Tyson Foods slowed chicken processing after recalls

The move was a major contributor to the company’s lower earnings expectations for 2019

Tyson Foods slowed chicken processing this year after it recalled millions of pounds of poultry over concerns they contained materials like rubber and metal, raising its costs, chief executive Noel White said.

The higher costs contributed to a US$220-million cut to the company’s expected adjusted earnings for 2019, White said at an investor conference. Almost half of the cut was linked to Tyson’s poultry business, he said, providing new details on the adjustment.

Tyson is also grappling with volatility in prices for grain used to feed chickens and a fire that shut a large beef plant in Holcomb, Kansas.

“It was extremely unusual to have that number of events within one quarter,” White said.

The slowdown in chicken production shows the financial pain that can stem from recalls of products suspected of being contaminated with foreign objects.

Tyson recalled nearly 12 million pounds of frozen, ready-to-eat chicken strips in May and 40,000 pounds of chicken patties in August.

The company wanted to ensure its products are safe and has implemented “corrective measures” to get its chicken plants back at full production, White said.

“That came at a pretty significant cost,” he said at the conference, without providing details.

About 30 per cent of the cut in Tyson’s earnings forecast was related to a drop in corn prices, which worked against positions Tyson held in grain markets, White said.

Tyson recorded a US$40-million gain in its chicken unit in the third quarter that ended on June 29 as corn futures rose, benefiting its position in grain markets. The company said last month that profit would likely be reversed in the fourth quarter as corn prices have declined.

Grain prices remain volatile and swings could affect Tyson’s earnings per share, White said.

About the author

Reuters

Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

Comments

explore

Stories from our other publications