- Capital Expenditure and Acquisitions: $168 million.
- Return on Invested Capital: 21.3%.
- Dividend: $0.08 per share, total dividends for FY24 $0.2 per share (38% increase).
- Underlying pre AASB 16 EBITDA: $240.1 million (31% increase).
- Underlying EBITDA pre AASB 16 Margin: 7.4% (130 basis point increase).
- EBITDA per Kilo: 27% growth.
- Total Recordable Injury Frequency Rate: Declined by 7%.
- Net Selling Price (NSP) Growth: 5.4%.
- Internal Feed Cost Increase: 1.3%.
- New Zealand pre AASB16 Underlying EBITDA Growth: 100.9%.
- Company Leverage Ratio: 1.5 times.
- Revenue Growth: 7.2%.
- Cost Increase: 6.2%.
- Net Debt: Increased by $85 million to $348 million.
- Cash Conversion: Improved to 98%.
- Core Poultry Volume Growth: 2.8% (Australia 1.9%, New Zealand 8.4%).
- Return on Invested Capital: 21.3%.
- Wheat Price Decline: 4% over six months, 1% over 12 months.
- Soybean Price Decline: 15% over six months, 14% over 12 months.
- Australia Revenue Increase: 6.3%.
- Australia Pre AASB 16 Underlying EBITDA Margin: 7% (80 basis point increase).
- New Zealand Revenue Increase: 12.4%.
- New Zealand Pre AASB16 Underlying EBITDA Margin: 9.3% (410 basis point increase).
- FY25 Core Poultry Volume Guidance: Decline of 1% to 3%.
- FY25 Underlying EBITDA pre AASB 16 Guidance: $236 million to $250 million.
- FY25 Capital Expenditure Forecast: $100 million to $110 million (excluding Bostock acquisition).
Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Inghams Group Ltd (ASX:ING, Financial) reported a record set of financial results for FY24, with strong year-on-year growth in earnings, profit, and cash flow metrics.
- The company declared a fully franked dividend of $0.08 per share, contributing to a total dividend increase of 38% compared to the prior year.
- Inghams Group Ltd (ASX:ING) achieved a 31% increase in underlying pre AASB 16 EBITDA to $240.1 million, with a 130 basis point increase in the underlying EBITDA margin to 7.4%.
- The New Zealand segment delivered a very strong performance, with a 100.9% growth in pre AASB 16 underlying EBITDA, driven by a return to normal operating capacity.
- The company completed significant investments, including two acquisitions and the installation of new automated leg deboning machines, contributing to a return on invested capital of 21.3%.
Negative Points
- The general rate of inflation remains elevated, impacting costs despite some stabilization in key feed ingredients.
- The company experienced a marginal increase in its leverage ratio to 1.5 times, although it remains within the target range.
- There is a phased reduction in annual volume under the new Woolworths supply agreement, which may impact overall volumes in FY25.
- Cost inflation has moderated but remains a concern, with increases in salaries, wages, utilities, and other operational costs.
- The shift in channel mix towards retail and away from out-of-home channels, including quick service restaurants, may affect overall revenue dynamics.
Q & A Highlights
Inghams Group Ltd (ASX:ING) Full Year 2024 Earnings Call Highlights
Q: Can you provide more details on the impact of the new Woolworths contract on FY25 volumes and margins?
A: The new agreement with Woolworths is phased in over FY25 and represents a one-time step down in volume. However, opportunities to grow with Woolworths remain, and the transition is manageable. The impact is reflected in our FY25 guidance, which anticipates a decline in core poultry volumes by 1% to 3% but still projects growth in underlying EBITDA.
Q: How confident are you in achieving the aspirational 10% EBITDA margins in Australia?
A: We remain very confident in achieving the 10% EBITDA margins through ongoing productivity gains and mix improvements. Our results demonstrate progress, and we have included EBIT per kilogram as a metric to track value addition over time.
Q: Can you elaborate on the expected recovery in QSR volumes for FY25?
A: We anticipate a general recovery in the QSR channel, driven by efforts from large QSR customers to bring back customers and increase order sizes. This sentiment is supported by early signs of improvement in the first seven weeks of FY25.
Q: How sustainable is the EBITDA margin improvement in the New Zealand business?
A: The New Zealand business has shown consistent margin improvement over multiple years. Despite the challenging economic environment, we expect the business to maintain or improve its EBITDA margins.
Q: What are the key factors influencing the first half and second half earnings mix for FY25?
A: We expect a return to a more normal first half-second half earnings mix, with a higher first half and a slightly lower second half. This is in contrast to the larger variation observed in FY24.
Q: How do you see the pricing outlook for core poultry net selling prices in FY25?
A: We expect modest improvement in net selling prices for core poultry in FY25. The price relativity to other proteins remains favorable, and we anticipate some growth in net selling prices, excluding potential feed cost reductions.
Q: Can you provide more details on the cost of goods sold and gross margin impact in the second half of FY24?
A: The gross margin decline in the second half of FY24 was influenced by increased labor, utilities, ingredients, and repairs and maintenance costs. Additionally, the conversion of grower contracts to performance-based variable contracts impacted the cost of goods sold.
Q: Are you seeing a trend among customers to diversify their supply base, similar to Woolworths?
A: The diversification of supply base is specific to Woolworths and is not indicative of a broader market trend. Most customers already have a diversified supply mix, and we do not anticipate significant issues with other customers.
Q: What is the expected EBITDA contribution from the Bostock Brothers acquisition in FY25?
A: We expect the Bostock Brothers acquisition to contribute approximately $3 million in pre AASB 16 EBITDA for FY25.
Q: How do you see the shift to in-home dining impacting margins in the Australian business?
A: We do not anticipate significant margin impacts from the shift to in-home dining. The expected changes are manageable and have been factored into our guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
