Rising stockfeed and energy costs are likely to put pressure on poultry meat prices says trans-Tasman producer and processor, Inghams Group.
The century-old Inghams, which listed on the Australian Securities Exchange 16 months ago, has just posted a 28 per cent lift in net profit after tax to $65.7 million for the six months to December 31, helped slightly by a one-off $3.1m tax credit.
The first half of 2017-18 delivered a rise in poultry throughput volumes of almost 3pc to 255,000 tonnes, with notable growth in Australian chicken and turkey volumes, and improvements in New Zealand.
Earnings before interest, tax, depreciation and amortisation jumped 22pc to $116.2m.
“The results are pleasing and reflect both good progress on implementing our strategy and continued strong demand for Ingham’s quality products,” said chief executive officer, Mick McMahon.
“It is very pleasing to see the progress we have made reflected in continued volume growth and improved earnings, supporting strong cash generation and continued reduction in net debt.”
Cost increases in utilities and feed are expected to continue
The company is flagging on-going asset sales to offset restructuring, and spending on efficiency improvements and capital works as part of its transformation strategy, Project Accelerate.
Accelerate is focused on greater automation, labour productivity, and new procurements.
Mr McMahon said Project Accelerate was delivering improved yields, lower unit costs and better asset utilisation with more opportunities still being identified in the farming, further processing and feed milling divisions.
Late last year Inghams sold its Wanneroo site in northern Perth for $54m as part of a three year plan to build a new feed mill at Murchea and expand Western Australian hatchery facilities.
It has also just bought another feedmill, is constructing another at Murray Bridge in South Australia and has opened a new distribution centre in Brisbane.
It’s breeder farm network in Australia and NZ is also expanding.
Inghams is looking to improved operational performances to help offset rising feed costs and utility expenses such as energy.
“Cost increases in utilities and feed are expected to continue and, where they are unable to be offset, flow through to price increases in the Australian market,” the company noted when releasing its profit result.
However, in NZ market dynamics remained “challenging” although the company’s performance had been supported by increased poultry volumes through retailers and quick service restaurants.
Demand for dairy feed from its milling business was also up.
Overall cash flow in the half was “very strong” thanks to continued improvements in working capital management and asset sales.