Market roasts overstuffed Inghams
The market has roasted Inghams for its failure to meet consumers' hunger, with the poultry giant's stock dropping by more than 20 per cent amid ongoing processing setbacks.
Inghams increased its full-year profit by 10.1 per cent to $126 million but expenses rose roughly 5.0 per cent to $2.34 billion as efforts to optimise its processing network faltered due to higher demand.
The company said on Tuesday it expected a significant financial impact to carry over into FY20 as costs continued to mount.
"Stronger customer demand has placed unexpected pressure on operations which has led to loss of productivity and higher costs," the company told the ASX.
Shares in Inghams fell as much as 20.3 per cent to a near 12-month low of $3.225 in the first 20 minutes of trade on Tuesday, and were still 17.08 per cent lower at $3.35 by 1540 AEST.
Revenue for the 12 months to June 30 rose 4.9 per cent to $2.5 billion on a 4.3 per cent increase in core poultry volumes to 414.9 kilotonnes.
The company also added $49.7 million in other income, including profit from the sale of the Mitavite horse feed business in August last year.
Inghams said demand for poultry in Australia and New Zealand would continue to grow on account of the relative affordability of the protein, but feed costs remained close to historic highs due to ongoing drought.
Managing director Jim Leighton, who joined the company in November, insisted the results were solid despite growing costs pressures and continued weakness in NZ.
Mr Leighton said Inghams' refreshed leadership team would unveil a new strategic and operational plan to the market in October.
Tim Singleton started as Inghams' chief operations officer in May, Chris Croese became chief customer officer in June and Gary Mallett is due to begin as chief financial officer in October.
"Poultry is a dynamic business that requires deep expertise and experience to unlock potential," Mr Leighton said.
"Our newly assembled leadership team brings world-class experience and expertise from companies such as Tyson, Pilgrim's and Perdue ... this new team knows what great looks like and how to achieve it!"
Inghams cut its final dividend to a fully franked 10.5 cents per share, down from 11.6 cents a year ago.
The full-year dividend of 19.5 cents per share is down from 21.1 cents in FY18 but Inghams also made a $125 million capital return to shareholders in December, the equivalent of 33 cents per share.
INGHAMS FLAGS PROCESSING PROBLEMS
* Revenue up 4.9pct to $2.5b (plus $49.7m in other income)
* Expenses up 5.0pct to $2.34b
* Net profit up 10.1pct to $126m
* Final dividend 10.5 cents per share, fully franked, down from 11.6 cents a year ago.
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