CHICAGO, March 14 (Reuters) – Tyson Foods Inc (TSN.N) will close two U.S. chicken plants employing nearly 1,700 workers on May 12, the company said on Tuesday.
The closures show that the largest U.S. meat company by revenue is still trying to figure out how to improve its chicken business, which has struggled for years.
Tyson will close a plant in Glen Allen, Virginia, employing 692 workers, and a plant in Van Buren, Arkansas, employing 969 workers, according to a statement.
Chicken demand will shift to other plants as part of a strategy to utilize the full capacity of each of its facilities, the company said.
“The current scale and inability to economically improve operations led to the difficult decision to close the facilities,” said Tyson.
Arkansas-based Tyson said last year it couldn’t fulfill all of its chicken orders due to limited supplies and labor, and planned to ramp up production. The company previously purchased chicken from other producers to meet demand.
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Tyson incorrectly predicted last year that demand for chicken would be strong in supermarkets in November and December, CEO Donnie King said during a quarterly call last month. In January, the company replaced the president of its poultry business.
Plant closures are difficult but justified because Tyson wants to improve performance, said Arun Sundaram, senior equity analyst at CFRA Research. He said he was not surprised by the decision and expects Tyson to make further restructuring.
“There has been a lot of pressure from investors on management to improve chicken margins,” said Sundaram.
Tyson shares were slightly lower in afternoon trading.
Total revenue fell short of analyst estimates for the quarter ended Dec. 31, when total operating margins fell from 11.3% a year earlier to 3.5%. The company said at the time that the current quarter would be weaker than at the end of 2022.
“They’re desperate,” said Magaly Licolli, executive director of Venceremos, an advocacy organization for poultry workers in Arkansas. “They’re trying to save money and lay off employees and get other employees to do more.”
Tyson had about 124,000 U.S. employees as of Oct. 1, including 118,000 workers at non-business locations such as meat plants, filings show. In October, the company announced it would be moving all of the company’s employees to its headquarters in Springdale, Arkansas.
The United Food and Commercial Workers Local 400 union, which represents workers at Tyson’s Virginia plant, denounced the decision to close the facility.
“These men and women have risked their lives and the safety of their families to keep this factory operational during the pandemic, and this is the credit they get?” said Mark Federici, president of the UFCW Local 400.
Tyson said employees who lose their jobs can apply for positions at other company facilities.
Reporting by Tom Polansek in Chicago. Additional reporting by Ananya Mariam Rajesh in Bengaluru Edited by Marguerita Choy
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