Tyson Foods is closing two poultry plants in the U.S. that employ nearly 1,700 workers

CHICAGO (Reuters) – Tyson Foods Inc ( TSN.N ) said it will close two U.S. chicken plants on May 12 that employ about 1,700 workers.

The closings show that America’s largest meat company by sales is still trying to figure out how to improve its struggling poultry business for years.

Tyson will close a plant in Glen Allen, which employs 692 people, and a plant in Van Buren, Arkansas, which employs 969, according to a statement.

The company said the demand for chicken will shift to other plants as part of a strategy to use full capacity at each of its facilities.

“The current scale and inability to economically develop operations led to the difficult decision to close the facility,” Tyson said.

Arkansas-based Tyson said it was unable to fill all of its chicken orders last year due to supply and labor constraints and plans to ramp up production. The company has already bought chickens from other producers to meet the demand.

Chief Executive Tony King said on a quarterly conference call last month that Tyson had wrongly predicted last year that demand for chicken in supermarkets would be strong in November and December. In January, the company replaced the head of the poultry business.

Arun Sundaram, chief equity analyst at CFRA Research, said plant closures are difficult, but Tyson is justified in seeking to improve efficiency. He said he was not surprised by the decision and that Tyson would implement further restructuring.

“There is a lot of pressure from investors on management to improve chicken margins,” Sundaram said.

Tyson shares were slightly lower in afternoon trade.

Total sales came in below analysts’ estimates for the quarter ended Dec. 31, when gross operating margins fell to 3.5% from 11.3% a year ago. The company said at the time that the current quarter would be weaker than the end of 2022.

“They’re desperate,” said Magali Liguly, director of Venceremos, which advocates for poultry farm workers in Arkansas. “They’re trying to save money, lay off workers, and make other workers do more.”

Tyson had about 124,000 U.S. employees as of Oct. 1, including 118,000 workers at non-corporate locations such as meat plants, regulatory filings show. In October, the company said it would relocate all of its employees to its headquarters in Springdale, Arkansas.

The Food and Commercial Workers Union Local 400, which represents workers at Tyson’s Virginia plant, criticized the decision to close the facility.

“These men and women risked their lives and the safety of their families to keep this factory running during the pandemic, and this is thanks to them?” UFCW Local 400 President Mark Federici said.

Dyson said workers who lost their jobs could apply for positions at other company facilities.

Tom Polancic reports in Chicago. Additional reporting by Ananya Mariam Rajesh in Bangalore; Editing by Margarita Choi

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