(Reuters) — Tyson Foods Inc. on Monday reported weaker-than-expected quarterly profit on higher expenses and said it expects pork supplies to be down as much as four percent this year due to a deadly piglet virus.
Shares of the largest U.S. meat processor plunged 7.4 percent in early morning trading to $39.48.
The porcine epidemic diarrhea virus reduced hog supplies in Tyson’s latest quarter, but that was partially offset by heavier animal weights, Tyson Chief Executive Donnie Smith said on a conference call with analysts.
Tyson expects PED to peak in August and to begin to ease in October, Smith said.
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Beef sales volumes slipped 1.8 percent in the second quarter, hurt by a fall in live cattle processed as a result of reduced export sales.
Beef prices have been spiking on rising feed costs and the decline of the U.S. domestic cattle herd, now the smallest since 1951.
International sales were hurt by poor export market conditions in Brazil, supply imbalances related with weak demand in China and an unfavourable pricing environment in Mexico.
Continued weakness in China, where Tyson is making significant investments to build poultry operations, accounted for most of the $30 million loss in the company’s international business.
“We think the worst is over and it should get sequentially better from here, but we’ll need to see demand recovery before we can predict when we’ll reach profitability in China,” Smith said.
The company also warned that overall domestic protein production for the year ending September would decrease about one percent, mostly due to lower hog supplies.
Tyson said it expect to see a reduction of industry-fed cattle supplies for beef of three to four percent in fiscal 2014.
The company said it expected sales of about $37 billion for fiscal 2014, above the average analyst estimates of $35.94 billion, according to Thomson Reuters I/B/E/S.
Springdale, Arkansas-based Tyson also reaffirmed that grain supplies would increase in 2014, bringing feed costs down.
U.S. shoppers and restaurant owners are switching from beef to chicken to save money.
That demand helped Tyson’s chicken sales rise about four percent to $2.84 billion in the latest quarter.
Pork sales rose about 13 percent to $1.49 billion, helped by higher prices.
Net income attributable to Tyson rose to $213 million, or 60 cents per share, in the quarter ended March 29 from $95 million, or 26 cents per share, a year earlier.
Revenue rose almost eight percent to $9.03 billion.
Analysts on average had expected the company to earn 63 cents per share on revenue of $8.84 billion, according to Thomson Reuters I/B/E/S.
At the close of trading on Friday, Tyson’s shares had posted a 52-week gain of more than 70 percent.
