- Inghams Group have had no problem keeping its chicken products on dinner tables this just-passed financial year, in fact the company continues to outdo itself
- Australians and New Zealanders sitting down to eat have increased demands for the company’s chicken by 4.3 per cent, but Inghams might have trouble keeping up with these numbers
- Despite all around growth in this financial year’s performance, the company says the 2020 financial year could be a problem because the chickens are costing too much to feed
- This morning the company made it clear to shareholders to brace for choppy waters ahead, as costs to feed the feathery produce reaches historical highs
After releasing its 2019 financial year results, share prices in Inghams Group have taken a heavy blow this morning in the ASX.
The chicken dinner provider dropped 19.8 per cent, opening at $3.49 per share before dropping to $3.24 apiece.
Across the board, the company reports strong growth in underlying profits, net profits and produce output.
“The results are solid despite growing costs pressures and New Zealand headwinds, as we continue to see strong demand for Ingham’s quality products across all channels,” CEO Jim Leighton said.
“Poultry is a dynamic business that requires deep expertise and experience to unlock potential.”
So what’s the catch? Why has the company’s share price taken a hit despite a solid financial earning period?
Inghams management actually warned for shareholders to brace against a tough period ahead — the 2020 financial year.
The company states poultry demands for Aussie and New Zealand meals continue to grow, by 4.3 per cent, but the rising cost to feed chickens on Inghams’ end will bear issues.
Feed costs for the chicken coops remain close to historic highs for the company and could rock the second half of the 2020 financial year’s earnings.
Australian margins for profit are already being negatively impacted according to the company.
This foreboding information has pulled the rug out from underneath shareholders after this morning’s numbers looked so attractive.
Earnings before taxation jumped 14.2 per cent from this time last year, to reach $242.2 million. This gave way for underlying profits to increase 2.9 per cent.
Net profits also look healthy for the company, increasing by 10.1 per cent from last year to $126.2 million.
While the financial year ends on a high note, the dark times ahead hang above like a dark cloud and the company is wasting no time to address it.
An operations leadership team at Inghams has been assessing performance issues and is looking to implement solutions to balance capacity requirements.
To entice loyalty, shareholders will receive a dividend payout of 10.5 cents per share to round off the financial period.
While the company continues to see great profits in Australia, for now, New Zealand profits are a different story.
The company warned this morning it will struggle to hoist up New Zealand profits in the 2020 financial year — expected to be below the 2019 results. A marginal return to form in the 2021 financial year is in the talks however.
Shareholders in Ingham will continue to receive a healthy dividend handout in the next financial year — to remain in the 60-70 per cent range of underlying net profits.
Speaking on bracing for choppy waters ahead, company management stated a ‘new strategic and operational plan’ will be presented to shareholders in October this year.
“Our newly assembled leadership team brings world class experience and expertise from companies such as Tyson, Pilgrim’s and Perdue,” Jim added.
“This new team knows what great looks like and how to achieve it!”