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Shares in Hormel Foods drop after bird flu outbreak hits its flock

Published 04/20/2015, 06:52 PM
Updated 04/20/2015, 07:01 PM
© Reuters.  Hormel Foods said an avian flu outbreak in the Midwest has impacted its supply chain in Minnesota

© Reuters. Hormel Foods said an avian flu outbreak in the Midwest has impacted its supply chain in Minnesota

Investing.com -- Shares in Hormel Foods Corporation (NYSE:HRL) fell mildly in after-hours trading after the company admitted on Monday that a devastating avian flu outbreak in the Midwest over the last several weeks has impacted its Jennie-O Turkey division.

Since early-March, the spread of the H5N2 strain has led to the death of approximately 2.5 million turkeys in Minnesota and millions more throughout the Midwest. Also on Monday, the U.S. Department of Agriculture (USDA) said a flock of 5.3 million chickens in Iowa had been infected with a deadly strain of the flu, the largest flock to be affected yet by the virus. Traces of the flu have reportedly been spread as far east as parts of Southern Ontario.

“We are experiencing significant challenges in our turkey supply chain due to the recent HPAI outbreaks in Minnesota and Wisconsin,” Hormel Foods CEO Jeffrey M. Ettinger said in a statement. “While Jennie-O Turkey Store has delivered strong financial performance so far in the first half, tight meat supplies and operational challenges will pressure earnings in the back half of our fiscal year."

Ettinger said Hormel will keep its forward guidance at $2.50-$2.60 per share, with the assumption that warmer temperatures will contain the outbreak over the next several months.

During a visit to Minnesota last week, Dr. John Clifford, chief veterinarian of the USDA, said the number of avian flu cases should level off once the warmer weather expectedly kills off the virus. Clifford added, though, that there is a strong chance the virus could re-appear in the fall.

Shares in Hormel fell 0.51 or 0.90% to 55.88 in after-hours trading after closing Monday's session at 56.39, up 0.04 or 0.07%.

"We expect the financial impact of HPAI to be partially offset by favorable hog prices benefitting the Refrigerated Foods segment and portions of the Grocery Products segment," Ettinger added.

Shares in Tyson Foods (NYSE:TSN), meanwhile, fell 0.54 or 1.38% to 38.49 on Monday. The majority of Tyson Foods' locations are concentrated in the Midwest with nine locations in Iowa.

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