Inghams has returned to volume growth with reduced dependence on Woolworths but net profit fell 61.5 per cent to $34.6 million as input cost inflation, first half production inefficiencies and a tax provision weighed on FY26 earnings.
Revenue rose 2.4 per cent to $3,227.4 million on core poultry volume growth of 1.9 per cent to 470.1kt and a 1.4 per cent lift in net selling prices to $6.40 a kilogram. Underlying EBITDA pre AASB 16 of $186.4 million was down 21.2 per cent but within the guided range of $180 million to $200 million.
|
FY26 snapshot |
FY26 |
Change |
|
Revenue |
$3,227.4m |
up 2.4% |
|
Core poultry volume |
470.1kt |
up 1.9% |
|
Net selling price |
$6.40/kg |
up 1.4% |
|
Underlying EBITDA (pre AASB 16) |
$186.4m |
down 21.2% |
|
Underlying EBIT |
$153.6m |
down 30% |
|
NPAT |
$34.6m |
down 61.5% |
|
Net debt |
$403.3m |
down $27.1m |
|
Full year dividend |
10.1c |
down 46.8% |
Inghams CEO and managing director, Ed Alexander, said, “During FY26, we returned to volume growth, materially diversified our customer portfolio, reduced inventory and delivered $82 million of cost savings.”
Diversification delivers
The result is the first full year to show what the loss of Woolworths volume costs and what replacing it looks like. Inghams reported a 10.2 per cent drop in net profit in FY25 as the Woolworths transition took hold, then cut earnings guidance in February after a first half it described as disappointing.
Australian revenue increased 3.5 per cent to $2.7 billion on volume growth of 2 per cent and a 2.4 per cent lift in net selling prices to $6.50 a kilogram. Growth came across channels, with food service volumes up 10.3 per cent, QSR up 4.7 per cent and retail up 1.3 per cent. Stripping out Woolworths, retail volumes were up 17.2 per cent.
Wholesale pricing held through most of the year before falling materially in the fourth quarter as market economics softened, and softer wholesale conditions carry into FY27.
In New Zealand, core poultry volumes rose 1.5 per cent, with combined wholesale, food service and export volumes up 6.4 per cent. Export volumes jumped 41.9 per cent on the reopening of offshore markets. Net selling prices rose 1.4 per cent to NZ$6.81 a kilogram, delivering local currency revenue growth of 2 per cent, which translated to a 3.3 per cent decline in Australian dollar terms on a stronger AUD.
Costs outrun the top line
Total costs rose 6.2 per cent, or $169.9 million, more than offsetting revenue growth. Adjusted for volume, cost growth was 4.1 per cent, spread across packaging, ingredients, cooking oil, freight, labour, and repairs and maintenance.
The Middle East conflict added $13.2 million in costs, reduced to a net $4.7 million after recovery. The cost reduction program delivered $82.3 million in savings, and internal feed costs were $27.6 million lower than the prior year.
Australian costs were up 8.1 per cent, or 6 per cent adjusted for volume. Inghams said production inefficiencies in the first half and higher supply chain costs were a material drag on full year earnings, with inventory levels and production settings normalising in the second half.
Reported net profit of $34.6 million includes a $12.7 million tax provision. Inghams has lodged an objection to an amended Australian Taxation Office assessment covering research and development tax offset claims paid for the 2019 to 2021 financial years and said it intends to defend its position.
Automation and cooked capacity
Capital expenditure of $77.4 million comprised $41.7 million in growth and strategic investment, $28.9 million in sustaining capital and $6.8 million in optimisation.
Major projects included automation at the Lytton, Murarrie and Bolivar sites, expansion of fully cooked capacity at Lisarow, and additional growing capacity for Bostock Brothers in New Zealand. The company is also continuing to move contract growers onto variable performance-based arrangements.
Leverage still above policy
Working capital improved $46.5 million, with lower processed poultry inventory releasing capital and better matching production to demand. Cash conversion rose 8.6 percentage points to 105.5 per cent and net debt fell $27.1 million to $403.3 million.
Leverage of 2.2 times underlying EBITDA pre AASB 16 remains above the company policy range of 1.0 to 2.0 times, and Inghams named reducing it a priority for FY27. Return on invested capital was 10.4 per cent.
The board declared a fully franked final dividend of 6.1 cents per share, a payout ratio of 70 per cent and within the target range of 60 to 80 per cent of underlying net profit. Full year dividends of 10.1 cents were down 46.8 per cent. The company has established a dividend reinvestment plan.
FY27 guidance and the feed bill
Inghams is moving to underlying EBIT post AASB 16 as its primary earnings measure and expects FY27 underlying EBIT of between $155 million and $180 million, equivalent to underlying EBITDA pre AASB 16 of between $190 million and $220 million.
The guidance assumes core poultry volume growth of 2.5 to 4 per cent and operating cost growth excluding feed of 4-5 per cent, to be significantly offset through pricing, including some feed cost recovery. It also builds in $30 million of additional transport and packaging costs tied to the Middle East conflict, $40 million to $50 million in higher feed input costs, and capital expenditure of $80 million.
“While the operating environment remains challenging, we enter FY27 with a more balanced network, a stronger and more diversified customer portfolio, a refreshed senior management team, and clear visibility of the opportunities still to unlock,” Alexander said.
