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Feed Costs Take Bite Out of Tyson Foods' 3Q Profit

Tyson Foods (TSN) revealed a narrowed third-quarter profit on higher input prices for its chicken segment, and warned the unit would likely hit a loss for the current quarter.

Tyson chief executive Donnie Smith said the company's outlook remains positive despite a still- challenging road ahead, however he warned that weak market pricing conditions will likely continue for its chicken segment due to an imbalance between supply and demand. 

The company expects to see a meaningful impact of the reduced supply in its results later in the current quarter and warned the segment will likely experience a loss.

The Springdale, Ariz.-based maker of various packaged meat and prepared food products posted net income of $196 million, or 51 cents a share, compared with $248 million, or 65 cents a share, in the same quarter last year. The Street was predicting a profit of 40 cents a share.

Revenue for the three-month period was $8.25 billion, up 10.9% from $7.44 billion a year ago, virtually matching average analyst estimates polled by Thomson Reuters $8.28 billion.

We are pleased that our overall performance in the fiscal third quarter was about what we expected it to be, Tyson CEO Donnie Smith said in a statement. The Pork segment's returns were above the new normalized range; the Beef segment was near the upper end of its range; and our Prepared Foods segment was just under its range.

Despite experiencing extremely volatile input costs, the company said it continues to feel good about its performance in the chicken segment.

The fact that we remained profitable in such a difficult environment demonstrates how much our chicken business has improved in the past three years, Smith said.

Increased demand for its pork products was partially offset by a decrease for its beef products and prepared foods. Prices across all of its segments increased, particularly of beef and pork, which both grew just over 16%.

For the full-year, Tyson predicts sales will exceed $32 billion with the help of price increases brought on with rising raw material costs.

Follow Jennifer Booton on Twitter at @Jbooton