Inghams/ING

Inghams, the big poultry company.

We sold them, a little while ago (to fund Woodside, to partially hedge out energy impacts / tail risks), which has been pleasing given the last few days of trading.

ING’s is citing some weakness in poultry volumes, not so much overall, but segmental impacts, where chicken in quick service restaurants is being substituted for chicken in home.

There’s margin impacts whenever you get large sectoral reallocations, and the headline comments around the consumer are well taken.

Also, the feedstock impacts coming through at a lower pace is pushing out some of what-would-otherwise-have-been-stronger earnings was an overhang to the stock.

It’s still quite cheap, and has retraced a lot, which means we will look on with interest.

They did buy a few assets, which meant higher capex, and thus gearing went up not down, which again take some gloss off the result, given that operating leases, when brought back on balance sheet, make ING look quite geared.

That’s not a problem when ING are paying down debt / being prudent, but if they start increasing capex, whilst the consumer slows, the market shifts its thinking from ND/EBITDA ex operating leases, back towards ND/EBITDA inc operating leases.

Final thoughts; the next half is flagged to be weaker, but if capex normalises and good progress is made on deleveraging, alongside some clear productivity gains (unlocked by the recent capex) we could be interested again.

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