Inghams Group shares have bounced back after Australia's largest chicken producer warned on Tuesday that its production and distribution had been hit by the number of staff ill with the Covid-19 Omicron variant.
Ingham’s previous market update at its AGM in November had indicated that a key feature of early FY22 had been the challenges of the extended COVID lockdowns in New South Wales, Victoria and Auckland.
The rapid spread of the Omicron variant across Eastern Australian States from December 2021 and the resulting staff shortages, are now also having a significant impact on the Australian supply chain, operations, logistics and sales performance of Ingham’s, and some of its suppliers and customers. This has disrupted production and distribution capability, and impacted sales.
While all Ingham’s major Australian sites are operational and have not experienced significant on-site transmission of COVID, they are currently experiencing significantly lower levels of staff availability. which is impacting production volumes and operational efficiency.
As a result, the company was making operational changes to volume and mix across its Australian business with no view on how long the disruption would continue. Inghams currently supplies to Australia's major supermarkets and fast-food outlets including KFC, McDonald's and Subway franchises.
The company also noted that its feed costs continue to remain elevated.
Ingham’s CEO and Managing Director Andrew Reeves said: “The operational and trading difficulties have resulted in significant operational inefficiency, additional costs and the temporary suspension of a number of Ingham’s products. Ingham’s is working closely with our customers and we are focused on supplying as much product as possible to customers while the current disruption continues. As operating conditions begin to stabilise, we expect our production capacity to recover relatively quickly to meet customer and consumer demand. We will continue to closely manage our working capital and inventory and seek to implement initiatives to minimise the financial and other impacts of COVID through the second half.”