Inghams first half profit surges as chicken demand returns

Poultry producer Inghams has returned to growth amid a recovery in demand for chicken after a pandemic hit.

Inghams poultry meat chickens.

Poultry producer Inghams returned to growth in the December half amid a pick-up in demand for chicken in supermarkets and on fast food menus, although it’s still facing high feed costs and constrained export markets.

The chicken producer said the net impact of lower feed prices was expected to be modest during the second half, as Australia emerges from the drought and a new wheat crop is harvested.

Meanwhile some offshore markets had started to reopen following the closure of some industry channels because of an Avian influenza outbreak in Victoria.

Inghams, Australia and New Zealand’s largest integrated poultry producer, gave an upbeat assessment of the first half and the outlook for 2021, as an easing of COVID-19 restrictions saw volumes returning to quick service restaurants, supermarkets and wholesale channels.

The company on Friday posted a 34.7 per cent increase in first-half profit to $35.3m, as revenue lifted 4 per cent to $8.7m.

Inghams declared an interim dividend of 7.5c per share, up 0.2c per share, and payable on April 8.

Inghams said core poultry volume growth of 5.6 per cent in the second half reflected strengthened demand and the return of overall trading volumes to pre-COVID-19 levels.

There was also good progress in reducing frozen poultry inventory after the pandemic. It was down $42.3m during the half year and was now close to normal levels, the company said.

Inghams chicken on a supermarket shelf. Picture: Hollie Adams

Inghams chief executive Jim Leighton said the first-half results were a testament to the execution of the company’s five-year strategic plan and the resilience of demand for poultry. “These results have been delivered despite the continued impact of COVID-19, ongoing high realised feed prices and the partial closure of Australia’s poultry export channels due to industry biosecurity issues in Victoria.”

The Avian influenza outbreak in Victoria was not at an Inghams facility.

“Our strategy is driving performance and delivering improved returns. Our team proudly fulfilled its role as an essential service provider throughout COVID-19 disruptions that occurred during the half year, maintaining supply to customers with operations fully maintained across Australia and New Zealand since reopening of our Thomastown facility on August 3.

“Our ability to respond quickly and effectively to these challenges has further strengthened our customer relationships and our reputation as a trusted and reliable supplier of poultry across Australia and New Zealand.”

In the key retail channel, the December half saw improving demand as lockdowns and other restrictions were eased, with strong volumes in Victoria. Inghams saw a strong recovery in the fast food channel and a rebound as lockdowns were eased.

The food service channel was recovering too, but it was a slow rebound throughout the period as dining-in restrictions eased, and restaurants feeling the loss of international tourists. However volume across the channel had now largely returned to pre COVID-19 levels, Inghams said.

Turning to its outlook, Inghams is expecting ongoing volatility in operating conditions and consumer behaviour because of the pandemic and the potential reopening of some Australian export markets.

In terms of its feed costs, despite a bumper wheat harvest in late 2020 prices have not reached anticipated lows. Easing grain prices are forecast to fully flow through Inghams poultry network to cost of sales by the fourth quarter of fiscal 2021.

Inghams shares closed up 3.6 per cent at $3.75.