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Ingham's sees New Zealand's chicken glut persisting

Wednesday 15th February 2017

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Ingham's Group expects New Zealand's oversupply of chicken to continue this year, keeping prices cheap and crimping the trans-Tasman poultry producer's local earnings.

The Sydney-based company's Kiwi division accounts for about 15 percent of the ASX-listed firm's revenue, and like its rival, Tegel Group Holdings, had to contend with low domestic prices with chicken supply outstripping demand. Ingham's New Zealand earnings before interest, tax, depreciation and amortisation fell 5.8 percent to A$17.7 million on largely flat revenue of A$185.8 million in the six months ended Dec. 24. Local poultry volumes fell 0.6 percent to 36,300 tonnes and feed volumes sank 11 percent to 69,100 tonnes.

"New Zealand volumes were flat in a challenging market, driven by reduced industry export volumes translating to domestic oversupply," Ingham's said in a statement. "New Zealand trading conditions are likely to continue in the second half."

That echoes Tegel's complaints in December when the NZX-listed firm posted a 4 percent decline in first-half earnings, while also warning that imbalance was likely to continue throughout the latter half of the year. Government data yesterday showed consumer poultry prices were 7.2 percent lower in January than the same month a year earlier.

Ingham's listed on the ASX in November in an A$1.2 billion initial public offering, selling shares at A$3.15 apiece, below an earlier target range of A$3.57 to A$4.14 per share. The shares last traded at A$3.39, while Tegel's were down 3 percent to $1.29 on the NZX.

The IPO's transaction costs amounted to A$28 million. Stripping out that and other one-off costs, Ingham's group earnings rose 14 percent to A$51.3 million on a 4.3 percent gain in revenue to A$1.23 billion, with strong growth in the firm's sales of Australian poultry. The board declared a 'stub' dividend 2.6 Australian cents per share, referring to the truncated period as a public company, and affirmed its intention to pay fully-franked dividends of between 65-and-70 percent of pro forma net profit.

Ingham's still expects annual pro forma net profit of A$98.8 million as projected in its prospectus.



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