By Granth Vanaik and Tom Polansek
(Reuters) -Tyson Foods Inc posted a surprise second-quarter loss and cut its full-year revenue forecast on Monday as prices for its beef and pork have declined, sending the U.S. meatpacker's shares tumbling 9% before the bell.
The weaker-than-expected results indicate that cash-strapped consumers are cutting back on meat spending in a high-inflation environment while a shrinking cattle herd forces Tyson to pay more for livestock, eroding margins.
CEO Donnie King, who is seeking to cut costs, said meat markets are challenging and Tyson is focused on improving profit margins. The company lowered its forecast for fiscal year 2023 sales to $53 billion to $54 billion from $55 billion to $57 billion.
"Clearly the macro environment is not in favor of protein processors right now," said CFRA Research analyst Arun Sundaram.
Average sales prices of beef and pork fell 5.4% and 10.3%, respectively, in the quarter ending April 1. Sales volumes in Tyson's beef segment also fell 3%, leaving the unit's overall sales down 8.3% at $4.62 billion.
Meatpackers increased prices of their products last year to offset spiraling costs of animal feed, labor, freight and commodity prices, aggravated by a lingering U.S. drought and supply chain issues.
The drought and cost of livestock feed have driven cattle producers to send animals to slaughter instead of keeping them for breeding. The lower supply raises costs for meatpackers.
Tyson reported an adjusted operating margin of 0.2% for the beef business, down from 12.7% a year earlier. The company pegged beef margins at negative 1% to positive 1% for fiscal year 2023, compared to its previous forecast of 2% to 4%.
"Margins are expected to decrease," Tyson said.
The Springdale, Arkansas-based meat packer's net sales were $13.13 billion in the quarter ended April 1, compared with analysts' average estimate of $13.62 billion, according to Refinitiv data.
Tyson posted an adjusted loss of 4 cents per share, compared with analysts' expectations of a profit of 80 cents per share.
(Reporting by Granth Vanaik in Bengaluru and Tom Polansek in Chicago; Editing by Shilpi Majumdar, Kirsten Donovan)
