Net income in the three months through June declined to $9 million, or 3 cents a share, from $111 million, or 31 cents, a year earlier, Springdale, Arkansas-based Tyson said today in a statement. Tyson had a profit of 1 cent a share, excluding certain items. The average estimate of nine analysts surveyed by Bloomberg was for a profit of 12 cents.
Chief Executive Officer Richard L. Bond couldn't increase prices fast enough to make up for rising animal-feed expenses. The chicken unit, the biggest profit contributor last year, posted an operating loss of $44 million, its second loss in a row. Pilgrim's Pride Corp. and other chicken producers have been reducing output to boost prices.
``Profitability in the chicken business has been very poor for the bulk of the past two quarters,'' Stephens Inc. analyst Farha Aslam said in a July 24 report. ``Chicken producers must be very diligent about reducing production through a combination of head and weight.''
Aslam rates the shares ``overweight'' and had forecast per- share profit of 12 cents excluding one-time items.
Tyson fell 71 cents, or 4.4 percent, to $15.52 at 9:41 a.m. in New York Stock Exchange trading. Before today, the shares had increased 5.9 percent this year.
The price of corn, a key feed ingredient, was 69 percent higher on average during the quarter than a year earlier and reached a record $7.9925 a bushel on June 27 in Chicago because of rising demand for food, livestock feed and ethanol. Soybean prices averaged 78 percent higher and reached a record $16.3675 a bushel on July 3.
``The chicken segment remains under pressure from higher input costs,'' Bond said in the statement. ``I am confident our chicken business will be well-positioned when the economics improve.''
Sales gained 3.5 percent to $6.85 billion. Grain costs rose by $140 million during the quarter from the year-earlier period and the company expects costs to increase about $550 million for fiscal 2008.
Tyson in April estimated grain costs will increase $600 million this year, higher than its January forecast of $500 million, and double its November estimate.
Skinless and boneless chicken breast prices averaged 16 percent lower at $1.4942 a pound during the same period, according to the U.S. Department of Agriculture.
Operating profit from the beef unit, which accounted for almost half of last year's sales, plunged 92 percent to $3 million, partly because of a $75 million charge related to the value of its cattle purchases and forward boxed-beef sales.
Earnings from prepared foods fell 77 percent to $6 million because of rising costs for wheat, dairy and cooking ingredients. The unit also took a $7 million charge related to flood damage at its plant in Jefferson, Wisconsin.
Profit from the pork unit rose 46 percent to $54 million