Inghams Shares Drop as Higher Feed and Fuel Costs Hit Outlook

Inghams Group Ltd. experienced a significant drop in its shares, marking the largest decline in approximately two months. This downturn followed the Australian poultry producer's warning that increased expenses for feed, diesel, and packaging, primarily stemming from the ongoing conflict in the Middle East, are expected to negatively affect its earnings forecast for the upcoming year.

For the fiscal year ended June 30, Inghams reported a net profit after tax of $34.6 million, a substantial 61.5% decrease from the previous year's $89.8 million and notably below the Visible Alpha consensus of $53.94 million. Despite this profit decline, revenue saw a modest increase of 2.4% to $3.22 billion, up from $3.15 billion in the prior year and surpassing the Visible Alpha consensus of $3.19 billion. The company's underlying EBITDA pre-AASB 16 was $186.4 million, a 21.2% decrease but within its guidance range of $180 million to $200 million.

Core poultry volumes demonstrated a return to growth, increasing by 1.9%, with both Australian and New Zealand markets contributing. Australian revenue specifically rose by 3.5% to $2.73 billion, supported by a 2.0% volume growth and a 2.4% increase in net selling prices. However, total costs surged by 6.2%, equivalent to $169.9 million, driven by production volumes, cost inflation, and inefficiencies, including an additional $13.2 million directly attributed to the Middle East conflict. These cost pressures were partially mitigated by $82.3 million in cost reduction savings and $27.6 million in lower internal feed costs.

Looking ahead to FY27, Inghams anticipates underlying EBIT to be between $155 million and $180 million, or underlying EBITDA pre-AASB 16 of $190 million to $220 million. This forecast assumes core poultry volume growth of 2.5% to 4.0% but also factors in ongoing additional costs from the Middle East conflict and elevated feed input prices. The company also declared a final dividend of 6.1 cents per share, bringing the total FY26 dividends to 10.1 cents per share, a 46.8% reduction from the previous year.