Discourse from the Bourse

The market ate up the profit upgrade from poultry producer Ingham’s on Friday after the company said it can beat consensus views from analysts of its 2020-21 revenue and earnings.

The company told the ASX that based on its understanding of current consensus forecasts in the market and its operating performance so far this year, it expected underlying earnings of around $203 million to $213 million, while net profit would be in a range of $96 million to $103 million.

This view is due to the receipt of a research and development tax credit, better operating efficiencies throughout the year and a stronger second half given disruptions due to the COVID-19 pandemic had materially eased in the second six months of the year.

Thanks to Covid, Ingham’s 2019-20 results were slashed – underlying earnings fell 14% to $179 million and net after tax profit dropped 68% to $40 million.

So the update on Friday showed a doubling in net profit and it’s no wonder the shares had a good day out, jumping 8.6% to close at $3.41, a two month high.


Interim earnings and profits might have plunged at almond grower Select Harvests but the market absorbed the news on Friday and the shares hardly moved.

The company told the ASX it had to withstand a sustained drop in the almond price, thanks to a surge in the size of the Californian crop and expectations of more to come this year. That was despite the company itself producing a big crop.

Profits at the business dropped 92.5% to $1.3 million for the six months to March 31, while earnings before interest, tax, depreciation and amortisation fell 63% to $12.8 million.

This was all down to almonds being priced at around $6 a kilo, compared with $7.50 last year. CEO Paul Thompson said pricing depends on the size of California’s almond crop, which had been very strong over the past year.

“With a record breaking 2020 Californian crop and a USDA Subjective Almond Estimate indicating another large crop this year, we are anticipating low levels of pricing for the remainder of 2021. The ongoing focus for 2021 is to ensure we maintain our horticultural practices to deliver another strong 2022 crop,” he said.

The business declined to pay a dividend for the half year because of the challenging international conditions for almonds.

The shares fell 1% to end at $5.90.

Mr Thompson said in the statement to the ASX “As anticipated, lower global almond prices have negatively impacted earnings, delivering a first half financial result well below recent prior periods.”

“The company remains focused on factors within its control such as almond volume, quality and operational costs. As a result, the company estimates delivering another large, high-quality crop of 28,250 MT at a cost per kg close to last year.”

“Given the 1H FY 2021 result, the Board has determined not to pay an interim dividend. Following the completion of the FY2021 accounts the Board will review the options of making a year-end dividend payment,” he said.


Market gossip earlier in the week was spot on as Betmakers Technology Group revealed a $4 billion paper and cash offer for the wagering and media businesses of Tabcorp.

Betmakers’ major shareholder is Matthew Tripp who started SportsBet in Australia and the BetEasy and bought into Betmakers in February in a $25 million deal.

Market rumours have been rising in the past month that he would get involved with Tabcorp’s wagering and media businesses and on Friday he did that.

The non-binding offer would involve a $1 billion payment to Tabcorp, and the $3 billion worth of Betmakers shares to be issued would be at a 15% premium to what they are trading at prior to signing of the deal.

Betmakers said its proposal would involve the shares being distributed to Tabcorp shareholders so they could convert their holding in Tabcorp to a new interest in the combined companies.

Chief executive of Betmakers Todd Buckingham said the combined businesses would represent a “compelling investment proposition as one of the most broadly deployed racing networks in the market”.

The companies will now work together on an indicative proposal to put to shareholders.

Tabcorp shares closed at $5.17 on Friday, up 5%. Betmakers shares were hammered, slumping 16.25% to $1.34. Existing shareholders don’t want to be diluted by the planned boost to the number of shares on issue if the Tabcorp deal goes ahead.

It won’t because there are two offers in the mix – the UK group’s $3.5 billion cash offer on the table and Apollo has its $4 billion cash offer and cash always wins, especially when someone wants part of another company and not the whole company.

The $4 billion offer is for the wagering, media and poker machine monitoring businesses of Tabcorp. There is a second offer at $3.5 billion for the wagering and media operations.

That is the same price UK gambling group, Entain has made for the wagering and media businesses.

Tabcorp has a review of its assets underway – now it has an auction underway and the top price, and cash always wins.


Shares in iron ore miner Fortescue Metals Group eased on Friday despite the strong day in the wider market because the company revealed the second serious cost overrun on its Iron Bridge magnetite mine in the Pilbara.

The miner on Friday told the ASX on Friday that it had completed a full-scale review into Iron Bridge project and warned investors it could now cost as much as $US3.5 billion ($4.5 billion) – up from a $US3 billion estimate given in February and the initial $US2.6 billion in 2019.

That’s a 38% rise in the cost of the project which is designed to produce 67% Fe concentrates for the Chinese steel mills (2% higher in iron content than the 65% fines from Brazil).

Fortescue blamed the increase in costs to WA’s constrained labour market, the strong Australian dollar and “project-specific” factors.

“Iron Bridge represents a strategic investment with compelling returns,” Fortescue chief executive Elizabeth Gaines said in a statement to the ASX.

“Completion of the technical and commercial assessment of the Iron Bridge project has confirmed the optimal transportation solution, while also addressing contractor and logistical constraints, managing capital costs and confirming first production by December 2022.”

Fortescue said its joint venture partners in Iron Bridge, Chinese steel giant Baowu and Taiwan’s Formosa, are yet to approve the higher cost estimate published on Friday.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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