Bird flu worries send this ASX 200 stock diving 17%

Some investors are jumping away from this stock.

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The Inghams Group Ltd (ASX: ING) share price is currently down 6.5% amid concerns that the S&P/ASX 200 Index (ASX: XJO) stock could be somehow exposed. At one point it had fallen 17% between the day's high and low. The company has reassured investors it is not affected.

As the largest poultry producer in Australia, investors are paying close attention to what this could mean for the company.

Bird flu detected near Ballarat

According to reporting by the ABC, Agriculture Victoria has confirmed that avian influenza has been detected on a farm in Victoria's west, at an egg farm near Meredith, south of Ballarat.

The property has been put into quarantine and samples have been sent to the Australian Centre for Disease Preparedness. Tests will be carried out to determine what the strain of the disease is.

This is reportedly the first time the virus has appeared in Australia in four years.

The ABC reported that consumers "should not be concerned about eggs and poultry products from the supermarkets — they do not pose a risk and are safe to consume."

Inghams response

This afternoon, Inghams commented in an ASX announcement noting it has no commercial broiler farms located in the affected region and "there is currently no impact to Ingham's operations or its supply chain, and the company continues to supply the market as usual".

Inghams pointed out that the Victorian Department of Agriculture has quarantined the infected farm and implemented an exclusion zone around it. The Department of Agriculture is also undertaking a disease investigation, which includes "detailed tracing of all movements related to the infected farm".

In response to these developments, the ASX 200 poultry stock has implemented "enhanced biosecurity measures", in addition to its "already strict standard protocols" throughout its Victorian operations. Those measures include restricting access to all Victorian operations, for both the livestock and processing.

What next for the Inghams share price?

The ASX 200 stock has risen around 11% since the low of $3.22, so investors seem more confident about the situation. Time will tell if this has been limited to just one location in Victoria.

Assuming no worsening of the situation, investors may shift their focus to Inghams' financial performance in the upcoming FY24 result.

In the FY24 first-half result, the business said its group core poultry volume was up 2.2% to 240.8kt and revenue increased 8.7% to $1.64 billion. An improvement in costs and margins helped underlying net profit after tax (NPAT) grow by 134.2% to $62.3 million.

However, the ASX 200 stock said market conditions for consumers in the second half of FY24 were expected to remain "challenging" underpinning the shift being seen toward in-home dining and away from the out-of-home channels of fast food restaurants and food service.

The business said in February that based on current market pricing, it's expecting some benefit from lower key feed costs in FY25.

Despite today's decline, the Inghams share price is up around 20% in the last year, as the chart below shows.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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