Aug 3 (Reuters) – Tyson Foods lowered its annual profit forecast on Monday, warning that losses in its beef business would widen as tight U.S. cattle supplies keep livestock costs elevated.
U.S. meatpackers have bled money in their beef businesses because increased costs for cattle have outpaced gains from soaring selling prices for steaks and hamburger meat.
The cut to Tyson’s forecast signals more financial pain for the sector after the company this year closed a massive beef plant in Nebraska and slashed operations at a plant in Texas, laying off thousands of workers.
Shares of the Springdale, Arkansas-based company were down about 3% in premarket trading.
Board member Jeff Schomburger must confront the challenge in beef in October when he takes over as CEO for veteran leader Donnie King.
U.S. ranchers reduced the nation’s cattle herd to its lowest level in 75 years after a prolonged drought burned up pastures and raised feed costs, driving up beef prices and squeezing meatpackers’ profit margins. Higher beef prices have also weighed on demand as inflation-conscious consumers curb spending.
Tyson now expects fiscal 2026 adjusted operating income of $2.1 billion to $2.3 billion, compared with its previous forecast of $2.2 billion to $2.4 billion.
For its beef business, the company forecast an adjusted operating loss of $500 million to $650 million, compared with its prior expectation of a loss of $350 million to $500 million.
Beef sales volumes fell 15.9% in the quarter that ended on June 27 while prices jumped 12.1%.
U.S. cattle supplies were further constrained after Washington suspended imports of livestock from Mexico more than a year ago in an attempt to keep out the flesh-eating pest New World screwworm. The agency plans to start lifting its ban this month, though the move will take time to benefit beef processors, analysts said.
As beef prices rise, some consumers have turned to chicken as a cheaper source of protein, helping Tyson offset part of the weakness in its larger beef segment.
Chicken sales volumes rose 1% during the quarter, while adjusted operating margin in the segment increased 11.2%.
Tyson reported quarterly sales of $13.87 billion, below analysts’ estimates of $14.12 billion.
It expects annual revenue growth of 2.5% to 3.5%, compared with analysts’ expectations of a growth of 4.3%, according to data compiled by LSEG. The company had previously forecast growth of 2% to 4%.
(Reporting by Tom Polansek and Neil J Kanatt in Bengaluru; Editing by Vijay Kishore)
Comments