Poultry business Inghams (ASX:ING) is well known among many investors. This is because they supply chicken, turkey and plant-based protein products to retail customers, quick service restaurants, foodservice distributors, and wholesale and export channels. Incidentally they are one of the largest producers of stockfeed in Australia.
Starting its business life in 1918, the company has facilities near all major cities across Australia and New Zealand. It has built an extensive network across all aspects of poultry production and auxiliary services. It has done this so that in their words, “reduce biosecurity risks and enables us to leverage our national network to meet our customers’ needs.”
By building out such a network they have created a strong economic moat which is not easy to replicate from scratch. It controls all stages of the chicken production and owns the chickens, the hatcheries, and primary processing plants. It contracts growers who are paid to feed the chickens and provide the sheds and husbandry (broiler farms). After all, no poultry products can be imported into Australia with the exception of certain fully cooked items from New Zealand.
Last year, core poultry volume was 463.5 kilotonnes, a slight rise on the year prior, however revenue rose 12.2% to $3bil and NPAT rose 72.1% to $60.4M. Much of this story however comes from FY2022, when the business experienced significant challenges whereby the business experienced significant challenges.
At the time, they continued to feel the after effects of the COVID-19 pandemic, chronic labour shortages, and floods in New South Wales and Queensland all had a significant impact. It also saw the outbreak of war in Ukraine, which had a significant impact on global fuel and feed prices at the time.
The result was significant supply chain disruption resulting in delays with key packaging and ingredients, transport issues arising both from truck and driver shortages and fuel levy increases due to global price growth, and carbon dioxide supply constraints in both AU and NZ.
But all the work they have put into building their partnerships, and their focus on continuous improvement including automation and plant specialisation has reaped strong results, even as soon as the next year as the FY23 result was materially better than expected, with the second…
