The Inghams Group Ltd (ASX: ING) share price is charging higher today as investors digest the poultry company’s full-year result.
In early afternoon trade, Inghams shares have jumped more than 4% to $3.43.
What did Inghams report?
Here are some of the headline figures:
- Core poultry volume increased by 3.3% to 428.7 kilotons
- Revenue climbed 2.6% to $2.6 billion
- Underlying EBITDA declined 13.9% to $179.7 million
- Underlying net profit after tax (NPAT) decreased by 23.6% to $78.8 million
On the whole, Inghams delivered full-year results in line with its May business update.
Following a difficult first quarter, positive operating momentum through Q2 and Q3 was interrupted by a decline in poultry demand in Q4, which created industry over-supply in Australia and New Zealand.
Additionally, realised feed cost remained elevated in the second half due to tight domestic wheat supply and inflation of key imported ingredients.
The adoption of the new lease standard AASB16 had a significant impact of Inghams’ statutory results – statutory EBITDA saw a $229.6 million benefit, while statutory NPAT was negatively impacted by $23.7 million.
If you’re confused about the difference between underlying and statutory figures, check out the video below:
Inghams’ year-over-year decline in both underlying EBITDA and NPAT was driven by the restructure of the further processing network in Q1, which impacted volumes, costs, mix and design. The impact of COVID-19 in the second half further weighed on the results.
Looking at regional performance, Australia grew revenue by 2.9% to $2.2 billion. While second half retail volumes benefited from pantry stocking, it wasn’t enough to offset declines in other channels like quick service restaurants. Profitability was lower in the second half due to higher costs and reduced activity related to COVID-19 safe measures, along with promotional and clearance activity in Q4 as volumes normalised.
In New Zealand, level 4 restrictions caused material volume loss and impacted margins. Revenue grew by 1.3% to $385 million, while poultry volumes were down 2% year on year. Similarly to Australia, retail gains did not offset other lost volumes during lockdown.
Inghams dividend
The Inghams board declared a final dividend of 6.7 cents per share (cps), fully franked, 36% lower than the 10.5 cps final dividend in FY19.
This takes full-year dividends to 14 cps, which represents a payout ratio of 66% of underlying NPAT (pre-AASB16).
Based on a current share price of $3.41, this full-year dividend translates to a dividend yield of around 4%.
What happens next?
Commenting on outlook, Inghams noted that poultry continues to show resilience as a preferred protein, supported by consistent supply and attractive pricing. However, the company acknowledged conditions remain uncertain as government restrictions in Australia and New Zealand continue to impact consumption of poultry products.
Inghams’ Victorian operations are currently operating with a reduced workforce, as mandated by the Victorian government. Despite this, the company said its diversified network ensures it is well-positioned to maintain supply as circumstances develop.
In other news today, TPG Telecom Ltd (ASX: TPG) revealed its merged half-year result, while Suncorp Group Ltd (ASX: SUN) shares are soaring more than 8%.
