Tyson Foods Inc.(NYSE:TSN) posted lower earnings for the third quarter due to a loss of $167 million on early extinguishment of debt and the meat processor warned of lower 2012 profit amid softer-than-expected domestic demand for protein. Shares fell 2.60 percent in premarket trading on Monday.
The Springdale, Arkansas-based company said its beef and pork segments have been operating in very difficult market conditions and that 2012 earnings will come lower than it had forecast.
Earnings attributable to Tyson were $76 million or $0.21 per share for the third quarter, sharply down from $196 million or $0.51 per share in the year-ago quarter. Third-quarter results included 29 cents a share related to the early extinguishment of debt.
Sales inched 0.7 percent higher to $8.31 billion.
Wall Street analysts, on average, expected earnings of 54 cents per share on sales of $8.72 billion.
Gross margins improved to 6.8 percent from 6.4 percent.
Tyson Foods, led by CEO Donnie Smith, is one of the world's largest processors and marketers of chicken, beef and pork. The company produces a wide variety of protein-based and prepared food products and is the recognized market leader in the retail and food service markets.
"Grain costs have been increasing significantly and rapidly, largely as a result of the on-going U.S. drought," Donnie Smith commented on third-quarter results. While we ultimately expect to pass along rising input costs, these costs, coupled with continued soft demand, are likely to pressure earnings in 2013.
Tyson Foods has been hit by decreased domestic demand for chicken and beef coupled with higher feed ingredient costs.
Sales volumes at beef and chicken segments declined 13.9 percent and 4.1 percent respectively, for the third quarter.
In the preceding second quarter, Tyson Foods' earnings per share increased to 44 cents from 42 cents. Sales rose 3.4 percent to $8.3 billion.
Looking ahead for the full year 2012, Tyson currently forecasts sales to approximate $33 billion, down from prior view of $34 billion citing weak domestic protein demand.
For 2013, Tyson expects overall domestic protein production (chicken, beef, pork and turkey) to decrease slightly from fiscal 2012 levels.
One of the company's key competitors is Hormel Foods (NYSE:HRL), which will report its quarterly earnings on August 23. Wall Street expects Hormel Foods to earn 41 cents a share on revenue of $2.01 billion for the third quarter.
TSN shares closed Friday's regular trading at $15.40. The stock has been trading in the 52-week range between $14.62 and $21.06.