Plenty to chew on for food providers as inflation rises

From the champagne quince paste to the humble roasted chook, consumers will have to get used to paying more for their favorite morsels as inflation bites.

From the champagne quince paste to the humble roasted chook, consumers will have to get used to paying more for their favorite morsels as inflation bites.

For ASX-listed food companies, it’s not so much about raising prices, which seems inevitable, but whether they can do so to the extent that they recover costs without severe long-term impact on their market share.

Several small and mid-caps have already warned of a hit to current-year earnings from entry cost pressures.

Supply chain issues related to the pandemic, labor shortages, fuel costs and weather have all been mentioned in dispatches, while the chicken farmer Ingham (ASX:ING) mentions chicken feed costs which are apparently anything but chicken feed.

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Gourmet food and basket provider Maggie Beer Holdings (MBH) it stepped in with about a 32 percent downgrade from its full-year underlying profit, citing higher import and freight costs, among other concerns.

The company estimates that it can maintain full-year sales at $100 million, but earnings before interest taxes and depreciation are expected to be $9.25-10.5 million instead of $13 million. .5-15.5 million dollars previously anticipated.

“We just had a lot of problems in the last couple of months,” laments Chantale Millard, head of Maggie Beer.

Millard says the company posted price increases in February, the amount of which varied across product lines. “We had the usual argy-bargy (with supermarkets), but they’ve all passed,” she says.

It’s a case of so far so good, with broader industry data suggesting consumers are accepting price increases without complaint.

“They’re not cutting back in the same way they’ve been in the US or the UK, but we’ve taken that into account when pricing,” says Millard.

Shares of Maggie Beer fell 13 percent after the downgrade announcement.

But the company has some pricing levers it can use to restore profits, especially in its growing, high-margin hurdle business.

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Maggie Beer will also benefit if consumers tighten their belts; they will not literally because they are consuming less fine cheeses and pâtés.

Rather, they are more likely to forgo dining out in favor of in-house entertainment, spending a bit more on a premium item for the cheese platter.

Broker Taylor Collison opines that with zero debt and a healthy cash balance, Maggie Beer is trading at an attractive discount.

The company values ​​the shares at 63 cents, a premium of about 65 percent to the current price, with the prospect of a final dividend being declared in August.

On the chicken front, broker Goldman Sachs reckons Ingham’s poultry feed bill has risen by a not-so-insignificant third since June last year and by 8 percent in the last three months.

The company has a dreaded “sell” call on the stock. But since chicken is an affordable and sustainable source of protein, Ingham’s should continue to rule the roost as the nation’s largest integrated poultry producer.

At his AGM this week, Costa Group (ASX:CGC) reported strong prices for its key mushroom and tomato lines, and its local and international berry business also paid off, financially and literally.

The company did not offer earnings guidance, but a clumsily reworded disclosure was interpreted as such.

As the country’s largest fruit and vegetable producer with operations in China and Morocco, Costa’s advantages of scale allow it to move scarce workers around its sites and ensure a reliable supply to supermarkets.

That said, Costa shares have withered by almost a third in the past 12 months with the sins of the past weighing on the stock.

The good news, for some, is that a glut of avocados has pushed prices down, so perhaps aspiring first-time homebuyers can pay for their lunches at downtown cafes and reclaim house keys. after all.

Read more from Tim Boreham at butt.

This story does not constitute advice on financial products. You should consider obtaining independent advice before making any financial decisions.


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Originally published as Stockhead: Plenty to chew on for food suppliers as inflation rises

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