Shortly before market open Inghams Group Ltd (ASX: ING) announced its half year result for FY2020. After normalising for asset impairments and restructuring, ING reported underlying EBITDA of $91.7 million. Furthermore, underlying net profit after tax (NPAT) came in at $42 million after normalising for AASB impact ($12.8m). Furthermore, the cash conversion of the business has dropped significantly from 98% to 82% - attributable to a large increase in receivables. ING has also declared an interim dividend of 7.3 cents per share.
Inghams Group Ltd (ASX: ING) reports first half results for FY20. 15 minutes after market open the share price has come off 2.7%. (Credit: Fairmont Equities).
For Inghams, the first half of the business is generally stronger than the second half. When assuming the current run-rate, the business is on track to achieving approximately $183m for the full year. If Inghams were to report this number, it would come in below current market expectations. The demand for chicken has been solid as it remains the meat of choice, seeing volume growth of 3.4%. Although, the current drought conditions in Australia have led to an increase in wheat prices – funnelling through to feed cost for the chickens. This may present an ongoing structural issue for ING.
Inghams continues to see the cost pressures from feed and energy. While ING has been successful thus far in increasing prices to offset these cost pressures, it is likely this solution is limited and thus eventually the business may have to compromise on volumes.
15 minutes after market open the share price is trading at $3.55 per share, representing a fall of 2.7% from market close yesterday.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
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