Inghams share price falls 5% on coronavirus closure

The Inghams share price fell 5% with the chicken producer announcing closure of a processing plant following positive COVID-19 tests.

| More on:
coronavirus mask with a falling line graph on it

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Inghams Group Ltd (ASX: ING) share price fell 5.1% yesterday with the chicken producer announcing the closure of a processing plant following positive COVID-19 tests. The Thomastown Further Processing Plant in Victoria has been temporarily closed after five employees at the plant tested positive for coronavirus. 

Ingham's advised that it has had contingency plans in place for plant closures for some months. Other sites across Australia remain in operation. The temporary closure is not expected to materially impact the businesses results in FY21. Although the company is yet to announce FY20 results, in May it reported it was on track for 2H FY20 underlying EBITDA to exceed 1H FY20. Nonetheless, Ingham's warned at the time that it would be premature to draw conclusions as to the trading results for the final weeks of FY20 given changes in volume and channel mix across the business. 

Impact of coronavirus 

COVID-19 restrictions created a temporary surge in retail sales in March and early April but as consumer behaviour normalised, store traffic subsided. Ingham's has advised that out of home consumption of poultry products has been negatively impacted by the pandemic. Major customers have been resilient but their operations have been restricted to drive through and home delivery. Customers supplying hospitality and tourism industries have reduced purchases leading to weaker conditions in the food service and wholesale markets. 

Ingham's CEO and Managing Director, Jim Leighton, said in early May, "COVID-19 has presented unprecedented challenges and we have executed a swift realignment of our supply chain and operations in order to manage any substantial operational issues created by required social distancing protocols in our facilities. This has created additional complexity, inefficiency, and cost and the temporary suspension of the production of some value enhanced products."

Inghams share price outlook 

The Ingham's share price remained fairly resilient in the March downturn, falling 18% from its February high of $3.76 to its March low of $3.06. It has now partially recovered to trade at $3.34. Ingham's says it has a strong balance sheet with good access to liquidity and funding. There is significant headroom in debt covenants and the company says it is well supported by its lenders. Measures have been implemented to manage costs including reducing discretionary spend and capital expenditure. As a food business, demand for Ingham's products is less variable than for more discretionary purchases. Demand from the hospitality industry is currently subdued, but this should lift with the easing of restrictions. 

Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Share Market News

Down 90% from its 2021 peak, can IDP Education shares turn around?

Is this beaten down stock a buy? Let's find out.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Share Market News

5 things to watch on the ASX 200 on Thursday

Will the market continue to rise? Let's find out.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Broker Notes

The smartest Australian stocks to buy with $250 right now

$250 to invest? Check out these stocks that brokers rate as buys.

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Share Gainers

2 ASX All Ords stocks that would already have more than doubled your money this year

These ASX All Ords stocks have gained 126% and 145% year to date. But how?

Read more »

A woman wearing dark clothing and sporting a few tattoos and piercings holds a phone and a takeaway coffee cup as she strolls under the Sydney Harbour Bridge which looms in the background.
Broker Notes

1 magnificent Aussie stock down 23% to buy and hold forever

Let's see why this could be a top share to buy while it is down.

Read more »

Ten smiling business people wave to the camera after receiving some winning company news.
Share Gainers

Here are the top 10 ASX 200 shares today

It was an historic day for the ASX, with the market setting a new record.

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Broker Notes

Bell Potter says this ASX 200 stock can rise 100%+

Let's see which stock the broker is tipping as a buy to clients.

Read more »