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Tyson Foods warns that rising costs will erode profits despite lifting its revenue outlook

12 May 2021

American meat processing giant Tyson Foods expects that rising costs will hit profits in later quarters of 2021, even though the company raised its full-year revenue forecast due to higher meat prices and improving consumer demand.

Reuters reports that increased costs for labor, 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.

“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.

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.

Shares rose 2% in afternoon trading.

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 labor 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.

Read more about this story here.

Source: Reuters



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