Tegel says earnings on track to increase

Chicken consumption has doubled in the past 16 years. Photo / Getty.

Tegel Group, New Zealand's biggest poultry producer, reiterated that it expects this year's underlying earnings to be ahead of last year's as it benefits from population growth and protein competition that still favours poultry.

"Domestic volume and market growth is underpinned by increased poultry consumption of around 5% since 1990. We see those trends continuing and they will impact favourably on our business," chief executive Phil Hand said in speech notes published before the annual meeting.

Tegel has a 52% domestic market share and it expects to retain that position in the current financial year.

According to Tegel, chicken is a much "more affordable option for consumers" than beef and lamb and now commands 53% of  "share of plate", double what it was 16 years ago.
The Auckland-based company reported underlying earnings before interest, tax, depreciation and amortisation rose to $75.6million in the 53 weeks ended April 30, from $74.9million in the year-earlier 52-week period, in late June.

Tegel launched new branding and packaging this year and "will continue to drive free range expansion which attracts higher margins," Mr Hand said.

Free range product growth increased 28% year-on-year in the 53 weeks to April 30.

The company is forecasting capital expenditure of around $30million in FY18 across a range of initiatives including a hatchery expansion in New Plymouth, brand investment and new product innovation. It launched 29 new products in the past financial year and "new product development is a major focus for us," Mr Hand said.

Export market plans include new range launches in the second quarter in Australia and shoring up market presence across the Tasman, and building its position in Asia and the Middle East. Tegel will launch its first products in Bahrain in the first quarter. It will also seek in-market partners in Japan and to gain market access in Singapore, Korea and Taiwan.

Its aim is for export revenues to represent about 25% of total revenues in four years. In the past financial year, export revenue was $103million while total revenue was $614million.

The poultry group, taken public by private equity firm Affinity Equity Partners, first traded at $1.69 in May last year, having sold in the initial public offering at $1.55 apiece.

The shares last traded at $1.23 and have fallen 26% over the past 12 months. Affinity was the second buyout firm to own Tegel, having acquired the business in a leveraged buyout from Pacific Equity Partners and ANZ Capital early in 2011. PEP had, in turn, bought Tegel from HJ Heinz in 2005.