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Tyson Foods shares fall, after plant fires send profits lower

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Shares in Tyson Foods tumbled after the group revealed a setback to earnings from two plant fires, and said that it had been asked for information by Florida's attorney general undertaking a probe into anticompetitive conduct.

Tyson Foods shares stood 6.7% lower at a five-month low of $59.10 in early deals in New York.

The fall followed the group's release of results for the three months to April 1 showing a 21% drop to $340m in earnings, reflecting a weaker contribution from the chicken segment.

Group revenues eased 0.9% to $9.08bn.

Furthermore, Tyson said that Florida's attorney general had requested information related primarily to Georgia Dock, the discredited chicken pricing regime formerly run by Georgia's agriculture department.

The group in February said that it had received a subpoena from the Securities and Exchange Commission which the company believed was related to price fixing allegations.

Plant fires

Tyson Foods said that in the latest quarter, its margins in chicken tumbled to 8.3% from 12.7% a year before, reflecting in part higher feed and marketing costs, but also a hit to sales volumes from fires at plants in Mississippi and Indiana.

"Unfortunately, we experienced fires in two chicken plants in our second quarter," said Tom Hayes, the Tyson Foods chief executive.

"Had it not been for the fires, our chicken segment return on sales would have been within its normalised range."

Tyson Foods said that its normalised range in operating margin for chicken was 9-11%, a level to which the group said it was poised to run over the full financial year.

Group-wide, "we're half way to another strong year of financial performance at Tyson, and we reiterate our adjusted earnings guidance", Mr Hayes said.

Beef profits soar

Tyson Foods said that it was helped in the latest quarter - when its underlying earnings per share came in at $1.01, only 1 cent behind Wall Street expectations – by "tremendous operating income" in its beef and pork divisions.

In pork, sales rose by 9.4% to $1.30bn, boosted by a 10.9% surge in prices, thanks to bumper exports.

"Average sales price increased as domestic availability of products decreased due to strong exports," the group said.

Beef profits near-tripled to $126m, as "stronger domestic demand for our beef products and increased exports" helped margins soar to 3.6%, from 1.3%.

For the current financial year as a whole, the group stuck by forecasts of its margins for beef coming in at about 5%, and for pork at about 12%, above the 10.8% achieved in the latest quarter.

It also repeated its forecast for $4.90-5.05 in earnings per share for the 12 months to the start of October.

By Mike Verdin

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