The Inghams Group Ltd (ASX: ING) share price is trading 1% lower this morning following the company’s Annual General Meeting (AGM). Here’s what you need to know.
About Inghams
Inghams was founded in 1918 and has gone on to become Australia and New Zealand’s leading poultry producer, supplying retail, restaurants and food service customers with four million birds per week. Inghams employs more than 8,000 staff across its feed mills, farms, hatcheries, processing plants and distribution centres.
Annual General Meeting
Inghams held its 2019 AGM in North Sydney this morning. Chairman Peter Bush opened the meeting and provided an overview of FY19 saying that it was “a year of change as we welcomed our new CEO Jim Leighton”.
He also commented on costs saying that “feed is our single biggest cost and it’s quite simple to understand that this business, and in fact this industry, can make profits more easily in times when wheat crops are good and much tougher when they are bad.”
He then passed it over to CEO Jim Leighton, whose commentary provided an outlook for FY20.
FY20 Outlook
So far the business is “trading to plan through Q1 FY2020”. Other points were:
- EBITDA run rate is planned to be lower in the first half than the second half of FY2020
- Current feed costs remain close to historic highs, impacting the outlook into 2H FY2020 dependent upon the next domestic grain harvest
- Australian margins are being negatively impacted by higher input costs and channel mix
- Further Processing network rationalisation project has not delivered to plan. Stronger customer demand has impacted operations, mix and resulted in higher costs
- EBITDA in FY2020 will be below underlying FY2019, with a return to growth expected in FY2021
Summary
Based on Inghams FY19 results and the AGM commentary, I’d be avoiding Inghams right now. The drought seems to have had an impact on Inghams’ operations, something ASX-listed Nufarm Limited (ASX:NUF) also highlighted in its FY19 result for its own Australian business.
Of note, according to Shortman, Inghams is the fourth most shorted stock on the ASX right now. Personally, I’d rather consider investing in one of the proven companies in the free report below.
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At the time of writing David does not have a financial interest in any of the companies mentioned.
