The Inghams Group Ltd (ASX: ING) share price is getting crunched after it reported its FY19 results this morning, showing the impact of increasing pressure on margins. Here’s a quick guide.
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.
The Numbers
Inghams reported core poultry volumes of 414.9kt, representing growth of 4.3%. Underlying gross profit grew by 3% to $480.2 million, while underlying EBITDA was up 2.9% to $208.6 million.
Net profit after tax (NPAT) was up 10.1% to $126.2 million, however underlying NPAT, which excludes one-off items, was down 4.4% to $103.2 million. The video below further explains the difference between statutory and underlying results.
Underlying earnings per share (EPS) declined by 2.1% to 27.8 cents per share.
Dividends
Inghams declared a fully franked final dividend of 10.5 cps, a decline of around 9.5% from last year’s dividend which was 11.6 cps. The full-year dividend of 19.5 cps is down around 7.5% from last year.
Analyst Estimates
Inghams met Bloomberg analyst estimates for dividends of 10.5 cps, but underlying NPAT fell short of the NPAT estimate of $111 million by around 7%.
Management Commentary
Inghams Managing Director Jim Leighton said the results were solid.
“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,” he said.
FY20 Outlook
Inghams reported that poultry demand is continuing to grow but it is offset by feed costs being close to historic highs. Outlook for pricing in 2H20 is dependant on the next domestic grain harvest, but Inghams said margins are being negatively impacted.
Inghams said the “financial impact will be significant in FY2020”.
New Zealand EBITDA is expected to decline in FY20 with a return to growth in FY21.
Summary
Based on these results, I’d be avoiding Inghams right now. It is clear that the drought and other supply factors are having a detrimental impact on the company’s results, and the outlook for FY20 does not look positive.
I’d rather invest in one of the proven companies in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
