Inghams FY24 Earnings Call Highlights

Inghams (ASX: ING) shares have tumbled to levels not seen since August 2023 after its FY24 earnings and FY25 guidance missed analyst expectations. To make matters worse, the company's biggest customer – Woolworths – has cut a new supply deal which reduces its poultry purchasing volumes.

FY24 Earnings Summary

• Group core poultry sales volume up 2.8% to 476,400 tonnes

• Net selling price growth of 5.4% to $6.28 a kilogram

• Underlying EBITDA up 30.8% to $240.1m

• Underlying NPAT up 31.3% to $109.2m

• Total FY24 dividend of 20 cents per share

• FY25 underlying EBITDA guidance $236-250m (flat to 6% growth)

The EBITDA, net profit and FY25 EBITDA guidance was 3.3%, 8% and 5.8% (at midpoint) below Macquarie expectations (as at 23 May 2024). The dividend was also 3.8% below expectations.

Earnings Call Highlights

The below topics have all been answered by CEO Andrew Reeves and CFO Gary Mallett.

Woolworths contract and implications: "Toward the end of FY24, we agreed in principle commercial terms for the renewal of our multi-year supply agreement with Woolworths... The agreement does provide for a phased reduction in annual volume, which will facilitate the execution of our own customer diversification strategy to a broader and more balanced portfolio."

New business: "We have won significant new business for FY25 and are actively working on additional new business opportunities across our broader customer base."

FY25 guidance: "Overall, we view the transition [of the Woolworths contract] as a manageable one, with the effect of the new agreement and the new business factored into our FY 2025 guidance and outlook."

Net selling prices: "Group net selling price increased 5.4% versus FY23 ... The general rate of inflation across the economy may have moderated a little, but costs are still rising and our costs therefore remain elevated."

Inflation impact: "While costs inflation has moderated a little during the period, it has been observed across salaries and wages, utilities, husbandry, ingredients, and repairs and maintenance."

Analyst Q&A Highlights

Woolworths contract and value-added opportunities: "During the course of last year, we worked with Woolworths on a quite a significant range curation project which expanded the space for poultry. And that did include expanding their range and space that they provided for free range products. That hasn't changed."

On volume reductions: "It's a one time step down. We will still have an opportunity to grow with Woolworths as their business grows."

On contract security: "Absolutely. Those opportunities are out there and we certainly have all the operational capability to make the products that are currently in demand in the marketplace."

On volume replacement details: "No, I'm not going to give you that detail."

On QSR volume recovery: "We're really looking at a recovery in that channel. And in fact, interestingly enough, we've seen some of that in the first seven weeks."

Poultry pricing outlook: "We do expect to see some modest improvement in net selling price across the course of the year."

On customer supplier diversification trend: "We're talking about one customer. We're not talking about the entire market."

This article was generated with the support of AI and reviewed by an editor.