Tyson Foods, the largest meat processor in the United States, reportedly fell short of the expected quarterly revenue because of the high costs of cattle. The company said that if there is no improvement in the beef market, it will not meet the projected earnings for the entire year.
In addition, Tyson was already forced to cut prices to clear the inventory during the third quarter following shipment issues, wherein their customers overseas refused to accept delayed shipments from West Coast port, Reuters reported. Because of this, the company suffered its most sluggish sales growth in nine quarters.
The conditions have not improved and they have been affecting the current quarter. Tyson Foods' shares fell nearly 11 percent. The company's total sales increased by four percent to $10.07 billion, but it fell short of the expected revenue by the analyst of $10.2 billion, according to Forbes.
"Our beef business suffered from export market disruptions that had an $84 million impact on third quarter results, and we continue to see very high cattle costs at a time when product values and export issues are making it difficult to realize expected revenue levels in this spread business," Donnie Smith, president and CEO of Tyson, stated, Monday.
The chicken and prepared food segments of the company performed well during this quarter, but Smith said if the cattle costs remain as it is, Tyson's earnings will suffer.
Tyson, based in Sprindale, Arkansas, already cut its full-year adjusted profit forecast from $3.30-$3.40 down to $3.10-$3.20 per share, as per Boomber's report.
Tyson warned investors that there may be some intervals of imbalance between the cattle supply and demand. There is already a drop of eight percent in cattle supply as it faced competition from other kinds of protein source meat such as chicken.
The CEO said that the supplies of U.S. beef will remain tight in the second half of 2016. Tyson Foods stock is currently down at 9.6 percent.
