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Ingham's posts 2.5% gain in FY earnings in NZ, cites improved trading from second half

Tuesday 22nd August 2017

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Ingham's Group, which is the number two poultry producer in New Zealand behind Tegel Group, reported a 2.5 percent gain in New Zealand earnings, saying trading improved in the second half after a weak first half and the trend has continued into the 2018 year.

Earnings before interest, tax, depreciation and amortisation at the company's New Zealand unit rose to A$36.2 million in the 53 weeks ended June 30, from A$35.3 million a year earlier, according to the Sydney-based company's annual results. New Zealand revenue climbed to A$361 million from A$353.5 million.

New Zealand earnings were below Ingham's prospectus forecast of A$37 million and reflected a difficult first half when rival Tegel cited a glut of chicken in the market and rising freight costs that were squeezing margins. Tegel's year-end was April 30 and it posted a 0.8 percent gain in ebitda even as sales rose 5.4 percent to a record $614 million. Today Ingham said stronger trading conditions were prevailing in the current year, which may signal supply and demand are returning to balance.

The company said it enjoyed "strong" sales of free-range chicken sold under its Waitoa brand and began sales of Waitoa products to Hong Kong. Third-party chicken feed sales were in line with expectations while dairy feed volumes were "improving on the back of milk price recovery".

Ingham's listed on the ASX last November and provided pro-forma figures for its operations for 2016 and 2017. Total revenue climbed 3.3 percent to A$2.4 billion and ebitda rose 16 percent to A$195 million. The company declared a final dividend of 9.5 Australian cents a share.

The improved trading was driven by Australia, where sales rose 3.4 percent to A$2.02 billion and ebitda jumped 20 percent to A$158.8 million, beating its IPO forecast of A$153 million.

"Overall poultry volumes increased 11.5 percent with stronger-than-expected growth in Australia and improving New Zealand volume growth in the second half," chief executive Mick McMahon said in a statement.

Commenting on the outlook, McMahon said: "Continued growth in poultry volumes is expected".

"The effect of increasing feed prices over recent months is expected to be mitigated by forward cover arrangements, feed cost pass-through mechanisms with customers and market recovery of increased prices over time," he said. Some further assets sales were expected while capital expenditure was likely to reduce from its 2017 peak.

Ingham's said it has begun a strategic review of its commercial stock feed business.

The company's shares last traded at A$3.50 on the ASX and have gained 7 percent in the past six months. US private equity firm TPG floated the business at A$3.15 per share.


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