Home Impact producer Tyson struggles to regain chicken profits as new competitor emerges

Tyson struggles to regain chicken profits as new competitor emerges

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(Bloomberg) – Tyson Foods Inc., America’s largest poultry producer, is fighting to get its chicken unit back on track as a formidable new competitor emerges.

America’s third and sixth largest chicken companies, Sanderson Farms Inc. and Wayne Farms Inc., are teaming up in a $ 4.53 billion deal, according to a statement released Monday by buyers Cargill Inc. and Continental Grain Co The deal comes as Tyson’s chicken unit posted a third-quarter loss amid a slew of headaches including high feed prices, production challenges and millions in fees. lawsuits resulting from price fixing proceedings.

A bigger and better version of Sanderson Farms isn’t good news for Tyson. The company is “arguably the best chicken producer in the country, and possibly the world,” analysts from JPMorgan Chase & Co., including Ken Goldman, said in a note. Yields over the years have been better than Tyson’s and its market share has grown accordingly.

“Chicken is our top priority for me and for our business,” Tyson chief executive Donnie King told analysts on a phone call to discuss financial results on Monday. “We continue to focus on the laser and make progress in restoring the competitiveness of our chicken segment. “

Executives at Tyson Foods declined to comment on competitors, saying they are focused on improving their own business.

The merger with Wayne Farms is also striking given the recent attention to antitrust laws in the meat industry. The industry is increasingly concentrated, and meat companies have argued that only scale can provide the world with affordable meat amid growing demand. Yet U.S. lawmakers have started to scrutinize the industry more than usual and question whether the protein companies are too big or too few. In particular, the US Department of Justice has accused several former chicken company executives of setting prices.

Despite its chicken woes, surging demand for beef from reopening restaurants in the United States has helped the company exceed sales and profit estimates. Tyson reported adjusted third-quarter earnings per share of $ 2.70, up from an average estimate of $ 1.63, while sales were $ 12.48 billion versus estimates of $ 11.49 billion. dollars.

High prices for feed, freight and packaging also mean Tyson is squeezed by inflation, which he estimates at 14% in the quarter. Part of this will be offset by price increases expected next month.

“The costs are hitting us faster than we can get the prices at this point,” King said.

Shares of the meat giant hit 6% to $ 75.39, while Sanderson Farms hit a record high of $ 195.97.

Other highlights of Tyson’s revenue include:

The company’s operating profit declined due to higher legal fees, weather and Covid-19 related disruptions, and hatch rate issues in the chicken unit. permanent over time.

(Updates throughout, including CEO commentary in fourth paragraph.)

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