Inghams Group reported a 65 per cent drop in profit in the first half of FY26, causing the share price to fall almost 16 per cent, wiping $172 million from its market capitalisation.
CEO and managing director, Ed Alexander, said the result was “disappointing”, citing excess inventory management costs and supply chain reset inefficiencies following customer changes in FY25. But the business had returned to volume growth in Q2 and he said the company expects a stronger second half.
Snapshot
- Revenue: $1.61b, flat year-on-year;
- EBITDA (post AASB 16): $139.2m, down 33.8% on prior corresponding period (pcp);
- NPAT: $18.1m, down 64.9% on pcp; and
- Dividend: 4.0cps, down 7.0cps pcp.
Revenue was largely unchanged at $1,61 billion as a 1.4 per cent increase in net selling price (NSP) to $6.43/kg largely offset a 0.7 per cent decline in core poultry volumes.
The main pressure point was costs, with Inghams reporting a total costs increase of five per cent (+$69.7 million) versus the prior period, driven by:
- excess inventory management costs of $19m;
- incremental supply chain and logistics costs of $6.7m;
- lower farming performance of $3.8m;
- Ingleburn transition inefficiencies of $1.8m; and
- broader inflation across labour, ingredients, cooking oil, utilities and packaging.
The company said lower internal feed costs provided some offset, with feed costs down $24.9 million in the half.
Australia weak, New Zealand resilient
Australia remained the main source of earnings pressure. Segment underlying EBITDA (pre AASB 16) fell 42.3 per cent to $58 million, with revenue flat at $1.35 billion as higher costs outweighed pricing improvement and new business wins.
Inghams said Australian core poultry volumes declined 0.5 per cent, but this reflected lower Woolworths volumes offset by growth in non-Woolworths retail and QSR channels, including new business wins.
By contrast, New Zealand was described as resilient, with stable operations and strong branded performance. NZ revenue was $255.8 million (down 0.4 per cent in AUD terms), while underlying EBITDA (pre AASB 16) dropped 3.4 per cent to $22.6 million.
A positive in the half was working capital performance. Inghams reported cash conversion of 113.1 per cent, up 18.6 percentage points, helped by a $24.3 million reduction in inventory.
But net debt increased $35.7 million to $466.1 million, and leverage rose to 2.4x – above the top end of the company’s internal policy range of 1.0x to 2.0x, and reflecting lower trailing earnings and ongoing capex.
Guidance downgraded, 2H recovery weighted to Q4
Inghams reduced its FY26 guidance for underlying EBITDA (pre AASB 16) to $180-200 million, down from $215-230 million. The company said the revision reflects the slower-than-expected timing of operational improvements flowing through to earnings, with benefits now expected to be more heavily weighted to 4Q26.
Management said inventory levels have returned to target levels and production settings have normalised into Q3, supporting improved network efficiency, while initiatives are underway across supply chain, planning and operations to restore unit cost performance in the second half.
