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Chicken glut hits Tegel's earnings

NZ Newswire logoNZ Newswire 14/12/2016 Paul McBeth

A glut of chicken keeping domestic prices low has hit Tegel Group Holdings' first-half earnings.

Earnings for the poultry group taken public by private equity firm Affinity Equity Partners in April over the period fell by 4 per cent.

Underlying earnings before interest, tax, depreciation and amortisation fell to $35.1 million in the six months ended October 23 from $36.6m a year earlier, it said.

Revenue rose 4 per cent to $296.3m, lagging behind a 6.9 per cent increase in the volume of chicken products sold.

Tegel warned that glut of chicken would probably continue through the second half of the financial year, and while domestic prices will likely increase, any gains would be offset by higher freight costs after the Kaikoura earthquake disrupted the main trunk line through the South Island.

The poultry firm expects annual underlying ebitda of between $75m-$85m, having previously projected proforma earnings of $84m for the 2017 year.

"We have seen a period of lower domestic pricing this year," chief executive Phil Hand said. "This has been due to excess volume in the local market. We are, however, expecting some recovery in prices in the second half."

Tegel's net profit more than doubled to $15.1m, though the year-earlier period was when the firm was privately owned and included $19m of finance costs. The company also lowered its guidance for annual profit to a range of $33m-$41m from $44m forecast in the offer document.

The board declared an interim dividend of 3.45 cents per share.

"The company is forecasting further growth in international markets through new products, existing customer growth, new customers and additional sales channels," it said.

The shares last traded at $1.55, unchanged from the price they were sold at in an initial public offering in May.

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