Higher costs are threatening the bottom line at major chicken supplier Inghams Ltd (ASX: ING), with the company's shares hitting a 12-month low on the release of a trading update.
So with the stock out of favour and well below its high over the past year of $3.90, could it be time to buy back in?
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Trading well but costs bite
Inghams managing director Ed Alexander said on Wednesday that while trading was solid, costs had been an issue for the company.
As he said in a statement to the ASX:
Market fundamentals have developed favourably over the first 18 weeks, with stable demand, volume and materially improved wholesale pricing tracking in line or ahead of our FY26 outlook provided in August. At the same time, we have experienced higher than expected operational costs in Australia across farming and processing operations which arose toward the end of FY25. These factors will weigh on first half earnings, however, we are taking decisive corrective actions, and the early results are encouraging.
Mr Alexander said combined with benefits from the company's organisational restructure, they remain confident of a "a significantly improved second-half performance that will set us up for long-term sustainable growth''.
The organisational restructure, which took place early in the company's second quarter, created three new divisions while removing layers in the business, and was expected to deliver $8-$10 million in annualised cost savings, the company said.
More broadly the company said it was on track to deliver $60-$80 million in annualised cost savings across the business, in line with previous guidance it has given.
With regard to the company's full year profit expectations, Inghams said it reaffirmed its underlying EBITDA guidance of $215-$$230 million, although this would be heavily weighted towards the second half of the year.
The company said:
First half 2026 Underlying EBITDA … is expected to be approximately $80 million, reflecting the short-term impact of the operational cost pressures before the full benefit of the company's corrective actions take effect.
Risk to forecasts
Analysts at RBC Capital Markets ran the ruler over the market update, and said overall it was negative for the shares.
The first half guidance came in at about 18% below their expectations of $97.8 million, and 17% below consensus estimates.
There was also risk the full year result would not eventuate, as they wrote in a note to clients:
The achievement of FY26 guidance hinges on Inghams' ability to drive significant operational improvements over a short period of time, as well as an improvement in volumes and a continuation of other key market fundamentals.
That said, RBC has a price target of $3 on the shares, well above the $2.41 the shares were changing hands for on Wednesday, down 0.2%
The stock traded as low as $2.27 on Wednesday morning – the lowest level over the past year.
