Tyson Foods Inc. of Springdale (NYSE: TSN) on Monday reported falling first-quarter profit for fiscal 2023 on lower meat prices.
Net income in the quarter was $316 million, down more than 71% from $1.1 billion a year ago.
The income came on revenue of $13.3 billion, up from $12.9 billion a year ago. Earnings per share came to 88 cents, down from $3.07.
The results missed Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of $1.35 per share.
“We faced some challenges in the first quarter,” CEO Donnie King said. “Market dynamics and some operational inefficiencies impacted our profitability. We expect to improve our performance through the back half of fiscal 2023 and into the future, as we strive to execute with excellence and work to become best in class in our industry.”
Prices for Tyson beef products fell an average of 8.5% in the quarter. Revenue in the segment fell to $4.7 billion from $5 billion a year ago, while operating income dropped to $166 million from $956 million.
The company's chicken segment also saw a sharp drop in operating income, falling to $69 million from $140 million. Revenue was $4.3 billion, up from $3.9 billion with prices 7.1% higher than a year ago.
King said the company got “hit in the mouth” because of all the protein available on the market. In January, King replaced David Bray as president of the poultry division with Wes Morris, a longtime Tyson Foods executive before he retired in 2017.
King said the company expected higher demand for chicken in November and December but a “softer” market led to an oversupply of retail fresh chicken. That forced the company to sell its excess product but at prices lower than it needed.
“So as we go back and look at what happened in Q1 and think about the future, in Q1 strategically, the only thing that went awry was the fact that the demand didn’t materialize in the place at retail in which we thought it would; and so that triggered a number of other inefficient moves and activities,” King said. “I’d like to have seen those decisions faster and perhaps some better quality of decisions and there were things in Q1 as it relates to chicken that we could have done better. And I made the change.”
Two segments saw an operating income loss. In Tyson's pork segment, sales volume declined 7.4%, bringing revenue down by $100 million to $1.5 billion. Operating income was a negative $21 million, down from a positive $164 million. The international segment saw revenue rise 11.3% to $612 million, but posted an operating income loss of $5 million, down from a positive $9 million.
The prepared foods segment was the lone bright spot. It had revenue of $2.5 billion, up from $2.3 billion with prices 7.1% higher than a year ago. Operating income was $258 million, up from $186 million.
“I would just simply tell you that Q1 was a very challenging quarter for us,” King said. “While we have opportunities to perform better and you would never hear me say anything other than that. This is the first time I’ve seen all markets work against us all at the same time. It’s the first time I remember market impacts being greater than those controllables that we have and the opportunity for improvement of them.
“As we think about moving forward, efficiency in our operations and our company will be a focal point for us. There are some places where we need to make decisions faster and, in some cases, better decisions. In some cases, we will need to adjust our business model. And in other cases, the accuracy of our projections has to be better than what we’ve demonstrated here in Q1.
“I’d remind you and everyone else that we’re not bigger than the market. And in Q1 and over time, markets will do their job, and we simply have to do ours.”
Tyson said a productivity plan launched last year helped save the company $700 million in the fiscal year, which partially offset the impacts of inflationary market conditions. The company expects to reach its goal of $1 billion in savings under the program in fiscal 2023, a year ahead of schedule.
Tyson expects revenue of $55 billion to $57 billion in fiscal 2023. The company is planning $2.5 billion capital expenditures, which include spending for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovation.
Shares of the company were down about 4% Monday morning.
The Associated Press contributed information to this report.