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Tyson Foods expects costs to hit profit as lifts revenue outlook

(Reuters) -Meat producer Tyson Foods warned that rising costs would start to hit profit on Monday as it raised its full-year revenue forecast on higher prices and improving demand from reopening U.S. restaurants and hotels.

FILE PHOTO: Tyson Foods brand frozen chicken wings are pictured in a grocery store freezer in the Manhattan borough of New York City, U.S. May 11, 2017. REUTERS/Carlo Allegri/File Photo

Higher raw material costs have led U.S. meat producers to raise prices, while demand recovers after an easing of pandemic-led restrictions on dining out.

Overall, Tyson said it expects fiscal 2021 revenue to reach $44 billion to $46 billion. Revenue had previously been forecast at the upper end of a $42 billion to $44 billion range.

Tyson Chief Executive Dean Banks warned, however, that rising costs will pressure profits later this year.

“We’re seeing substantial inflation across our supply chain, which will likely create margin pressure during the back half of the year,” he said.

Tyson said for the second quarter ended April 3, sales rose about 4% to $11.30 billion from a year earlier, exceeding forecasts from analysts, who were on average expecting $11.19 billion, IBES data from Refinitiv showed.

Higher prices helped Tyson’s chicken segment post 4.6% sales growth, while pork rose 16.7%, even as volumes dropped.

In beef, Tyson’s largest business, sales rose 1.7% from a year ago to $4 billion, as prices climbed 7.5% and volumes fell 5.8%. Tyson said it now expects its beef division to post improved fiscal 2021 results compared to last year.

“Commodity beef drove the beat,” Credit Suisse said.

Net income attributable to Tyson increased to $476 million, or $1.30 per share, from $376 million, or $1.03 per share, a year earlier. Excluding items, Tyson earned $1.34 per share, compared with estimates of $1.12.

Shares in Tyson, which are up 22% this year, were around 3% lower following the results.

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