000654 Tyson Foods Sees Profits Below Estimates

New York - Tyson Foods Inc. said its third-quarter earnings will fall short of analysts' estimates because of weak chicken prices.

“Chicken prices have not experienced the normal seasonal increase as expected primarily due to the continued oversupply in the industry, which affects both domestic and international markets,” John Tyson, chairman, president and chief executive officer, said in a press release.

The Springdale, Ark.-based company, which warned in May it may have trouble meeting Wall Street fiscal year forecasts because of heavy poultry production and low prices, said third quarter earnings should range from $0.18 to $0.20 per share.

Analysts polled by First Call/Thomson Financial expected the company to post $0.26 per share in the period ending July 1, 2000, compared with $0.34 in the third quarter of last year.

“While we previously anticipated this oversupply situation and cut production, the remainder of our industry has yet to react. Our focus on value added products continues to provide us some insulation from the unusually poor market conditions while our industry rationalizes supply.” Tyson added.

“Unfortunately, while I am confident that conditions will improve, I see nothing that signals an immediate change in market conditions,” he said.

Food industry experts echoed that dismal outlook, adding that the revival of the red meat industry has exacerbated the problem.

“This is a case of too much supply, too much competition and a lot of demand growth coming from red meat side of the industry, which is stronger than we've seen in 20 years in beef,” David Nelson of Credit Suisse First Boston said.

Nelson said a lot of the meat demand is coming from the food service sector, “and some of it is a little better marketing by the industry... helping people know how to prepare the right cuts in the right way.

“But competition is secondary to the basic supply demand dynamics in the industry. Tyson had been providing some leadership on the supply management side and no one followed. They lost share, suffered margin contraction and are not going to let that happen anymore.

“So this confirms that the industry is going through a difficult period with no sign of relief,” he said.

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