Ingham’s CEO incentives to be rejigged in face of poor outlook for poultry company

The country’s largest poultry producer says incentives will be rejigged in face of poor outlook as profits dive and costs rise.

Ingham’s CEO incentives to be rejigged in face of poor outlook for the poultry producer as its profits dive and costs rocket.

The chief executive of the nation’s largest poultry producer, Ingham’s, will share the pain of his shareholders with his incentive package rejigged to face the tough economic environment.

In a letter to shareholders issued by the company on Friday, Ingham’s chairman Helen Nash said – in the context of the business challenges currently facing the company – the board would not put forward chief executive Andrew Reeves; long-term incentive plan for shareholder approval at an annual meeting slated for November 8.

The incentive package was tripped up by calculations on returns that took into account lease valuations captured by accounting treatment changes.

“The board had previously committed to changing the return on invested capital target for future long-term incentive plans from a measure calculated by reference to performance based on pre AASB 16 financials return to a calculation based on post AASB 16 financials,” Ms Nash said in her letter.

“In doing so, the board reviewed the proposed LTI plan and budgeted ROIC target and did not consider that it provides appropriate incentives for long-term profitable growth.

“As a result, the board is considering alternative incentive arrangements that ensure our remuneration structure and strategy align with shareholders’ interests to create value for the company over the short, medium and long-term, and that those incentives foster a business-ownership approach.”

However, Mr Reeves won’t miss out completely on his incentives with next year’s shareholders meeting to consider a newly crafted incentive scheme for 2023 and beyond.

Ms Nash said once alternative incentive arrangements had been developed, the board would seek shareholder approval at the 2023 annual meeting for the 2023-2025 long-term incentive plan and the 2024-2026 long-term incentive plan for the CEO.

It comes as Ingham’s, the nation’s largest chicken producer and whose chicken products are ranged at supermarkets, pubs, restaurants and fast-food chains, suffers from rising costs fuelled by the war in Ukraine, rising energy bills and elevated chicken feed prices which it is being forced to pass on to customers to bolster its fading margins.

In August Ingham’s posted a 57.9 per cent full-year profit slump, driven by a massive blowout in costs – such as feedstock for its chicken flock – and the disruptions caused by the Covid-19 pandemic that constrained supply chains. At the time it said spending on chicken feed alone had spiked by more than $45m in 2022 and costs are expected to be similarly higher this year.

Further strangling its operations were shutdowns and lockdowns across the country of restaurants, cafes, fast food chains and other venues such as hotels and reception centres where its chicken products were popular dish choices.

The poor result led to a number of downgrades by analysts while on the day of the results release its shares fell as much as 10 per cent. Inghams shares fell 3c, or 1.2 per cent, to close at $2.48 on Friday. Shares in the company have slumped more tham 31.8 per cent since December 31.