- Inghams Group (ING) has elected to cut its dividend as it forecasts delayed impacts from COVID-19 in the second half of FY2022
- First-half interim dividends will be distributed at 6.5 cents per share, reflecting a decrease of 13.3 per cent
- This comes despite improved financials across the board, with a 5.9 per cent increase in underlying net profit after tax to $39.7 million
- Managing Director and CEO Andrew Reeves said “the most recent Omicron-related disruption” will be “reflected in 2H outcomes”
- Shares in Inghams Group had slumped 5.2 per cent to $3.35 as of 12:23 pm AEDT
Despite improved financial results across the board, Inghams Group (ING) has elected to cut its dividend as it forecasts delayed impacts from COVID-19 in the second half of FY2022.
During the first half, the poultry producer saw its core sales grow 5.6 per cent overall, driven largely by domestic growth in Australia of 6.5 per cent. Inghams said this came despite various lockdowns and other “challenging market conditions”, but also reflected weak pricing across its wholesale channels due to excess supply.
The company also noted that it continues to progress the implementation of operational efficiencies. While these initiatives were impacted to an extent by the growing prevalence of the Omicron variant, Inghams said the process was able to cap cost growth at just 2.5 per cent.
In New Zealand, core poultry sales remained flat, also due to the implementation of lockdown measures. However, revenue jumped 3.6 per cent due to price increases across all sales channels that sought to offset similarly increased feed costs and “inflationary pressures” brought on by supply chain disruptions.
Overall, the group’s underlying EBITDA jumped 1.7 per cent to $222.4 million, while underlying net profit after tax also rose 5.9 per cent to $39.7 million.
“The results we have delivered in the first half are broadly in-line or ahead of the first half of 2021, reflecting the resilience of our business and people, and the ongoing benefits of the company’s continuous improvement program,” Managing Director and CEO Andrew Reeves said.
“The first half of FY22 has been defined by the challenging operating environment that the business has had to navigate, which has been characterised by extended lockdowns and significant operational disruptions caused by ongoing pandemic conditions, with the most recent Omicron-related disruption to be reflected in 2H outcomes.”
In an apparent attempt to help mitigate those forecast disruptions, Inghams elected to cut its first-half interim dividend by 13.3 per cent. Shareholders will receive 6.5 cents per share, which represents a payout ratio of 60.9 per cent of underlying net profit after tax. While that figure is still within the company’s target range of between 60 and 80 per cent, it reflects the “continuing uncertainty in the short-term market outlook due to COVID-19”.
“While 2H FY22 will be significantly impacted by Omicron, and noting it is not possible to be definitive as to how long the Omicron impact on the business will last, the Inghams business is capable of recovering relatively quickly,” the company said in an announcement to the ASX this morning.
“Another strong wheat harvest in Australia has resulted in some recent price stabilisation, however ongoing strong global demand for Australian wheat due to supply shortages and adverse northern hemisphere weather conditions is expected to result in pricing remaining firm.”
This, combined with recent increases in soymeal pricing, is expected to result in a general increase in feed costs during the second half of the year.
Shares in Inghams Group had slumped 5.2 per cent to $3.35 as of 12:23 pm AEDT for a market cap of roughly $1.25 billion.