SPRINGDALE, ARK. — Former professional boxing champion Mike Tyson once said, "Everyone has a plan 'till they get punched in the mouth." This sounds a lot like what happened to Tyson Foods Inc. in the first quarter of fiscal 2023.

"We think we have a good plan," King said during a Feb. 6 earnings call. "Yes, we got hit in the mouth in Q1 because of all the protein on the market in Q1. And our tray pack, our fresh chicken business didn't materialize as we had expected. And so, we created our own issue with that because of what happened in the market."

He said the company's overall results were impacted by a confluence of factors, including consumer and customer demand dynamics and the curve of the beef cycle, among other factors, including unpredictable market swings across all businesses, saying, "...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."

For the first quarter ended Dec. 31, 2022, net income attributable to Tyson Foods was $316 million, or 88¢ per diluted share, down 72% from $1.12 billion, or $3.07 per diluted share, reported in the first quarter of 2022. GAAP operating income was $467 million, down 68% from the prior year.

Revenues for the quarter were $13.26 million up 2.5% or $12.93 billion recorded in the prior year.

"Compared to record performance in the prior year, first-quarter earnings decline was driven by weaker results in chicken, pork and beef, which more than offset strong performance in Prepared Foods," King said.

Tyson Foods reported an adjusted operating income of $453 million, down 68% from a year ago. Adjusted earnings per share was 85¢, down 70% from 2022.

On a segment basis, sales in Tyson's Chicken business were at a record first-quarter high at $4.3 billion, up 9.6% from the prior year. The company attributed the sales increase to a 2.5% increase in volume and a 7.1% gain in pricing compared to the last year's quarter. Volume gains were due to a combination of strategic choices to maximize capacity utilization and pursue an optimal mix strategy with products and customers, said John R. Tyson, chief financial officer.

"Our pricing results, while improved, were lower than expected," he said. "We pegged this to a combination of factors that influence chicken prices, mostly related to total protein availability, notably chicken and beef. We anticipate these factors easing in the back half of 2023 as beef availability lessens and total poultry harvest normalizes, providing support for improvement in our chicken prices.

"The fall in commodity chicken prices driven by heightened protein supply in the market and seasonal demand weakness does not change our strategy," Tyson continued. "Based on current USDA industry placement data, we are optimistic on our forward-looking supply conditions in the intermediate term."

Operating income in the quarter was negatively impacted by $225 million of higher feed ingredient costs and an unfavorable year-over-year derivative impact of approximately $40 million. The Chicken segment delivered operating income of $77 million in the first quarter.

"For chicken, when compared to expectations from last quarter, a few different things didn't go as planned," King said. "Most notably, demand didn't appear in the parts of the market where we had expected. As a result, we had to move things around and we experienced higher cost, a lower price environment and knock-on effects from a network standpoint."

Tyson Foods' Beef business reported sales remained strong at more than $4.7 billion but were down 5.6% compared to record-high sales in the prior year. Volume gains of 2.9% were supported by improved staffing for higher throughput, while the average sales price declined 8.5% due to softer domestic demand for beef. Additionally, live cattle costs increased approximately $530 million in the quarter as cattle supplies continue to tighten.

Segment operating income for Beef was $129 million for an operating margin of 2.7% off the previous year's historical record first quarter margin of 19%.

"We saw higher cattle prices as beef herd numbers continue to decline," Tyson said.

"We will continue to monitor the beef cutout value and balance our supply with customer demand during a period of margin compression while pushing volume growth in case-ready and premium branded products," he added. "Although the near-term operating environment remains challenging, we have reasons to believe in our long-term outlook for beef. This outlook is supported by our investment in strategic supplier relationships that provide higher quality beef, a growing global demand, specifically in Asia, and the strengthening drop credit as well as opportunities to shift our beef products up the value pyramid."

In the Pork segment, sales were approximately $1.5 billion for the quarter, down 6% from the record high in 2022. Average sales price gains of 1.4% were mostly driven by higher-value specialty products but were offset by volume decreases of 7.4%. Segment operating income was lower than expected at a loss of $19 million for the quarter, down from a profit of $160 million in the prior year.

"International demand for US pork products continues to be impacted by the strong US dollar, while domestic demand is being affected by high retail prices despite the cutout realigning to historical norms," John Tyson said. "However, we are optimistic that when these factors normalize, demand will improve. We expect to see continued industry supply challenges in the fiscal year as the producer navigates herd health issues and higher input costs."

Tyson Foods incurred greater cost as lean hog costs increased by approximately $55 million compared to the prior year. The company also experienced an unfavorable year-over-year derivative impact of $35 million.

Finally, Tyson Foods' Prepared Foods business had a solid first quarter with growth in both revenue and volume driven by strong brands, increased customer support and pricing aimed at recovering the continued inflation, according to the company.

Revenue was approximately $2.5 billion for a record first quarter, up 8.8% compared to the prior year. Segment operating income was $266 million for the quarter. The operating margin of 10.5% was up from 8% in the prior year.

"We are very pleased with the performance of this quarter in Prepared Foods, as this segment is critical to drive profitable growth for Tyson by valuing of Beef, Pork and Chicken commodity meat products," John Tyson said.

King said efficiency in Tyson Foods' operations and throughout the company will be a focal point going forward. He said there are some areas where decisions must be made faster and, in some cases, better decisions must be made.

"In some cases, we will need to adjust our business model," he added. "And in other cases, the accuracy of our projections has to be better than what we've demonstrated here in Q1."