SPRINGDALE, Ark. – Due to market challenges in the meat and poultry processing industry, Tyson Foods Inc. issued revised guidance for its 2018 fiscal year on July 30. Citing the negative impact of recent tariffs on chicken and pork exports; a domestic protein supply glut pushing prices lower; headwinds in demand for chicken domestically from competing proteins; imbalance in supply and demand of pork pressuring margins; and lower-than-expected benefit from tax reforms earlier this year, Tyson lowered its guidance, expecting adjusted earnings per share (EPS) to $5.70-$6.00. Adjusted EPS previously were expected at $6.55-$6.70.
“The combination of changing global trade policies here and abroad, and the uncertainty of any resolution, have created a challenging market environment of increased volatility, lower prices and oversupply of protein,” said Tom Hayes, president and CEO. “We will continue to watch these conditions carefully.”
One week ahead of the company releasing its fiscal Q3 results, Hayes said the company is optimistic looking forward thanks in part to its diverse business structure and because it identified some of the current challenges early in the year, including higher logistics and input costs, earlier this year and proactively responded. That said, Hayes admits the market conditions are resulting in the company’s fiscal fourth quarter getting off to a slower-than-expected start.
Labor shortages, volatile trade markets and supply issues have been topics on the radars of analysts throughout 2018, including protein market experts at Rabobank.
“Through pricing and aggressive cost management, we’re working to stabilize the impact of freight and feed ingredient costs; however, we still face pressure on chicken sales volume and pricing due to the abundance of relatively low-priced beef and pork on the market. We are working to mitigate these pressures, but our fourth quarter is off to a slower-than-expected start driven primarily by market related factors.
“We expect the supply-demand imbalance to equilibrate, and we remain confident in our ability to grow our company and create long-term shareholder value,” Hayes said. “Our management team has a strong grasp of both the short- and long-term challenges and is actively driving the business to overcome them.”