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UPDATE 3-Tyson Foods shares drop as quarterly sales miss estimates

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Tom Polansek and Praveen Paramasivam
·2 min read
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(New throughout, adds quotes from executives)

By Tom Polansek and Praveen Paramasivam

Feb 11 (Reuters) - Tyson Foods Inc reportedlower-than-expected first-quarter sales on Thursday amid weakmeat demand at restaurants during the pandemic, sending sharesdown as much as 7.5%.

The biggest U.S. meat company by sales expects demand willimprove as COVID-19 vaccinations prompt people to eat out moreoften. So far, though, increased meat sales at grocery storeshave not been enough to offset the decline at food-servicebusinesses.

Shares were last down about 5.6% at $65.40.

Tyson's total quarterly sales volumes dropped 4.4% from ayear earlier, including a 7% decline in chicken, according tothe company. It faces additional challenges from surging costsfor corn and soy, which are used for animal feed, and from ashortage of truck drivers, executives said.

U.S. corn futures this week reached their highestprice since June 2013 as strong export demand is expected todrain U.S. stockpiles to the smallest in seven years.

"The change in pricing in grains has been nothing less thanenormous, and that is going to weigh on the business," ChiefFinancial Officer Stewart Glendinning told analysts on a call.

Higher chicken and pork prices helped offset declines insales volumes, according to Tyson. Overall sales fell about 3%to $10.46 billion in the quarter, missing a Refinitiv IBESestimate of $10.84 billion.

Net income attributable to Tyson fell nearly 8% to $467million, or $1.28 per share, in the three months ended Jan. 2.Excluding items, it earned $1.94 per share, handily beatingexpectations of $1.49.

Tyson, the maker of Ball Park hotdogs and Jimmy Deansausages, raised by about 33% its estimate for fiscal 2021pandemic-related costs, such as COVID-19 testing and protectiveequipment for employees, to $440 million.

Its chicken plants are still struggling with labor,Glendinning said, after COVID-19 outbreaks temporarily shut someU.S. slaughterhouses last spring.

"Higher levels of absenteeism and turnover have createdinefficiency in our operations," Glendinning said. "They leaveus short of team members to fully staff our plants and alsodrive higher levels of overtime pay."(Reporting by Praveen Paramasivam in Bengaluru and Tom Polansekin Chicago; Editing by Saumyadeb Chakrabarty and MargueritaChoy)