Tyson Foods, one of the largest meat companies in the United States, has announced plans to close four chicken facilities due to falling sales and plummeting profits. The decision comes after Tyson’s fiscal third-quarter sales failed to meet even the lowest estimates by analysts.
The affected facilities, located in Arkansas, Indiana, and Missouri, will have their production moved to other locations as the company aims to boost capacity utilization and reduce costs. Tyson’s Chief Financial Officer, John R. Tyson, acknowledged that this was a difficult decision but emphasized that it is necessary for the long-term future of the company.
In the three-month period ending on July 1, Tyson reported a net income of 15 cents per share, a decline of 92% compared to the previous year. This figure fell short of the analyst average estimate of 26 cents per share. Additionally, sales were down approximately 3% from the previous year, even below the lowest analyst estimate.
Following the announcement, Tyson’s shares dropped by 7.9% before the start of regular trading hours in New York. The company has faced numerous challenges this year, including tight cattle supplies, high feed costs, and an oversupply of chicken and pork. As part of cost-cutting efforts, Tyson has already implemented staff reductions and closed two under-performing operations.
John Tyson expressed that market conditions have remained relatively unchanged and acknowledged the need for improvement. However, he praised the performance of Tyson’s brands, particularly in the retail sector.
The quarter saw a decline in the average price for pork by 16.4% compared to the previous year, while chicken prices shrunk by 5.5%. Additionally, there was a decrease in volumes for both beef and pork. Tyson also announced a combined write-down of $448 million in its chicken and international businesses.
Interestingly, Tyson’s losses in the chicken sector contrasted with the better-than-expected profit reported by Pilgrims’ Pride Corp., which signified improving conditions within the industry.
Over the past 12 months, Tyson’s shares have declined by almost 30%, further highlighting the challenges the company faces.
In conclusion, Tyson Foods is taking steps to close four chicken facilities in response to declining sales and profits. The decision aims to improve capacity utilization and reduce costs. Despite the difficulties faced, Tyson’s CFO believes it is the right choice for the company’s long-term future. The company will now focus on addressing market challenges and improving its performance.
