Tyson's sales tumble amid meat safety fears
chicken has impacted sales, as international BSE, arsenic and avian
flu scares dent consumer confidence.
America's largest meat producer has reduced its yearly profit forecast, indicating weaker than expected operating performance and sluggish earnings.
"While we expected tough and uncertain conditions...it has been far more difficult than we previously projected," CEO John Tyson said Wednesday in a statement.
"Protein supplies have remained more burdensome than anticipated and will continue to put pressure on product price recovery.
"We still expect an improved performance in the last half of fiscal 2006; however it will not be of the magnitude originally projected."
Many analysts are now forecasting year-end losses for the firm struggling to maintain margins as domestic oversupply of meat, export restrictions and lowered consumer confidence create difficult market conditions.
With sales of over $26bn (€21bn), Tyson is the world's largest protein processor with operations in beef, chicken and pork, as well as branded packaged foods.
But while US beef exports to Japan and South Korea remain restricted due to fears of BSE contamination, and domestic consumers are shying away from chicken following bird flu media hype, the outlook remains bleak for the food processor.
Moody's ratings firm has put the company in review for a possible downgrade, concerned that the company's "weak operating performance will impact its debt protection measures and financial flexibility".
The review will also assess whether the manufacturer will "require additional financial covenant relief from its bank group [which could] impact on the company's liquidity," and "the likelihood that Tyson will be able to restore its debt protection measures and overall financial profile to levels appropriate for its current rating."
And Fitch Ratings has branded Tyson's outlook as negative, predicting a net loss in earnings for the company in 2006.
Fitch claims the manufacturer is experiencing severe margin compression in its largest division, chicken, and the current "glut in the protein market" will slow down any possible recovery.
A study earlier this month by the Institute for Agriculture and Trade Policy (IATP) revealed that arsenic has been found in chicken meat on sale in US supermarkets - further impacting Tyson's fortunes.
At least 70 per cent of American broiler chickens have been fed arsenic, according to their estimates.
And though plenty of the raw chicken tested had either none or nearly no detectable arsenic, including most chicken tested from the world's largest producer Tyson, sales have been impacted as consumers lose faith in modern meat-rearing practices.
