative for gasoline is hurting Tyson's profit. It's a situation the company hasn't faced before. In the past, higher grain prices were due to supplies and were short-term, Bond explained.
The Springdale, Ark.-based company (TSN) will stop offering financial forecasts, calling the commodity markets too "volatile" to make accurate predictions.
For the quarter ended Dec. 29, Tyson said it earned $34 million, or 10 cents a share, down from $57 million, or 16 cents, in last year's same period.
Sales rose 3% to $6.8 billion in the fiscal first quarter.
Tyson said higher average selling prices for chicken and beef helped offset lower shipment volumes. Pork sales were lifted by strong exports and Tyson said global demand for chicken and pork is increasing as the standard of living in the developing countries improves.
Meanwhile, the company is facing more beef slaughter capacity than available cattle as well as sluggish demand for U.S. beef overseas. It plans to cease slaughter operations at its Emporia, Kansas, beef plant in the next few weeks, resulting in 1,500 lost jobs.
In its fiscal first quarter, Tyson's beef unit reported an operating loss of $ 85 million, wider than the loss of $23 million a year ago. The company's overall gross profit margin fell to 4.5% of sales, from 5.1%, hurt by rising grain costs and lower sales volumes.
Tyson shares rose 3.5% to $13.72 in late morning trading.
January 28, 2008: 01:57 PM EST
SAN FRANCISCO (Dow Jones) -- Tyson Foods Inc. reported Monday its quarterly profit fell 40% from a year ago, dragged down by wider losses in its beef business and surging grain and fuel costs.
Near record-level costs for corn and soybean meal is taking its toll, and Tyson said it plans to raise costs for its chicken and beef products that account for 78% of its total sales.
"We have no other choice but to raise prices substantially," CEO Richard Bond said in a conference call. "We are raising prices because we can't absorb these costs. Despite concerns about the economy, people have to eat, and they will continue to eat protein."
Tyson boosted its fiscal 2008 grain-cost forecast to more than $500 million, 67% higher than its prior outlook issued in November. Demand for corn-based ethanol used as an alternative for gasoline is hurting Tyson's profit. It's a situation the company hasn't faced before. In the past, higher grain prices were due to supplies and were short-term, Bond explained.
The Springdale, Ark.-based company (TSN) will stop offering financial forecasts, calling the commodity markets too "volatile" to make accurate predictions.
For the quarter ended Dec. 29, Tyson said it earned $34 million, or 10 cents a share, down from $57 million, or 16 cents, in last year's same period.
Sales rose 3% to $6.8 billion in the fiscal first quarter.
Tyson said higher average selling prices for chicken and beef helped offset lower shipment volumes. Pork sales were lifted by strong exports and Tyson said global demand for chicken and pork is increasing as the standard of living in the developing countries improves.
Meanwhile, the company is facing more beef slaughter capacity than available cattle as well as sluggish demand for U.S. beef overseas. It plans to cease slaughter operations at its Emporia, Kansas, beef plant in the next few weeks, resulting in 1,500 lost jobs.
In its fiscal first quarter, Tyson's beef unit reported an operating loss of $ 85 million, wider than the loss of $23 million a year ago. The company's overall gross profit margin fell to 4.5% of sales, from 5.1%, hurt by rising grain costs and lower sales volumes.
Tyson shares rose 3.5% to $13.72 in late morning trading.