The Inghams Group Ltd (ASX: ING) share price has surged more than 6.5% in early trade, despite the company reporting a drop in net profit for FY20.
How has Inghams performed in FY20?
Inghams reported a 68.2% drop in net profit of $40.1 million for FY20. The poultry producer also reported a 23.6% fall in underlying profit of $78.8 million for the year. Despite the drop in profit, poultry volumes increased 3.3% to 429,000 tonnes in FY20.
Inghams cited the uncertain trading conditions as a result of the COVID-19 pandemic for the profit fall. The company said the pandemic presented significant challenges to the poultry market, supply chain and operations. However, it noted that full year results were in line with expectations laid out in its May business update.
According to the report, a decline in poultry demand in the fourth quarter interrupted positive momentum from previous quarters, resulting in an over-supply. Inghams also noted that a 2% decline in New Zealand volume offset a 4.3% growth in Australian volumes for FY20.
Inghams management highlighted the company's resilience to overcome the challenges of the pandemic. Despite the drop in net profit, Inghams still declared a final dividend of 6.7 cents per share.
What is the outlook for the Inghams share price?
Inghams has an optimistic outlook for the company despite challenges posed by the pandemic. The company said poultry demand continued to show resilience in the market as a preferred protein source.
However, the poultry producer noted that government restrictions during the pandemic would continue to impact consumption.
In addition, COVID-19 restrictions could reduce capacity due to closures in poultry processing plants. Inghams was forced to close its Thomastown facility for 10 days due to an outbreak last month.
However, the company said its diversified network could maintain supply.
In the short to medium-term, Inghams will focus on its cost base and predictability of supply chains.
Foolish Takeaway
Investors seemed impressed with the company's full year report this morning, with Inghams share price soaring more than 6.5% in early trade. However, the share price jump has scaled back this afternoon, with shares trading 3.65% higher at $3.41 at the time of writing.
