The Inghams Group Ltd (ASX: ING) share price is in the red today after the company released its FY23 half-year results.
The Inghams share price opened at $2.63, down 4.4% on yesterday's close, before falling to an intraday low of $2.55, down 7.3%.
It has since recovered somewhat to $2.71, down 1.45% for the day at the time of writing.
Let's take a look at the company's results.
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Inghams share price punished after 44% dividend cut
Inghams said its 1H FY23 results represented "a significant improvement" on 2H FY22, but were below the prior corresponding period (pcp) of 1H FY22.
The interim dividend was cut to 4 cents per share, down from 6.5 cents per share in FY22. This reflects lower earnings but remains within the company's payout policy range.
Here are the key points for the six months to 31 December 2022:
- Group core poultry sales volume down 0.6% pcp
- Revenue increased 8.9% but the cost of sales increased 10.9% pcp
- Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $197 million, down 10.6%
- Net profit after tax (NPAT) of $17.2 million, down 55.2%
- Interim fully franked dividend of 4.5 cents per share, down 44% pcp.
What else happened in 1H FY23?
Inghams said inflation was impacting the company on several fronts, with the cost of many inputs rising, including feed, fuel and transport, packaging, and ingredients. Feed costs increased by $57.9 million pcp.
Inghams said it has increased its prices and will "pass on further price increases as required".
Inghams reported net debt of $294.2 million, up 10.1% on FY22 due to reduced operating earnings and increased working capital expenditure.
Debt leverage is 2.5 times, which is outside the company's comfort zone of 1–2 times. The company extended its $345 million debt facilities for an extra two years to November 2025.
Inghams said it completed the design phase of its business transformation program but will postpone its implementation "for the medium term" to focus on other priorities, including higher return projects.
What did management say?
Ingham's CEO and managing director, Andrew Reeves, said:
Our results for the first half represent a significant improvement for the business over second half of FY22, and we expect this positive momentum to continue as we proceed through the second half of the financial year.
While it is clear the business is successfully transitioning from the various operational challenges experienced over the past 12 months, our farming operations are taking longer to return to normal levels, resulting in lower than required poultry volumes.
We also continue to manage a number of general market headwinds including supply chain disruptions and broad inflationary pressures, that are a feature of the current operating environment.
What's next?
In a statement, the company said it has implemented initiatives to address reduced farming performance, with more chickens expected to become available later in 2H FY23.
The company said that in today's economy, poultry has an advantage over red meat because it's cheaper.
Inghams share price snapshot
The Inghams share price has decreased by 23% over the past 12 months.
Inghams has vastly underperformed its peers, with the S&P/ASX 200 Consumer Staples Index (ASX: XSJ) up 6.1% over the period.
