Ingham’s hopes for sales bump from tax cuts amid warnings of further price hikes as feed costs remain high

Prices of chicken fillets, nuggets and burgers could increase again after one of the country’s major poultry producers warned further hikes were likely despite overall inflation slowing. Ingham’s on Friday said feed costs for poultry, other ingredients, wages, electricity and repairs and maintenance expenses were growing, which would necessitate further price hikes where needed. Ingham’s is a major supplier to McDonald’s, KFC, Woolworths, Coles, Aldi, Metcash and Subway. Ingham’s and major rival, privately-held Baiada Poultry, which operates the Lilydale and Steggles range, supply about 70 per cent of the nation’s meat chickens, according to the Australian Chicken Meat Federation. Further price hikes for its supermarket customers will likely be unwelcome as they battle four separate inquiries into prices. Coles said earlier this month it received about 73 supplier price hike requests per week in the 2023 financial year. While expecting price hikes would “decelerate” from levels seen in the past 18 months, Ingham’s chief executive Andrew Reeves told analysts feed costs for poultry were likely to remain elevated over long-term averages. “Price increases are never easy and none of our customers ever like it when we take the price increases, but it’s our job to responsibly engage with them when they are necessary and when we need to recover costs,” Mr Reeves told analysts. “It’ll definitely moderate . . . I don’t think we’ll be seeing the level of increases we’ve seen over the last couple of years as inflation comes off. “But there will definitely be opportunities for some price increase and we’ll continue to pursue those where it’s relevant.” He added there had been a significant lift in farming conditions across its network and supply was returning to “pretty healthy” levels. The company said though the price of key feed ingredients had stabilised in recent months, Australian wheat pricing was adjusting at a slower rate than international pricing. As a result, it does not expect significant benefits from lower key feed costs until next financial year — but overall the costs would remain elevated against long-term levels. Ingham’s reported after-tax profit for the first half of the financial year was up 268.8 per cent on a year ago to $63.4 million, core poultry sales volumes rose 2.2 per cent. Australian sales volumes were up just one per cent, which Mr Reeves said reflected changes in where products were being bought — more in supermarkets for cooking at home rather than in quick service restaurants. “If you talk to our QSR customers, they’ll talk about the fact they’re having issues with visitation, or foot traffic, and the size of transactions,” he said. “There’s definitely a softening of demand in that channel.” Mr Reeves added he expected some return in demand in all channels from impending income tax cuts in July. Ingham’s reported a fall in its feed revenue due to the closure of its Wanneroo feedmill in Perth’s outer north in April last year, while it opened a new distribution centre in Hazelmere, in the city’s north-east. Investors punished Ingham’s, with its shares down 14.4 per cent to $3.70 just before 10.30am. UBS analyst Evan Karatzas said while the results were strong, a focus would remain on potential tailwinds of feed cost issues into the 2025 financial year.