Tyson Foods beats second-quarter profit estimates, eyes boost from fatal hog virus
Tyson Foods Inc projected on Monday that it could reap significant financial gains from an incurable hog disease spreading across Asia, after reporting quarterly profits above analysts` estimates.
Tyson, which sells pork, beef and chicken, said all the proteins could benefit as African swine fever kills hogs and reduces global pork supplies.
The disease, which is fatal to pigs but harmless to humans, has been detected in China, Vietnam, Cambodia and parts of Europe.
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With African swine fever in China, the world’s top hog producer, about 5 percent of the global protein supply has disappeared, Tyson Chief Executive Noel White said. China is expected to import more protein to make up for herd losses, which White estimated at 150 million to 200 million pigs.
The deaths could help Tyson by pushing up pork prices and prompting consumers to buy more chicken and beef as alternatives, White said.
"African swine fever has the potential to impact the global protein industry on a level that we have never experienced," he said.
Tyson shares were up 2.7 percent at $77.08 in afternoon trading and reached their highest price since February 2018.
Tyson could start benefiting from the disease outbreaks late this fiscal year, White said. So far, though, U.S. hog prices have climbed faster than those for pork on expectations for increased Chinese demand, hurting processors` margins.
White said there was a distinct possibility African swine fever could enter the United States, which would threaten trade and herds.
African swine fever COULD ALSO HURT Tyson by raising input costs for pork the company uses in prepared food products.
Tyson tempered an annual outlook for its prepared foods unit to a range of 10 percent to 12 percent return on sales. The company was previously expecting closer to 12 percent, White said.
Tyson plans to raise prices for prepared foods over the next six months to compensate for more expensive raw materials, White said. He said higher meat costs will reduce demand among some consumers.
"We do not yet understand how pork and prepared food margins will be anything but impaired under the weight of higher hog costs," J.P. Morgan analyst Ken Goldman said.
Profits in the quarter ended March 30 benefited from higher sales in Tyson`s beef and prepared foods segments.
Excluding certain items, Tyson earned $1.20 per share, beating the average analyst estimate of $1.14 per share. Quarterly sales were $10.44 billion, above expectations for $10.29 billion.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)