The Inghams Group Ltd (ASX: ING) share price is down more than 7% as Omicron COVID sweeps through Australia and the workforce, impacting production and sales.
Inghams is one of Australia’s largest poultry businesses. It has some important clients such as KFC as well as major supply agreements with supermarkets like Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).
What’s going on with the Inghams share price?
The poultry company gave an update about its business and COVID conditions.
There is a rapid spread of COVID through NSW, Victoria and Queensland, this is having a significant impact on the Australian supply chain, operations, logistics and sales.
But despite those impacts, all of Ingham’s major Australian sites are operational and have not experienced significant on-site transmission of COVID.
However, those sites are currently experiencing significantly lower levels of staff availability, which is impacting production volumes and operational efficiency.
How is the company going to manage these impacts? Operational changes are being made to the volume and mix across its Australian business and it is not currently possible to predict how long this disruption will continue.
Ingham’s said that it was premature to make any conclusions on the overall impacts on the business and trading results.
On top of the above operational difficulties, feed costs remain elevated, which increases the company’s expenses. It will be interesting to see how much of these costs can be passed onto customers.
CEO comments
The Inghams CEO and Managing Director Andrew Reeves said:
“Following the COVID issues we faced in calendar 2021, the recent Omicron surge in Australia has presented unprecedented challenges to Ingham’s Australian business, with many Ingham’s employees being forced to isolate at home due to contracting COVID in the community or as a result of being close contacts.
“I would like to acknowledge the recent announcements of both the Federal Government and State Governments on changes to isolation rules for close contacts in the food sector which should assist to alleviate some of the current staff shortages. As operating conditions begin to stabilise, we expect our production capacity to recover quickly to meet customer and consumer demand.”
Ingham’s management talked of operational inefficiency, additional costs and the temporary suspension of a number of Ingham’s products.
My thoughts on the Inghams share price
This is tough news for Ingham’s shareholders, employees and customers. However, I think it’s very likely this is just going to be a short-term issue for Ingham’s production and sales. COVID may be around a bit longer than hoped, but rule changes and improving practices will hopefully help get chicken products flowing again to customers.
Whilst Ingham’s probably isn’t the greatest ASX share around, I think it could be a solid option for income and decent long-term earnings growth.
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