Inghams Faces Margin Pressure Amid Contract Changes and Rising Debt
Inghams Group Limited reported a 3.4% revenue decline and an 11.5% drop in net profit for FY25, impacted by a new Woolworths supply agreement and lease accounting changes, while maintaining stable underlying earnings and declaring an 8-cent fully franked final dividend.
- FY25 revenue down 3.4% to $3.15 billion
- Net profit after tax declined 11.5% to $89.8 million
- Underlying EBITDA pre AASB 16 stable at $236.4 million
- Core poultry volume fell 1.4%, with Australian volume down 2.5% and New Zealand up 5.3%
- Final fully franked dividend declared at 8.0 cents per share
Financial Performance Amid Transition
Inghams Group Limited has released its audited financial results for the year ended 28 June 2025, revealing a modest contraction in revenue and profit amid significant operational changes. The company reported revenue of $3.15 billion, a 3.4% decrease from the prior year, and net profit after tax (NPAT) of $89.8 million, down 11.5%. These results reflect a 52-week trading period compared to 53 weeks in FY24 and the impact of transitioning to a new supply agreement with Woolworths, which led to volume reductions in the Australian market.
Underlying Earnings Stability and Volume Dynamics
Despite the headline declines, Inghams’ underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) pre AASB 16 lease accounting adjustments remained stable at $236.4 million. Core poultry volume decreased by 1.4% overall, with Australian volumes down 2.5% primarily due to the Woolworths contract transition and softer retail demand. Conversely, New Zealand volumes grew 5.3%, bolstered by the acquisition of Bostock Brothers Limited, an organic poultry business, which contributed approximately 40 basis points to group volume growth. This acquisition aligns with Inghams’ strategy to strengthen its premium market positioning in New Zealand.
Lease Accounting and Cost Management
A significant factor influencing reported EBITDA was the accounting treatment of leases under AASB 16. The conversion of contract growers to variable performance-based contracts and the acquisition of the Bolivar processing facility led to a $60.8 million reduction in lease-related costs. While total costs increased slightly by 0.8%, internal feed costs declined by $57.2 million due to lower feed input prices, partially offsetting inflationary pressures and acquisition-related expenses. The company also achieved a reduction in selling, general, and administrative expenses by $26.2 million, reflecting ongoing cost management efforts.
Balance Sheet and Financing
Inghams’ net debt rose to $430.4 million, up $82.5 million from the previous year, driven by capital investments including automation projects and the Bostock acquisition. The company successfully refinanced its syndicated finance agreement in November 2024, increasing facility size by $200 million and extending maturity by approximately 2.4 years. This refinancing provides enhanced financial flexibility to support ongoing operational improvements and strategic growth initiatives.
Dividend and Leadership Changes
The board declared a fully franked final dividend of 8.0 cents per share, payable on 1 October 2025, maintaining a full-year payout ratio of 72.7% of underlying NPAT. Executive remuneration outcomes reflected the company’s financial performance and strategic transitions, with downward discretion applied to the former CEO’s short-term incentive. Edward Alexander assumed the CEO and Managing Director role on 29 June 2025, signaling continuity and a focus on executing the company’s growth and sustainability strategies.
Sustainability and Strategic Outlook
Inghams continues to prioritize sustainability, operational efficiency, and premium product growth. The company’s environmental management system and animal welfare commitments remain integral to its strategy. Investments in automation and capability development aim to enhance productivity and meet evolving consumer demands. The integration of Bostock Brothers and the expanded finance facilities position Inghams to navigate market challenges and capitalize on growth opportunities in Australia and New Zealand.
Bottom Line?
As Inghams adapts to shifting supply agreements and market conditions, investors will watch closely how underlying operational momentum translates into future growth and profitability.
Questions in the middle?
- How will the new Woolworths supply agreement impact Inghams’ volumes and margins in FY26 and beyond?
- What synergies and growth prospects does the Bostock Brothers acquisition unlock for Inghams in New Zealand?
- How will the recent refinancing and increased leverage affect Inghams’ financial flexibility and cost of capital?
