Inghams says inflationary pressure could force yet another price rise for chicken this year

The cost of fattening poultry isn’t chicken feed thanks to inflationary pressures and Inghams says that could trigger another consumer price rise.

Despite price rises for chicken it still costs less per cut than red meat and seafood, says Inghams. Picture: Brenton Edwards

The cost of a chicken schnitzel might be on the rise yet again.

Australia and New Zealand’s largest poultry producer, Inghams says, the high cost of feed and energy could result in another consumer price rise for chicken, which already went up 12 per cent last year.

However, Inghams chief executive Andrew Reeves said the fundamentals of the chicken market were strong because cost-of-living pressures encouraged shoppers to buy cheaper cuts of meat, such as chicken purchased from supermarkets, and consumers also cooked at home rather than dining at restaurants and fast-food chains.

Inghams said chicken would continue to have a price advantage over red meat and seafood even if prices had to be raised in 2024.

Mr Reeves said he didn’t think production costs would accelerate at the rate they have over the past 12 to 18 months but those cost pressures were elevated in areas such as wheat and soy, used for feed, and had been worsened by the war in the Ukraine.

“It is pretty clear we are in a strong inflationary environment,” Mr Reeves told The Australian after Inghams on Thursday reported that revenue for fiscal 2023 rose 12.2 per cent to $3.04bn.

Net profit lifted 72 per cent to $60.4m, which was in line with market expectations of a profit between $58m and $62m.

The poultry producer declared a final dividend of 10c per share, up from just 0.5c per share last year. The total 2023 dividend declared of 14.5c per share, fully franked, is an increase of 107.1 per cent.

The market rejoiced in the performance, especially the improving sales and earnings momentum through the latter part of fiscal 2023 and into 2024, sending shares in Inghams up more than 16 per cent during intraday trade on Thursday.

“I am very pleased with the strong recovery, underpinned by the progressive return to normal operational performance levels across the business, with farming performance continuing to recover and supply chain conditions normalising,” Mr Reeves said.

“Despite the fact prices have gone up in the last 12 months chicken particularly still holds an attractive price advantage over meat, seafood and proteins.”

Core poultry sales volume declined slightly, down 0.4 per cent. In Australia, volume declined 0.6 per cent, driven mainly by lower bird numbers processed as a result of a first-half decline in farming performance.

In the key Australian supermarket channel, volumes were up 3.1 per cent as cost of living pressures pushed shoppers to cheaper proteins while in fast-food chains its chicken sales were up 1.3 per cent, and for other dining venues and food service chicken volumes were up 1.6 per cent.

In New Zealand, volumes grew 0.8 per cent. The recovery in volumes during the second half offset the lower first-half performance which arose as a result of a lower egg setting implemented to address the impact of labour-related processing constraints and reduced further processing production driven by a nationwide shortage of available CO2.

Shares in Inghams were trading almost 15 per cent higher in mid afternoon trade and later closed up 41c, or 14.75 per cent, at $3.19.