Australia's largest chicken supplier has inked a new deal with the nation's biggest grocery chain, but its margins remain under pressure from ripple effects of the Iran war.
Inghams reached an in-principle, long-term supply agreement with Woolworths, which would extend the two companies' relationship into the 2030s, Inghams chief executive and managing director Ed Alexander said.
"For Ingham, this obviously represents a significant step forward, supporting our long-term planning, investment, and the continued development of our Australian operations," he told shareholders at the group's annual meeting in Sydney.
“While the commercial terms remain confidential, we are pleased with the agreed volumes and key terms, which provide a strong foundation for our ongoing partnership," he said.
Despite the good news, the poultry producer has trimmed the upper end of its forward operating income guidance range by $10 million, targeting between $155.0 million and $170.0 million.
Higher freight, feed and packaging costs due to Middle East oil supply disruptions continued to pose a challenge to the company's bottom line, chair Helen Nash said.
"Inflationary pressures remain a feature of the Australian business environment and are stubbornly high, exacerbated by the current Middle Eastern conflict, which is being mainly felt through higher fuel and packaging costs," Ms Nash told shareholders.
The group's updated guidance assumed additional transport and packaging costs of $30 million, and $40 million to $50 million of higher feed input costs.
Inghams predicted core poultry volume growth of up to four per cent, a progressive recovery in wholesale pricing into 2027, and capital expenditure of $80 million.
Volumes and pricing outcomes were tracking better than forecasts from RBC Capital Markets, but analyst Michael Toner said the market was likely to focus on the guidance downgrade.
Inghams' share price initially spiked more than two per cent in early trade before easing to a 0.9 per cent dip to $2.22 as the chair and chief executive took questions from frustrated shareholders.
After a series of underwhelming results, K Capital's David Kingston asked if the company would consider a takeover bid to improve shareholder value.
"It is obviously very disappointing to see that the earnings this year are dramatically down, and they just seem to be ongoing disappointments, to be frank, with this company," Mr Kingston said.
The chair said no takeover offers had been made, but noted any approach would be taken seriously and any merits or disadvantages would be looked at "through the eyes of shareholders".
"What I can confirm, and we've confirmed in the past, is that we have had no formal approach, and we are not in discussions about the sale of this business," Ms Nash said.
"We are focused on delivering Horizon (strategy) and improving the returns to shareholders."
Ms Nash also provided an update on bird flu, noting the company had made significant investments into biosecurity measures, surveillance and scenario planning, and no outbreaks had impacted its industry or operations.
