Chicken seller’s wings clipped after profit fall
Australia’s biggest chicken supplier cut its full-year forecast by millions of dollars after rising costs hurt interim earnings and its shares fell more than 16 per cent.
First-half net profit at Inghams Group, which raises, processes and sells chicken and turkey products, fell almost 65 per cent to $18.1 million; This is at the lower end of analysts’ expectations.
Revenue from its Australia and New Zealand operations for the six months ending Dec. 23 was flat at $1.6 billion, while underlying earnings fell 33.8 percent to $139.2 million, though better than expected.
Inghams chief executive Ed Alexander said the first half result was disappointing and reflected the cost of managing excess inventory and supply chain transition, particularly of processed chicken and turkey.
The poultry supplier also faced cost fluctuations in its Australian operations; for half the group, costs rose five percent to $69.7 million.
Cost inflation was seen in labor, materials and cooking oil, utilities and packaging.
Inghams also continued to move poultry farmers to performance-based contracts, a process that has been ongoing for 18 months, resulting in operating costs of $29.5 million.
“I want to emphasize that the fundamentals of our business are strengthening,” Mr. Alexander told analysts on the earnings call.
“Improved stock location has enabled a return to normal production settings, which supports improvement in unit costs.
“We have clear actions to reduce supply chain costs and this translates into a materially stronger second half performance than the first half.”
Inghams sells a large number of products to supermarket giant Woolworths and had lower volumes in the second half, although this was offset by gains from other retailers.
In total, approximately 233 kilo tonnes of chicken and turkey were transferred in the first half; core net sales price increased 1.4 percent to $6.43 per kilo; this was the best in at least four years.
But the core price for quick service or fast food restaurants fell 1.2 per cent following a new supply deal with Nandos and after accounting for the lower price per kilo from McDonalds, which offers McWings meals.
Inghams lowered its full-year underlying earnings forecast range to between $180 million and $200 million, from $215 million previously to $230 million.
However, Mr Alexander said the guidance change was due to the timing of the flow of benefits from the business changes and that he expected to see earnings momentum improve in 2026/27.
Its stock fell more than 16 percent in morning trading, then fell 14 percent to $2.10.
Inghams will pay an interim dividend of four cents.
