July 30, 2018 / 11:52 AM / 4 months ago

Meat processor Tyson Foods cuts profit forecast on mounting tariff pressures

(Reuters) - Tyson Foods Inc (TSN.N) cut its full-year profit forecast on Monday, citing the uncertainty in trade policies and increased tariffs that have hurt domestic and export prices of meat, sending its shares down 6 percent.

Tyson food meat products are shown in this photo illustration. REUTERS/Mike Blake

Following U.S. tariffs on imported aluminium and steel, China retaliated with tariffs on U.S. pork and beef, while Mexico and Canada also implemented levies, leading to over supplies and subsequently lower prices for these proteins in the domestic market.

This has in turn hurt the consumption of chicken in the United States, forcing producers such as Tyson to reduce prices to spur demand.

“We still face pressure on chicken sales volume and pricing due to the abundance of relatively low-priced beef and pork on the market,” Chief Executive Officer Tom Hayes said.

“Our forecasted earnings range reflects the current market volatility in meat prices,” Hayes said.

The company now expects adjusted earnings per share of about $5.70-$6.00 for fiscal 2018, down from its earlier forecast of $6.55-$6.70.

Analysts’ on average were expecting the company to earn $6.53 per share, according to Thomson Reuters I/B/E/S.

Jefferies analyst Akshay Jagdale lowered his profit estimates for Tyson and peers Sanderson Farms Inc (SAFM.O) and Pilgrims Pride Corp (PPC.O), as he expects demand for chicken weaken due to increased availability of competing meats.

“Commodity chicken prices will remain weak through at least Q1 of 2019,” Jagdale wrote.

Shares of Sanderson Farms dipped 3 percent, while Pilgrims Pride’s stock was down 1.6 percent.

Tyson Foods said the benefit it would get from the U.S. tax reform is now about 77 per share, down from a previous projection of 85 cents per share.

“Our fourth quarter is off to a slower than expected start driven primarily by market related factors,” Hayes added.

The company is expected to report third quarter results on August 6.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Shailesh Kuber

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