Tyson sees surprise 2nd-quarter loss
Tyson Foods suffered a surprise loss in the second quarter, something not witnessed since 2009, and cut its sales forecast due to the cost of plant closures and layoffs.
Tyson has been trying to cut costs over the last six months. It closed its corporate offices in Chicago and South Dakota late last year and consolidated its workforce in Arkansas. In March it announced the closure of two plants in Arkansas and Virginia in order to better use available capacity at other facilities.
Tyson laid off 15% of its senior leadership and 10% of its corporate workers last month as it faces steep inflation on labor, grain and other inputs.
CEO Donnie King said in a conference call Monday that feed costs for chickens were $145 million higher in the second quarter. And in 2021 the company raised wages and implemented changes like flexible scheduling in order to combat rising absenteeism at plants.
Chicken sales volumes rose 6% in the quarter but prices lagged as supplies rose across the industry. Tyson’s pork volumes rose 1% but prices dropped 10% on lower global demand. And beef sales volumes and prices dropped as U.S. demand sank, with inflation-weary shoppers looking for alternatives.
“I can’t remember a time when our business faced the highly unusual situation that we’re currently seeing, where all three of our core protein categories – beef, pork and chicken – are experiencing market challenges at the same time,” King said.
The Springdale, Arkansas, company – which processes 20% of all U.S. chicken, beef and pork – lost $97 million, or 28 cents per share, for the three months ended April 1. A year earlier it earned $829 million, or $2.28 per share.
Taking out one-time restructuring charges, Tyson lost 4 cents per share at a time when Wall Street analysts had been projecting a per-share profit of 81 cents, according to a survey by Zacks
Fed, in a statement last week, signaled it may pause its interest rate increases at its next meeting in June.
“I don’t know that it’s a full-blown credit crunch, but it’s certainly credit tightening,” Goolsbee said in an interview with Yahoo Finance. “That will slow the economy, and we absolutely should have to take that into account when we’re setting monetary policy.”
The report follows other signs that the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank in the past two months has caused other financial institutions to reduce their lending to conserve capital.
Federal Reserve officials and economists will closely scrutinize the report, because tighter credit standards are expected to be followed by a reduction in lending. That could force businesses to pull back on expansion plans and reduce hiring, and could limit sales of cars and homes.
The survey respondents were 65 U.S. banks and U.S. branches of 19 foreign banks. The results were gathered from March 27 to April 7, well after Silicon Valley Bank and Signature Bank collapsed in early March, touching off the latest round of bank turmoil. First Republic
bank failed a week ago, the second-largest bank failure in U.S. history.
The Fed’s report said that midsize banks – those with assets between $50 billion and $250 billion, like the three banks that failed in March – were more likely to report tighter standards.
The banks also said they are restricting credit for most consumer loans, including auto and credit card lending and home equity lines of credit.
Separately Monday, the Fed released its twice-yearly financial stability report, which examines the financial sector – banks, insurance companies, and investment funds – for any potential signs of future turmoil or disruption.
The report said that commercial real estate loans – particularly loans to downtown office buildings and retail sites – were at greater risk of default as fewer Americans report to work in cities, preferring instead to work from home. Those loans are disproportionately held by smaller banks.
“The Federal Reserve has increased monitoring of the performance of (commercial real estate) loans and expanded examination procedures for banks with significant” exposure to such loans, the report said.
At the same time, the report said that on average, most loans for commercial properties were backed by significant down payments, reducing the risk to banks from widespread defaults.