Ladies and gentlemen, thank you for standing by, and welcome to Inghams Group Limited first half results conference call. At this time, all participants are in a listen-only mode. Today's call will include the question and answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you that this conference is being recorded today, Thursday, 22nd of February, 2018. I'd now like to hand the conference over to your speaker host today, Mr. McMahon, CEO of Inghams Group. Thank you, sir. Please go ahead.
Thank you. Good morning, everyone. Thank you for joining the results call for the first half. With me today is Ian Brannan, our CFO, and Janelle Cashin, our Chief Operating Officer. I'll run through the key points this morning, and Ian will cover the financials, and we'll make sure there's plenty of time for questions. In short, we've delivered some pleasing results. We're delivering on our strategy. We're seeing growing volumes and earnings and very strong cash flow. In particular, in Australia, where we're cycling the EDLP initiatives from customers in FY 2017, we've continued to see growth in chicken and turkey, and overall for the business, we grew core chicken and turkey volumes at 3.7%, so that's excluding ingredients. We are seeing rising energy and feed costs, and we're either offsetting them or being able to pass them through to customers where we can't offset them.
We've seen price increases across all channels and into customers that account for the vast majority of our volume. Very pleased with the New Zealand performance, driven by strong growth in poultry and recovery of dairy feed volumes in what's a challenging competitive market. We are performing well over there. As I said, we generate very strong cash, supported by some targeted asset sales as we implement our strategy, and that's seen us reducing our leverage ratio down below one. In terms of Project Accelerate, we're now three or so years into that five-year strategy. It continues to deliver in line with our expectations. We're seeing those benefits flow through in areas like improved yields, reducing costs, and improving utilization of our assets right across the network.
We're very pleased with how that is tracking, and we're also turning our mind now to other areas of opportunity in farming, Further Processing feed, and so on. We continue to maintain capital investment into the business to both expand capacity and improve our efficiency. The South Australia hatchery and breeder investments are on the ground, fully operational. The new feed mill in South Australia is progressing well to be commissioned in the second half of the calendar year. We just opened our new Queensland Distribution Centre, and we've acquired an existing feed mill in Queensland to complement our existing capacity. A lot going on in the business and a lot of investments continuing to be made. Turning to the financial highlights. Overall poultry volumes are growing and excluding ingredients growing at 3.7%.
As we've said in this business, revenue is not a good indicator of activity because it's influenced by things like feed prices, the lagged effect of falling feed prices, and also in this particular half, reduced third-party feed volumes as we focus on profitability in that segment within Australia and cycle the effect of one contract loss in Victoria from a year or so ago. Very strong financial performance off the back of that growth in poultry volumes. Gross profit increasing 6.1%, EBITDA up 22%. Stripping out the effect of asset sales and restructuring, underlying EBITDA up 14.8%, and net profit after tax increasing 28.1%, and that's put us in or contributed to a very strong cash position and reducing our net debt significantly down and our leverage ratio below 1.
Earnings per share at AUD 0.177. The board declaring an interim dividend of AUD 0.095 per share. Just reconfirming, though, that across the full year, our dividend policy remains unchanged, an intention to pay out in that 65%-70% range. All of that taken together and the cash that we've generated and sitting on the balance sheet puts us in a position where the board has seen fit to consider capital management options. We'll be taking some soundings from investors over the next few days on those options and progressing them over the next few months. Turning to Australia, where we saw most of that EDLP activity in the prior period a year ago. We saw poultry volume, excluding ingredients, up 2.7% in Australia. We are seeing those price increases across all channels. Plays out differently in the different segments.
Flow through very quickly into the wholesale channel, which is effectively a weekly spot market, and then depending on the various contractual arrangements that we have in place with customers, it flows through. In different ways to our key customers. As I said earlier, somewhere north of 60% of our volume has seen price increases over recent weeks and months. We are seeing the Accelerate benefits come through in improving the profitability within Australia. We've also seen a return to growth in premium penetration of products like free-range, as we get past the EDLP launches from last year, which, if you like, drowned out a lot of the premium propositions. Wholesale market prices have strengthened significantly, which reflects the fact that smaller competitors, in particular, see increases in feed prices before we do. Probably not procuring energy in the same way we are.
They're subject to those cost price pressures before we are, and we tend to see it first in the wholesale market. As I said, within Australia, we're cycling a third-party customer loss from a year or so ago. Excuse me. We're also seeing some lower demand from smaller chicken feed customers as those feed prices flow through. Within New Zealand, it's a mix, if you like, a very strong performance from our business there in what we would describe as a return to some of the challenging market conditions across that half. We are, to some extent, cycling a relatively soft performance from a year ago in New Zealand, also pleased with the progress that we've made both in growing our poultry volumes and supported by recovery in dairy feed volumes as dairy demand has increased in that market.
A lot of focus continues into the higher value products like free-range Waitoa and in continuing to drive improved operational performance within that business. In particular, very pleased with the working capital performance in our New Zealand business and in fact in Australia as well. In New Zealand, we run a very tight and disciplined business with inventory well in control and a very fast cash conversion cycle. A lot to be pleased with in our New Zealand business, despite some of the challenges in the marketplace there. With that, I'll hand over to Ian to run through the financial results themselves.
Thanks, Mick, and good morning. On page eight, you can see the profit and loss. The earnings performance has been pleasing for the first half, with EBITDA 22% ahead of the comparable period last year. This includes the profit on sale of the Wanneroo property of AUD 14.1 million. That's been offset by AUD 6.8 million of restructuring. That restructuring related to redundancies in both New South Wales and Victoria, and also breeder farm exit costs, predominantly in New South Wales. A reconciliation of this underlying EBITDA, which excludes both those items, can be seen and detailed on page nine. The gross profit of the business continues to improve. This reflects the benefits that we have driven by Project Accelerate with efficiencies and cost reduction.
If you look at the net profit after tax, that grew 28% versus the corresponding period last year. This included a one-off tax credit of AUD 3.1 million. That follows a settlement of an historical dispute that originated whilst in family ownership. Page nine, as I mentioned, shows the reconciliation of the underlying EBITDA to the statutory EBITDA I referred to earlier, and also highlights the underlying group EBITDA in Australia, EBITDA margins. If I move to page 10 on cash flow and balance sheet, we've had a very strong cash period, as Mick mentioned earlier. This has driven net debt to AUD 193.3 million. Tight working capital management contributed approximately AUD 27 million in the period, and the business had an overall operating cash conversion ratio to EBITDA of 110.5%. A great result.
This, together with the proceeds from the Wanneroo property and CapEx spend in line with our expectations, drove the leverage ratio to below 1 at 0.9x. With that, I will hand back to Mick.
Thanks, Ian. A quick update on our strategy. A reminder that our focus is on ensuring that Inghams is as good as anyone in the world, and a genuine world-class food company. We believe we're making very good progress towards that, but the more we look at some of the best-in-class operators in Europe and other parts of the world, we can still see a lot of room for improvement in the business here. On Project Accelerate itself, our focus hasn't changed. We're now somewhere around three years into that five-year strategy, with the benefits flowing through in line with expectations. Some ups and some downs on the various initiatives, but overall on or slightly ahead of where we expected to be.
We're also starting to focus in on some of those other opportunities, as I mentioned, areas like farming, feed, and so on. On the initiatives themselves, we are seeing automation, the capital investment that went into the plants, particularly in primary processing, delivering those improved yields and lower labor costs through our key primary processing plants. We're continuing with that initiative into our New Zealand plant, and then through into some of our smaller plants, FP and the like. We also see a lot of opportunity still in streamlining processes within our plant, debottlenecking our plants, and so on. We do a very good job, but we still run relatively complex plants compared to other parts of the world. We're pleased to say that we've completed all the major EBA renegotiations and locked in the flexibility and opportunities for improved labor productivity that we were looking for.
We're now moving through to focus on some of the smaller EBAs, areas like maintenance agreements and the like. You never quite finish that, but the major EBAs are locked down, and we're delivering benefits against them. We've had a lot of support from our people in general for that process. In terms of network rationalization, following the closure of the plant in New South Wales some 18 months or so ago now, we continue to grow volumes into Queensland and South Australia, supported by the capital investment we've made in those markets in recent times, and consequently reducing activity in New South Wales and a little bit of production in Victoria. Other initiatives in areas like procurement, turkey, and supply chain, all tracking as we expect. As I said, the capital investment continues to flow into the business.
Turning to energy and feed prices, we give you a little bit of color on that. We still see some energy cost increases ahead of us. For instance, gas prices in the market at the moment, some 30% higher than our current contractual arrangements. Who knows what they'll be by the time we get to December 2018, but just as an indicator of where the market is now. Similarly, with electricity, we're well covered through to the middle of this year. We have a progressive procurement approach in place for FY 2019, but in the end, as a large energy user, we'll be impacted by whatever happens in the energy markets through that time.
I guess the only encouraging thing in that is that all industry participants face the same challenge, and we're seeing that evidenced in flow-through to market price increases in recent times, the last three or four months in particular. We'll continue to focus on offsetting those increases, of course. We're not really in the business of passing on price increases unless we have to. We are able to do that where we do have no option. The benefit of a lot of the recent capital investment is that it does come with a lower energy usage, particularly in areas like DCs and a number of our farms and the like. We should, from a competitive point of view, get some benefit from that new investment as well. Feed prices are up in general. They can move up, they can move down, remembering that we're majority Australian wheat.
It's been a dry summer, and Australian wheat prices tend to be higher, particularly in Queensland, New South Wales regions. Our forward coverage extends about roughly nine months. We will start to see some of the feed price increase of the last six or nine months flowing through over the next little while. Again, we're seeing market pricing move to reflect that. We are seeing some of the smaller feed customers who don't have the balance sheet, or they're not covered forward, starting to feel the pressure as some of those rising cost prices, particularly on feed. Within New Zealand, feed prices tend to be a little bit more stable. A fair bit of the feed is imported, but there are some rising price pressures there, but not to the same extent as in Australia.
On feed itself and a brief update on what we're doing with feed, a reminder that we're focusing on self-sufficiency, so provision of feed for our own use, chicken and turkey, and in doing so, improving mill utilization and making sure that third-party sales are profitable where we engage in them. The South Australian feed mill well progressed. As I said, we've acquired a smaller mill, existing mill at Wacol in Queensland, and that will take us to self-sufficiency in Queensland as well as South Australia, and we're progressing a new feed mill in WA as part of both WA expansion, taking Western Australia towards self-sufficiency in chicken production and ensuring that we can cover our own requirements over there. Both our dairy feed business in New Zealand and Mitavite, the horse feed business here in Australia, perform well.
They operate to a different dynamic, less influenced by increasing input prices. We'll continue to work through a number of improvement opportunities within the commercial stock feed business. Turning finally to outlook. In summary, our strategy implementation remains on track. We're pleased with the momentum that we take into this half. We will continue to face challenges of rising input costs, but we expect to be able to address them in the same way that we have over recent times. A reminder that last year was a 53-week year, and it changed the end dates of the halves. As we revert to a 52-week year this year, the first half seasonality, which is more normal in the business, will be a little more evident compared to last year.
We've talked about the New Zealand market. We believe we're managing that market dynamic as well as we can. Some challenges remain in that market. As I say, in terms of third-party feed customers, they may struggle if feed prices continue to rise in terms of impact on volume. There are some further asset sales in the second half. There may be some further restructuring costs as we progress our strategy. As we've said, our objective is to have restructuring costs covered by asset sales or other initiatives as we implement the strategy. Capital management options I've talked about. We'll work through that over the next half and just confirming that the dividend policy remains unchanged. With that, I'll stop there, and we'll hand over for questions. Thank you.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question now, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Your first question comes from the line of Craig Woolford from Citig roup. Please go ahead.
Morning, Mick. Morning, Ian.
Hey, Craig.
Morning, Craig.
Can I just clarify the, I guess I'm interested in the performance on poultry volumes, the underlying performance ex ingredients. How do you feel that was compared with market growth, particularly in Australia? Because the 2.7% you had is a good result, but below where we've typically seen industry growth on poultry in Australia.
Yeah. Excluding ingredients, which I can explain if anyone wants me to, yeah, we think that was a pretty good result. I would suspect it's either at or better than the market, I can't demonstrate that, I would judge that it's better than the market. The reason for that is that we're cycling all those EDLP initiatives when a lot of product was produced, and probably overproduced in response to a lot of those initiatives last year. The volume still gets cleared through, if you like, because it ends up being cleared through wholesale channels or export channels. We're seeing a tightening of supply through into wholesale channels, for instance. My judgment is that that's at least as good as the market as we cycle those initiatives and probably a bit better.
Yeah. Okay. Then you talked about challenging market conditions in New Zealand. You've delivered 7% volume growth, 3% revenue growth and 24% EBITDA growth. Which bit's challenging?
It's a fair question. It's more the dynamic and that competitors over there are probably long on production and long on inventory, and so we're having to sort of navigate our way through that. We think we're navigating our way through that market dynamic reasonably well, as evidenced by the numbers, but it's just a cautionary note.
Okay. Thank you. Depreciation was up 25% in the first half. The add total property plant and equipment was actually down slightly. What's the reason for such a step-up in depreciation?
It's the impact of the capital expenditure. If you look at last year, Craig, we had a pretty hefty year where we spent quite a bit. Although some of that was third party, we did have a lot of P&E that went through into those capacity expansions. That's the key driver of it.
Does it have a shorter average life or something?
Yeah. It's not your typical 10 years. It can be anywhere from five to seven years for some of that equipment.
Okay. Great. Thanks, guys.
Thank you.
Thank you. Your next question comes from the line of Paul Vai from Credit Suisse. Please go ahead.
Morning, guys. First one from me, just a quick one on the underlying EBITDA. You guys obviously showed the rec between kind of reported and underlying. I just wondered at the segmental basis and reading through that reconciliation, is it fair to say that the difference between underlying and reported would all sit in Australia, or is there some of that New Zealand as well? I.e. just the divisional splits by underlying, if you've got it.
Yes. It's all Australia.
Got it. Easy. Okay. Thank you.
Yeah.
Second one, just, I think it was sort of midway through last year, you guys mentioned the expansion of your WA operations. My question is how is that going and more broadly, I suppose, opportunities in terms of expansion or increased penetration across your customer base. Are there any opportunities out there, I guess, beyond sort of the market and the efficiency of the business?
First of all, in terms of WA expansion, the main focus of that expansion is on meeting our own local demand in WA. At the moment, as an indication, 50%-60%, maybe a little bit more of our own product is produced locally, and the rest comes in typically from South Australia. As we build up our volumes in South Australia, we can still support that, but to handle future growth, it's more efficient to do that out of Western Australia, effectively take the plant, for instance, from one shift to two, and focus that South Australian capacity back into the East Coast. That's the focus of our WA expansion. In terms of what's actually happened, we've expanded broiler farms, which are on the ground and operating.
We've invested some money in the plant, and we're able to expand the shift pattern now off the back of our new EBA agreements very efficiently. That's the focus there. In terms of the wider market, look, there's always opportunities to grow. You've got to be careful, of course, it's not growth at any cost. In this sort of a market, you want to make sure that you're only growing where it's profitable. I would say the opportunity over the next little while may be more as the pressure comes on some of the smaller competitors, that is and will create opportunities for us.
Thanks, Mick. That's a good segue into my next question, which is just going to be on the state of the Australian competitive environment. You've obviously touched on New Zealand. We got some insight into listed players there. In terms of Australia, and given a number of moving parts, including energy and feed and I guess yourselves improving your efficiency, my question was, how do you see that playing out? You've maybe partially hinted at that, but do you think some of the smaller players close down, or what kind of, just pressure leading to you winning business from them? How do you see that landscape evolving?
I guess there's two things there. Hopefully you can hear me, a bit of background noise. If you look at ourselves and our major competitor in this market, essentially following the same strategy at a logical level, if you like. We're both building up volume in key plants independent of state borders, if you like, so we can leverage national scale, putting investment in capability behind that. That coupled with the cycle we're in with rising input costs, will put the pressure on smaller plants. Of course, we don't wish them any ill will, and a number of them buy feed from us, for instance. It'll only get harder for some of those smaller plants, I would expect. Some of them do a good job of differentiating or doing something somewhat unique, and others will feel the pressure a little bit more.
I guess that's a polite way to say that there may not be as many of them around in the future, if you look at what's happened in other markets as this sort of dynamic plays out.
Thanks, Mick.
We mainly focus on fresh chicken when we're talking there. We've probably seen the Further Processing area a little more competitive where other players, at least one other of the smaller players, building up their FP capability. Those who can broaden their offer, if you like, will probably do better than those who can't.
Thank you. Last one just on the feed business. Just interested to know if you're growing a focus on self-sufficiency. Is that with an aim to improve profitability, or is it more from a risk management diet perspective? I just want to know what's driving that focus.
It is both. We retain the margin, but I'd say the major reason is that nutrition is key to performance of this business. It heavily links into your genetics, the development in the genetic program. We believe that we're the leader in nutrition and the IP associated with that, and we have no desire to give that away to third parties inadvertently, if you like, through third-party feed arrangements. That's our very strong preference. We keep that in-house. We control the quality of our own food, I would say is the major focus, but it does improve profitability as well.
Thanks, guys. That's all from me.
Thank you. Next question comes from the line of Ari Neurosi from UBS. Please go ahead.
Morning, guys.
Morning, Ari.
First one for me, could you please give me an indication around what the tax effect is for those profit on sale items?
We just struggled to hear there, sorry. Did you say the tax on the profit on sale items?
Yeah, just the tax implication on the one-off item.
Yeah. It will be a straight 30% corporate tax rate, Ari.
Cool. On the public assets profit on sale on the balance sheet, that is obviously come back quite a bit this half. I am just wondering what that means for some of the property sales moving forward, please.
Yeah. In terms of significant asset sales, property sales, there is a further asset sale, which we have talked about before Leppington. Which we expect to happen this half. Well, it is contracted to happen this half.
Yeah.
Apart from that, in terms of active plans, that is about the extent of any significant property sales. There is always a few smaller things happening around the edges, farms or whatever, but in terms of high-value items, that is the only one in the pipeline at the moment.
Okay. Just on the contract loss as well in your commercial feed business, can you just add a bit of color around the magnitude and the reasons for loss and just in general for that business where you see the future heading for it?
Yeah. That was in Victoria. We announced it, if you like, or communicated it at the time, I'll say a year ago, somewhere then. I probably shouldn't talk specific customers, but some of you will be aware that Ridley either built a new mill or expanded their mill significantly in Geelong which gave them a geographical advantage from where our feed mill is in Victoria to this particular customer. Sort of a logical thing, if you like. In terms of that mill, it just reduces the utilization of that Victorian mill, which has already happened, as I say, pretty much a year ago. Those things will happen in third-party feed. In terms of our focus, as I said, we're working through that. We spent the first two or three years very much focused on the core chicken business for obvious reasons.
That's where the biggest improvement is. We're focusing in a little more on the feed business. There'll be wins and there will be losses in that market. That's the nature of it. There are opportunities to grow the commercial side of that business.
Just final one for me, please. On the price increases you flagged, obviously offset the cost pressures, can you just give some color around the magnitude of the increases and your confidence in passing those through? You've got a large proportion of your volume that are contracted, so should be experienced so far.
Yeah, we're very confident because they've been passed.
Okay
on in excess of 60% of our volume in Australia, for instance. In terms of magnitude, it can be up to in the sort of 2%-3% range. It varies depending on the product and the mix. A bit hard to be more specific than that. I would say in the wholesale channel, price probably moved more than that. It plays out slightly differently across the various channels. As I said, we're not setting out to increase prices for the sake of it. We are able to do it.
Great. Thanks, guys.
Thank you.
Thank you.
Thank you. Your next question comes from the line of John Purtell from Macquarie. Please ask your question.
Good morning, guys. How are you?
Morning, John. Good.
Hey, John.
Just had a few questions. Just the first one, just following on from the price increases there to recover feed. We didn't see that flow through. Is that a timing issue, so we should expect to see that in the second half in terms of a higher revenue number?
Well, it's definitely a timing issue. I don't have a second half revenue number in my head because I don't focus on revenue for the obvious reason. Yes, the majority of the price increases, apart from the wholesale channel, have flowed through in the last 2 to 3 months. 2 months?
2 months.
Yeah, a number of them even in January. Yeah.
Just in terms of electricity and gas. Electricity, you last mentioned back in August was you had a sort of contract expiring pretty much now or at the end of the first half. Has that been pushed out six months, Mick?
No. We're pretty much through into progressive procurement on electricity. We're absorbing some of those price increases now. As we said, gas, we've got a bit longer to run. I think there's different tranches, though. We're currently, in terms of procurement, locked through to.
Yeah, electricity.
End of this.
We're locked through to the end of the financial year.
Yeah. The previous one expired, and we're now into another.
Yeah, that's right.
Yeah.
Okay. How should we think of the gas impacts versus electricity? Previously, you talked to an AUD 20 million gross impact on electricity, and you expect to recover at least half of that.
Yeah. We use more electricity than gas.
Yeah.
Gas, it might be 25% order of magnitude of that impact. Yeah.
A fair bit lower than electricity.
Yes.
Yeah.
Okay. Just a couple of others, if I can. Ian, just as far as working capital, good performance there. Typically, we see a first half build. We haven't seen that, just in terms of some further color as far as what drove it.
Yeah. Obviously, we enabled the inventory financing, which is effectively now an ongoing payable. We did have a little bit of benefit through that. Receivables came down, to be fair. That's not because we did too much differently. The overdues reduced, which was good. Effectively, like all half years and full years, it's timing of cash receipts. Inventory, we certainly have managed very tightly. That's one of the things where the inventory days is a constant weekly focus, and that's been lower. From an accounting standpoint, that's pleasing. From a planning customer service, it can be challenging, but overall, it's pretty good. Payables really is as a result of the Project Accelerate programs that we've mentioned before, John, where we've renegotiated various terms
Benefited through that. That kind of is an ongoing performance driver. We think there's still a little bit more in payables as we go through. It's a weekly management, very tightly managed.
Thank you. Just last question. Just in terms of seasonality, Mick, can you provide any guide as far as what that looks like in a normal year in terms of revenue or otherwise?
I'm still waiting for a normal year in chicken. I don't know what that looks like, or a normal week. No, look, we're just flagging that we'd be a bit cautious about taking the first half and timesing two or something. Because last year, there were two impacts that affected the splits. One was where the period end dates fell because of that 53-week, and in particular, that kind of shortened the first half, if I can put it that way, and put the extra week and the finish date into the second half. Plus, we had a lot of Project Accelerate benefits flowing through in the second half last year, particularly around the Cardiff closure. They're the two main factors.
Apart from that, the genuine seasonality in the business is that we see a buildup in the run into Christmas and through summer, and the barbecue bird has introduced more seasonality into the business, especially in that lead up, the six or eight weeks leading into Christmas. Those two things mean we see a bit more weight in the first half in terms of the front end of the business sales.
Got it. Thank you.
Thank you. Your next question comes from the line of Michael Peet from Goldman Sachs. Please go ahead.
Morning, Ian, Mick, and Janelle. Just on the Project Accelerate, where do you think you are on a scale of one to 10 through the first sort of cost out phase?
Maybe put it slightly differently, we talked about AUD 160 million of benefit being the first target, if you like, which we're well progressed through. Although it's a five-year program, the vast majority of that comes in the first four years. As we get to the end of FY 2018, we'll be getting on for around AUD 140 odd or something of that AUD 160 in the numbers, if that makes sense. That gives you an indication, I think.
Okay. As the margin, I guess, potentially in Australia that you think you can achieve, notwithstanding, I guess, pass-throughs might throw that out a bit in terms of EBITDA margin, but is that double digits at a margin?
Yeah. I'm always cautious to put a target on that because then people just work back from that in their spreadsheet. It's our ambition, we've said repeatedly, that a business like this should be able to produce double-digit EBITDA margin. We do it in New Zealand. Other good quality operators do it. It's certainly our ambition, yes.
Just on the capital management side, what's your upper leverage ratio, sort of upper range that you would go to if you were considering capital management?
Yeah. I probably won't answer that because it'll be a matter for the board over the next few months. We'll take some soundings from investors and get some independent advice over the next few months. I suppose, at one level, it always pays to be cautious in terms of leverage ratios. On the other, this business is a very good cash business, so I'm not sure we'd be too worried about the leverage ratio. Probably the easiest thing, there's plenty of cash sitting there.
Yep. Finally, just on CapEx and AUD 21.2 million in the half, what are we looking for the year? It was a little bit lower than I thought it might have been, for the full year and maybe next year, roughly?
Well, it's actually AUD 30.
Sorry
net of the third-party capital recovered, Michael. We'd said we expected around about the AUD 60-AUD 65, and I kind of reiterate that's where we're thinking.
Yeah, no, that looks like it's spot on. Cheers. Thanks very much. Cheers.
Thank you.
Thank you. Next question comes from the line of Monique Rooney from Morgan Stanley. Please go ahead.
Hi, Mick. Hi, Ian.
Morning, Monique.
I've got a question on Project Accelerate. You guys have obviously done a phenomenal job on the cost side of things. I know at the beginning, I guess, when we're doing the IPO process, you were talking about reinvesting a lot of those back into the business. Now that you're kind of three years through the project, can you talk about the reinvestment rate? Is that kind of higher or lower than what you'd expected?
Look, I would say it's running, broadly speaking, in line. Remember that our competitors don't stand still. For the reasons we said earlier, certainly our bigger competitors can pursue some of the same sort of efficiencies that tends to find its way into the market, which puts pressure on the smaller player. I think I did my best to avoid answering that question in the IPO process anyway, but I think majority of analysts have probably got it about right. That some of it does go back to customers or in competition in the marketplace. As we're demonstrating, we can get some of it through to the bottom line as well.
Okay, great. Thanks. Maybe just quickly, once you kind of get through Project Accelerate, how should we think about the kind of typical growth of this business beyond that period?
In terms of growth, I suppose what we've done so far is focus more on extracting value from the volume and the growth that we've got, particularly the growth we experienced through the course of last year, where we said that Rapid growth in this business can be as challenging as no growth. We've absorbed that and looking to extract the operational leverage benefit, if you like, from that growth. As we move forward, we talk about differentiation opportunities, and we've put our toe in the water a small amount in terms of differentiated high-end exports out of New Zealand up into Hong Kong. There are opportunities to differentiate more. We're encouraged by a return to growth in free-range and so on as we got through the EDLP drowning out effect, for want of a better term.
In terms of top line and differentiation, I'd say we've done a serviceable job, but as we get to focus more in on that, I believe there's more opportunities there. In terms of continuing to extract operational benefits and improve profitability, the longer you're in this business, the more opportunity you see. We do a very good job, I think, in terms of Australia and New Zealand, but we've put a bit of time and effort over the last 6, 12 months into sending people to visit plants, particularly in Europe, which looks like a better market for us to follow. They're subject to many of the same consumer trends and many of the same sort of labor cost structures and so on as we are. You come away very much believing that there's a lot of operational improvement still in our business.
If you compare what we do here to the rest of the world, we do an awful lot in our primary plants, small birds, big birds, value enhanced, all within the one plant. We do a tremendous job to deliver that every day to our customers. There are a lot better ways to do it when you look at what others do. We're not short of improvement opportunity within the business.
Okay, great. Thanks. Maybe one last one from me, maybe a bit cheeky, but about the full year FY 2017 results. You said you were happy with consensus of about AUD 213 million EBITDA. You happy to reiterate that?
I'm never happy with anything to do with that, but yes. We're not advocating any change. We don't provide guidance, but going to my earlier comments about seasonality, I'd be cautious about lifting that too much.
Okay, great. Thanks for that.
Thank you.
Thank you. Next is a follow-up question from the line of Craig Woolford from Citi Group. Please ask your question.
Hi, Mick. Hi, just a quick one on this working capital. Is there any seasonality in working capital? Particularly interested in payables, which was up a lot. Will there be any reversal of that in the second half?
No, not at all. The issue with this business, and last year was particularly challenging because of the 53 weeks, was where the half year month-end finishes, Craig. This year was great. It finished pretty much the 30th of December. It's more normal. I would expect you should expect what you've seen in the first half through into the second half, to be fair.
Okay, great. Thank you.
Thank you once again, ladies and gentlemen. If you wish to ask a question, please press star one on your telephone keypad. There are no further questions at this time. Presenters, please continue.
All right. Well, we'll just finish there. Thank you again, and if you have any questions, let us know. Thanks very much.
Thank you.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.