By Geoffrey Smith
Investing.com -- Tyson Foods' (NYSE:TSN) profit slumped by two-thirds in the three months through December, as the U.S.'s largest meat processor struggled with cost squeezes and "operational inefficiencies".
Tyson said underlying earnings per share fell 70% from a year earlier to 85c, as a 12% rise in operating costs took a huge bite out of its margins. Profitability fell across all three of its main product categories - beef, chicken and pork, with the last of the three swinging to an operating loss in the period, the first quarter of its fiscal year.
Tyson Foods stock fell 5.1% in premarket trading in response to the news, putting it on course for a new low for the year. The stock has lost nearly a third of its value in the last year as inflation and the end of pandemic-era government income subsidies have weakened its outlook.
“We faced some challenges in the first quarter," Tyson Foods President and CEO Donnie King said in a statement. "Market dynamics and some operational inefficiencies impacted our profitability."
He added that the company expects performance to improve in the second half of fiscal 2023, but said its operating margin for beef and chicken will only be around 3% this year, while its margin on pork will only be around 1%.
First-quarter revenue also fell short at $13.26 billion, as consumers felt the pinch of high inflation, shying away from premium meat cuts. The group's own price increases had driven revenue 13% higher in fiscal 2022 and Tyson said it expects full-year revenue this year in a range around $56B, implying another 5% growth.
The group is spending heavily on automation and other improvements to its facilities to help it alleviate labor issues. among other things. It projects capital expenditure of around $2.5 billion in fiscal 2023. As a result, it expects to meet its 2024 target of $1B in operating cost savings a year ahead of schedule.