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Tyson Foods Expects Costs To Hit Profit, Lifts Revenue Outlook

Published on May 11 2021 7:59 AM in Supply Chain tagged: Sales / Revenue / Tyson Foods / Meatpackers

Tyson Foods Expects Costs To Hit Profit, Lifts Revenue Outlook

Tyson Foods has warned that rising costs will hit profits later this year even though the US meatpacker raised its full-year revenue forecast on higher meat prices and improving demand from restaurants.

Increased costs for labour, transportation and raw materials like grain and packaging are squeezing a range of companies including Tyson, the biggest US meat company by sales.

Tyson's costs for feed ingredients rose $135 million from a year ago in the second quarter as corn and soybean prices soared on supply concerns.

The company also spent $60 million more buying chicken from other producers due to raw materials shortages, said Donnie King, president of the poultry unit.

Globally, food prices in April were at their highest level since May 2014.

Expectations for further cost increases pushed Tyson to lower its forecast for prepared foods sales to flat from last year.

'Substantial Inflation'

"We're seeing substantial inflation across our supply chain, which will likely create margin pressure during the back half of the year," Chief Executive Dean Banks said.

Still, Tyson said it expects fiscal 2021 revenue to reach $44 billion to $46 billion, up from a previous forecast for revenue in the upper end of a $42 billion to $44 billion range.

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Sales in the quarter ended 3 April rose about 4% to $11.30 billion from a year earlier, exceeding analysts' estimates for $11.19 billion, IBES data from Refinitiv showed.

Divisional Performance

In beef, Tyson's largest business, sales rose 1.7% from a year ago to $4 billion, as prices climbed 7.5% and volumes fell 5.8%.

Tyson said it will pass on increased costs to customers and now expects its beef division to post improved results compared to last year.

The company must also overcome labour hurdles. King said worker absences are up some 50% from before the pandemic and it now takes six days to do five days' worth of work in meat plants.

News by Reuters, edited by ESM. For more Supply Chain stories, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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