Following reporting of better than expected earnings for the latest completed quarter, the CEO of Tyson Foods Inc Donnie King said on Monday that the pace of increase of prices by the company for its chicken and prepared foods products is unable to keep paced with the rising costs for raw materials such as grain.
Strong demand for its beef prompted the meat company to lift its 2021 revenue forecast with the recovery from the Covid-19 pandemic hit of demand and sale for its steaks and burgers from restaurants and hotels in the United States as pandemic induced restrictions eased and people started to dine out more.
There was also strong export demand for US beef.
However, future earnings of the company could be hit by the rising costs of raw materials and transportation.
In order to offset inflation, prices of its products for restaurant customers have been increased by the company while also planning to raise retail prices on September 5, King said on a conference call with analysts.
He added that the company is planning to make more price increases.
“Costs are hitting us faster than we can get pricing at this point,” King said.
Inflation has had a particular impact on branded and value-added products of the company as inflation rates reached 14 per cent during the quarter that ended July 3, he added.
“We’ve seen unprecedented and accelerating inflation, and we’re trying to catch up with that,” King told reporters.
During the last quarter, an increase of 39.3 per cent in its average price for pork was made by Tyson while it also raised prices for its beef and chicken products at an average rate of 11.6 per cent and 15.6 per cent respectively.
Sales volumes also increased, the company said.
For the quarter, the total sales revenue increased to $12.48 billion compared to $10.02 billion for the same quarter a year earlier. That was more than the estimates of analysts of sale revenues of $11.49 billion.
Tyson also reported an increase in the net income attributable to Tyson at $2.05 per share compared to $1.44 for the same period a year ago. Tyson earned $2.70 per share on an adjusted basis which easily beat estimates of $1.62, according to IBES data from Refinitiv.
The company also predicted its total sales of about $46 billion to $47 billion for fiscal 2021m, the Jimmy Dean hotdogs maker said, compared to an earlier forecast of the company of the figure remaining between $44 billion and $46 billion.
Having mandated complete Covid-19 vaccinations for its employees in the United States, the company said that it has found difficult to find workers because of the rising coronavirus cases.
“We were on a good trajectory and then the Delta variant showed up,” King said.
(Adapted from DailyAdvent.com)