Very much. Good morning, everybody. Thank you for joining the call. Welcome to our first results as a public company. With me this morning is Ian Brannan, our CFO. We'll run through the material that's been loaded to the ASX, an overview of the results. We'll go through the detailed financials, an update on implementation of strategy and how we see the period ahead. Then leave plenty of time for questions. The key point to make from the result is that we've delivered very strong volume growth. Our financial performance is in line with the prospectus forecasts. That volume growth is in Australia and being primarily driven by growth in retail and QSR, quick service restaurant, customers who are very much investing in chicken as the healthy competitive protein.
I guess consistent with the long-term trend, that as other proteins become more expensive, we're seeing growth in chicken, especially so over the last period where we've seen customers investing in everyday low pricing, driving chicken in the face of rising red meat prices in particular. We've delivered our results in the first half despite the continuation of the challenging New Zealand market conditions driven by oversupply. In that market, that's consistent with our expectations at the IPO, as we would have previously commented. Nonetheless, that market dynamic continues. We'll say a bit more about that later on. We're pleased to say that we're translating that volume growth through to profitability increase, despite some of the supply chain challenges that come from rapid growth.
In an integrated supply chain, live birds, fresh products, and growth in particularly some SKUs can provide imbalances in the business. We've been able to manage all that and continue to deliver improved profitability. Our strategy continues to be implemented and is delivering in line with expectations. We're leveraging now the first-phase automation projects that were implemented in our primary processing plants. That has enabled us to support the volume increase in Australia. We're seeing the benefits of that automation come through. We closed the Cardiff plant in New South Wales and transferred the volumes to other plants. We continue to make good progress on labor procurement and other initiatives, which I'll go through in more detail shortly. We continue to extend our key customer contractual coverage.
In Australia, for instance, we have over two-thirds of our volume covered by contracts ranging from 2-5 years. We're essentially extending the tenure of those contracts, formalizing previously largely informal supply arrangements. We continue to extend that, extend or improve the detailed terms, if you like, things like feed prices and other adjustment mechanisms. We have continued to build our capabilities. As we continue to take Inghams from a very long and successful history as a family business to a modern, growing public company, we've continued to invest in capability through all parts of the business, but particularly operations and in category management, marketing, new product development, and the like. Capital investment peaked in the first half as we would have previously flagged.
A lot of the investment that's gone in is now starting to be productive with the hatchery and breeder expansions in South Australia coming online, and we continue to invest in both expanding the capacity of the business and building capability that we'll go through in a few moments. To finish the overview, if you like, we confirm that the outlook is unchanged and consistent with the prospectus forecast. Turning to the financials. From a financial point of view, first of all, volume growth was very strong. Overall, poultry volume growth for the group at 12.9%. It's important to break that down for a reason that I'll explain, but chicken and turkey growth grew at 9% for the group. The difference is ingredients, product that goes off to, for instance, pet food or other uses.
We saw rapid growth in ingredients volume, more as a result of a change in the way we do some business at one of our plants, where instead of rendering and selling the end product, we're selling the raw ingredients. That has the effect of amplifying volume, and distorting the overall volume number. Hence, where you'll see us breaking out the core chicken and turkey product growth as we go through. So you can look through that and see the underlying chicken and turkey growth, which for the group, as I said, is 9%. Volume is a key driver in this business, more so than revenue. Revenue grew at 4.3%, reflecting both the volume increase up and feed deflation, deflating revenue. As we've said before, feed prices largely get passed through to customers, and you can see that in the revenue change.
From an EBITDA and profitability point of view, EBITDA grew 9.1% to AUD 95.2 million, roughly half our full year forecast. Net profit after tax grew 13.8% to AUD 51.3 million. All of these are on a pro forma basis, consistent with the prospectus forecast. Net debt reduced from the point at IPO to AUD 403.4 million, and we expect that to continue to decrease through the second half, consistent with our expectation. We discussed in the IPO. That puts us in a position to declare a stub dividend of AUD 0.026 a share, which is 65% of NPAT period for the period since IPO. On a segment basis, turning first to Australia, again, you'll see that very strong volume growth in poultry volumes, and of overall 15.6%-10.5% for chicken and turkey, excluding ingredients for the reason that I mentioned earlier.
That growth, as I said, creates some challenges. If you like, we still do extract some of the operating leverage from that growth, because early on we do our best to meet customer requirements and deliver that growth. We do so with, at times, extended overtime, extended shifts, as well as having to rebalance our business, to take account for growth in particular SKUs. Of course, chicken is a business where we need to balance the bird right through the supply chain. As that volume increase settles in, we would expect to gain more of the benefit of that volume over time. At the same time, we're managing a very high degree of change in the business as we not only handle that volume, but implement our Project Accelerate initiatives and the capital projects. Within retail, very strong growth right across the customer base.
As we said, customers investing in everyday low pricing on chicken, in the face of rising costs of other proteins. You will have all seen the AUD 9 breast fillets, AUD 7.90 barbecue or AUD 8 barbecue birds, and that's continued into the last week or so, where we're seeing AUD 10.50 thigh fillets out there as well. We're certainly not seeing any slowdown in customers investing in chicken to grow their own sales and to deliver value to their customers, which is ultimately good for us. We have rolled out in Australia the brand refresh and the new packaging, and that will roll out through New Zealand through the second half. As we said earlier, we've ramped up innovation and new product development activity to meet changing customer requirements and extended supply contract coverage in the retail space.
Interestingly, I think most people will have seen a lot of that retail activity in the marketplace, but we've also seen very strong growth from our quick service restaurant customers, also driven by chicken as the healthy, competitive, good value protein. That combination of retail and QSR growth is what's driven the growth in Australia. Food service volumes are in good shape, but closer to flat versus last year as we move to meet that growing demand in retail and QSR. We do have one key quick service restaurant agreement under negotiation, as we would have mentioned in the prospectus period that those discussions continue. In the wholesale market, remembering that we don't do a lot into the wholesale market, most of our volume is contracted supply to the large customers.
The East Coast market through the first half was reasonably soft in terms of margins, as a lot of product was cleared, what we call fallout or product that you produce in order to produce the breast fillets, the barbecue birds, the thigh fillets, et cetera, being cleared through the wholesale channel, in some cases. We are seeing those wholesale margins improving as we enter the second half. Export volumes, export primarily remains a clearance strategy for us here in Australia. We also call out their increase in feed volumes. We're seeing feed volumes increase. These are third-party volumes or volumes to third-party customers. That was consistent with our forecast. There was one customer contractually dropped off at the end of the first half. We'll see that come back a bit in the second half. Feed volume's in good shape, in Australia.
Improving EBITDA in Australia, but as per previous commentary, a fair way to go to get to the sort of level that we would expect the EBITDA margin to be. That's a large part of what our strategy is in terms of Project Accelerate and continuing to invest in the business to get ourselves towards double-digit EBITDA margins, which is where a business like this should be. New Zealand is a very different story, again, consistent with previous commentary at the IPO. Challenging conditions in that market. We see it very much as being oversupplied. Our volumes, however, are flat. There are two large players in New Zealand, our volumes are flat and the volume's coming from elsewhere. You'll see there, we've inserted a graph that just shows New Zealand government statistics for exports. These are total industry export volumes from New Zealand.
That would include our volumes to where we export some product to PNG and the Pacific Islands. You'll also see the drop-off in volumes to places like Australia and not much growth elsewhere. PNG and Fiji, for instance, you can't export to from Australia for various reasons, but we can from New Zealand. There's been some growth there as Australian exports have dropped off into those markets. You'll see the trend in exports. We think that those export volumes or volumes that should have been going to export from some competitors are finding their way back into the domestic market and causing or contributing to that oversupply.
From our point of view, our strategy has been to not add to that oversupply in that market, to moderate volume growth, and to focus on free-range and differentiation of product, which we've been doing a very good job of with Waitoa, the leading free-range brand in New Zealand, and very tight operational performance to offset that impact. We're not yet seeing any material change in that New Zealand market dynamic. To repeat what we would've said at the IPO, we're not relying on any improvement in New Zealand to deliver our prospectus forecast for this year. It'd be nice, of course, to see an improvement in that market, we're not relying upon it. The feed business in New Zealand has a very high dairy feed component, the third-party feed sales, and that's a product or related to the health of the dairy price.
Not surprisingly, with dairy prices where they've been, dairy feed volumes and margins were low through the first half. Some of that, we are seeing an improvement. Turning to the detailed financials, I'll hand over to Ian.
Thank you, Mick. On page eight of the presentation pack, that's the pro forma profit and loss. This is the half 2017 versus the same period a year ago. The Australian volumes, have certainly uplifted the total revenue by AUD 50 million, taking us to just over AUD 1.2 billion at the half year. As Mick said earlier, the revenue has increased 4.3%, and that does reflect the reduction of the feed prices along with some mix as we've added all the volume going through in terms of the roast birds through the Australian business. Pleasingly, the gross profit has increased, and now that sits at 18.7% overall. Really this reflects not only the strong volume growth through the Australian business, but pleasingly Project Accelerate has actually delivered as we expected.
That being said, that's all delivered in accordance with the fact that we are rebalancing the network with a strong volume increase through the Australian business. Overall, a strong result. That in turn drives the EBITDA. As you can see on this chart, we've grown the business at 9.1%. More importantly, at a net profit after tax, we've grown 13.8%, and this reflects lower financing costs with the new facilities that we've put in place at the IPO. Also, the fact that we've got tax expense at the same effective rate as we had in the prospectus. You'll see the tax expense is slightly elevated versus prior year, but that reflects the increase in earnings. If I go to page nine, which is the pro forma cash flow and balance sheet.
Cash flow from operations at AUD 79.2 million is a cash conversion rate of 83.2%, which is an increase versus the prior year. We basically run into the half year with the November, December period, which is a very busy and strong time for the Inghams business. The November, December period obviously runs into Christmas and the holiday period. Because of the timing of the close off of the half year, which was the 24th of December, that does cause some issues in terms of timing of cash flow and receipts from customers. Effectively, the key driver of working capital increase is the increase in trade debtors, predominantly by increased trading. Like I said, the timing of the half year close does create that impact in the half year.
Pleasingly, inventories in working capital have reduced from June, payables, we're starting to see the progress that we highlighted at the IPO, and that's starting to work through. That in turn, we had a first half where we expected capital expenditure to be higher, it peaked in the first half of approximately AUD 68 million. AUD 60 million of that is what we call the Inghams capital. The AUD 8 million relates to third-party capital that is for recovery through the sale and leaseback arrangements. You can also see there we've got insurance and third-party capital, that relates to the Hamley Bridge insurance claim, where the facility was lost in the bushfire just over a year ago. Also third-party capital, where the agreements are in place, and the funds are yet to be received.
All in all, even though we've had a peak of capital expenditure in the half year, we've seen net debt reduced to AUD 403 million, which is a reduction from listing and a net debt to the EBITDA of 2.3 times. Thank you, Mick.
Thanks, Ian. Turning to a quick update on progress on strategy, all of which is consistent with where we were at the IPO a few months ago. A reminder, first of all, that our goal with Inghams is to build a great company into a world-class food company. For most of our nearly 100 years of history, it's been good enough to be the best in Australia and New Zealand, and I think for much of that history, Inghams have been. Increasingly, our customers are international, and we need to ensure that we're on top of what's going on elsewhere in the world and able to deliver that here in Australia and New Zealand. You'll see there, Inghams have a great heritage of delivering quality and service to our customers. We're building on that culture.
It is a good culture in Inghams, continuing to build it into a world-class food company. Consistent with that, turning to Project Accelerate on the next page, we're halfway through a multi-year transformation program. If you remember, three to five-year program, we're getting on for a couple of years into that now. Making sure we capture the underlying market growth, ensuring that we build strong foundations within Inghams, where there's been a lot of investment, both in management capability, in capability through the business, improving IT, strengthening planning, ensuring we've got very strong network plans, and putting that capital investment into capacity and productivity. Driving hard at the first phase of Project Accelerate, AUD 160 million in benefits being targeted from very specific projects, labor productivity, automation, procurement, network rationalization, turning around the turkey business, and supply chain.
Beyond that, a series of opportunities that we see, but that we haven't yet got to in terms of driving benefits from. If we go over to an update in terms of Project Accelerate, first of all, with automation, a lot of investment in automation within our primary plants in particular, and through the hubs, looking to leverage that investment, particularly in automated deboning through our big Australian primary plants. World-class deboning equipment, which is all in and operating and delivering benefits, and as mentioned earlier, has supported us in handling the very strong volume increase in this market.
We've got more in the pipeline, more automation activity to go, whether that's further deboning equipment, automated portioning equipment to support value-added requirements for customers, doing similar automation activity in New Zealand, and also adding to automated case packing, palletizing, and the like, and also turning more attention to our FP or our cooked product plants. At the same time, we're continuing to invest in things like tray packing, top lidding, live bird handling systems, and other things to meet customer or welfare requirements, in addition to what we call a debottlenecking of our main plant. As we put in automation, as we handle the volume increase, making sure we're optimizing the operation of those plants. Very good progress on automation and more to go. From a labor productivity point of view, good progress on renegotiating EBA agreements at our primary plants.
Pleased to say that we have agreement at Bolivar, at Te Aroha in New Zealand, Murarrie, and Somerville, with the Somerville one just pending Fair Work approval, but the others are off and running. Our approach there has been to negotiating in good faith with our people, prepared to pay for productivity improvements, but we must get productivity improvements. Very important to this business. We've been successful in doing that. Over the coming period, we'll start to leverage some of the flexibility that those new EBAs give us. Things like moving to 10-hour shifts and the like. That program will continue now for the smaller plants and on into the FP plants and the like, but we have the big plants behind us.
At the same time, we're improving our ability to manage labor on a detailed basis, although at the same time, we've had to absorb some of that extra volume through extended hours and overtime, but that will start to reduce as we resettle or we settle the business off the back of the improved flexibility of the new EBAs. In terms of the other areas, we've closed at Cardiff, as I mentioned. That's now completely done. Our procurement initiatives are working well for us, phase 1 and phase 2. As we would have mentioned before, focusing on procurement of goods in the main, things like corrugated cardboard, packaging, ingredients, and the like. Phase 3 will focus more on services. Out of all the procurement activity, we're delivering exactly where we expected to be.
The main challenge in that area as we move forward will be in the area of energy and utilities, for all the reasons that I think everyone's aware of, particularly in Australia. Turkey business continues to grow its profitability, I'm pleased to say. It's still not where we would like it to be, but from a couple of years ago, it's gone from loss-making to break-even last year to delivering its targeted profit this year, and we had a very good Christmas in the turkey business. A series of other initiatives under Project Accelerate are all delivering where we expected them to be in supply chain and the like. Moving to the investment program On the capital itself. It's very pleasing to be able to commission the expansions in South Australia. For instance, the hatchery is now up and operating.
A significant portion of the breeder network is now operating, and the expansion continues. Hamley Bridge is back online post the bushfires, and we continue to have major project work underway with the South Australian feed mill and in New Zealand for a second hatchery and expansion of the breeder network, in addition to a large number of smaller initiatives as linked to Project Accelerate in terms of automation or debottlenecking of plants or meeting customer requirements, as we mentioned earlier. We have continued to expand capability. Automation itself improves our capability, modernizing and upgrading our IT infrastructure, and moving from reactive to proactive maintenance capability and building our skills in key areas, as I mentioned earlier.
Turning to outlook, not surprisingly, given that it's not that long since the IPO process itself, but thus far we've delivered in line with our expectations for or consistent with the prospectus forecast, and we confirm that prospectus forecast for profitability for the balance of this financial year or for the full year. Just from a mathematical point of view, we'll start to cycle that volume growth in Australia in the second half as a result of a number of those customer EDLP initiatives over the last 6 to 12 months. Although, as we mentioned with the thigh fillet launch, there may well be further such launches in the period ahead. It'll be our job to support our customers if they choose to do that.
As I mentioned earlier, the volume growth in Australia, it's a good challenge to have, but it's still a challenge to digest that volume. As we settle the volume, rebalance the business, we'll start to see some improved leverage from the volume we've already got, if you like. As I've mentioned, we continue to extend key customer contractual coverage, and the QSR customer discussion will not have any impact on this financial year to the extent that it has any impact at all, but that's an FY 2018 matter anyway. The New Zealand trading conditions, while we would like them to improve, we're not seeing too many signs of that at the moment.
As we said, we'll continue to implement Project Accelerate, and we expect our cash flow, dividends, and the like to be in line with prospectus forecasts, confirming our intention to pay 65%-70% of pro forma NPAT. Could summarize all that by saying a little bit of detail, but essentially unchanged outlook from the prospectus forecast. I'm going to stop there, and we'll go to questions.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel the request, please press the pound or hash key. Your first question comes from the line of Craig Woolford from Citigroup. Please ask your question.
Good morning, Mick.
Hey, Craig. How are you?
Good, thanks. I just wanted to understand, because there wasn't a lot of granularity through the prospectus around the half year split. I just want to understand what we should expect from the second half. There was commentary in the prospectus that the first half would be 45%-48% of the full year. If we use anything within that range, we get an EBITDA for the full year that's above the prospectus forecast?
Yeah. I think what we would've said with the commentary around that in the prospectus is that, although there's a little bit in turkey, there's not a lot of seasonality in this business. It can be affected a little bit by where the timing of the half year finishes, as Ian mentioned. Yes, we've done a little better in the first half than we would've expected at the time of the prospectus. Volume has been stronger in Australia. We've held up profitability in New Zealand, if you like. Also in the second half, we continued, for the reasons we've said, to digest that volume increase.
We do have more short weeks, as we call them, in the second half, so they are public holiday weekends and the like, which with all the growth presents a challenge for us because essentially you're selling the same volume of chicken in that week, but producing it in either fewer days or pushing into overtime and the like. Hence why we're a little more cautious on the second half in terms of the splits. Yes, we did a little bit better in the first half than we would've expected at the IPO.
Okay. It probably relates to this first question, I'll tie it into a broader question about the sequencing of Project Accelerate savings.
Yeah.
There's a number of initiatives we went through on those slides of things you've done, as well as comments about what's coming. Just wanted to understand, are there any new initiatives being implemented or executed in the second half of 2017? Given the run rate sort of effect of this, shouldn't there be a greater level of cost savings in the second half than the first half?
Yes, that was our original logic for the split that you talked about. That if there's not a lot of seasonality, the profile of Accelerate savings should help us in the second half. To answer your question, I guess two parts there. One is, are there new initiatives? There are not new initiatives that will deliver benefits in the second half. Consistent with our logic for Accelerate, though, in terms of the further opportunities that we see, we are doing work on those further opportunities, they're a bit longer out in time. Improving our farming operation, for instance, pursuing or looking at the way we operate our third-party feed business and so on. There's work going on those things, not expected to deliver any benefits in the second half.
In terms of benefits from the initiatives, consistent with what I've said, we are getting benefits from automation going in now. To some extent, it has helped us handle the volume, but handling that volume is still a challenge. We will start to leverage the EBA flexibility in the second half, as we can move to 10-hour shifts and various other opportunities that they give us. Of course, we need to do that in consultation with our workforce, so we'll do that carefully over the second half. If you're putting those two points together, yes, there's further opportunity in the second half, but we're cautious given where we are in New Zealand and just handling that volume growth in Australia.
Right. Some of the EBA benefit doesn't start flowing until you get the Fair Work approval?
Yeah. The process is that you negotiate with your workforce and their representatives. Once you reach agreement, it's voted on. They've all been voted up at those large plants. It then has to go to Fair Work for ratification. That should be a straightforward process. It's just the Somerville vote occurred a week or 10 days ago, so that's just where we are. Yes, we're in a good place in all those four plants.
Okay. My last question is just around current trading, given the sensitivity of the supply chain in poultry generally, has the New South Wales weather conditions had an impact on the broader industry? I have heard some feedback about wholesale prices rising in January.
I don't think those two things are connected. Look, I'll comment on us first of all. I'm pleased to say that we've managed our way through a very hot summer quite well. Whether it was back several months ago now, but the blackout in South Australia, we didn't lose any birds. We didn't lose anything at the hatchery. This last weekend, we've got through in good shape. From an animal welfare point of view, we sometimes shuffle the movement of birds out of the heat of the day into overnight or early in the morning, and that throws our production around. We manage that. I'm pleased to say we've got through with no material impact anywhere across the country.
There's a little bit of noise, yes, that there may have been some losses in some areas of New South Wales, possibly Queensland, but I can't say that's factual. It's just what we've heard. I wouldn't say that's linked to the wholesale price change. I think that's a product, as we would have talked in the IPO, that they've been soft in the first half, but there were various market-related reasons. It takes a while to adjust this business to change settings. If a period of oversupply can take three or four months to correct itself, and we think that's occurred largely on the East Coast. We're seeing signs of that anyway. Let's see how it lasts.
You've seen signs of it since January, or was it in the-
Yes.
Yeah.
We are. Over the last four, six weeks, yes.
Okay. Thanks, Mick.
Your next question comes from the line of Paul Bice from Credit Suisse. Please ask your question.
Morning, guys. First one from me. Just on your comments when you talk about in the second half, volume increases are expected to moderate. I just wanted to clarify that that's really just saying that they're going to moderate versus the very strong first half. You're not saying they're going to moderate versus against what you would have originally expected for the second half?
That's correct. It's just a math thing in a comp sense. For instance, breast fillets were launched at AUD 9 in November, whatever that is now, 15 months ago, 14, 15 months ago. The AUD 8, AUD 7.90 barbecue bird in January, 12 months ago, and so on. We're just starting to comp some of those launches, and therefore, you just get a mathematical effect that % increase won't be as strong.
Okay. On your commentary on New Zealand and showing that chart there with the exports from New Zealand, just interested to know how you'd reconcile the apparent drop in exports from NZ to Australia with the relaxation in terms of the rules around being allowed to bring products into Oz from New Zealand. I mean, at face value, that's kind of at odds.
Yeah. Well, all we're doing there is putting some facts there, and that information's available on the New Zealand government website, so people can draw their own conclusions, I suppose. Look, our commentary on that remains the same. That as the only operator on both sides of the Tasman, we've got a pretty good handle on relative economics. There's no fundamental economic case for producing in New Zealand and exporting to Australia. It might be a marginal economics case, but you can't really build a business on that. The supply chain itself precludes fresh products. You're really left with frozen. There's not really a market for frozen whole birds in Australia, which is quite a big export line out of New Zealand into Pacific Islands and the like, so you're through into SP or cooked and frozen product.
Well, then again, the stats speak for themselves, we don't think it's inconsistent.
Okay. Mick, just on your highlighting the one key QSR agreement still under negotiation, which you said doesn't have an FY 2017 impact. Just to get a little bit of additional color to the extent that you can provide us. Is that from a timing perspective or a progress perspective, tracking along the lines that you would expect? Or is anything going a bit slower than you'd expect? I just want to get an idea on that one.
Sometimes slow is good. It's not controlled by us, obviously. It's just the ongoing discussions with our customers, which happen all the time. We're just calling that out because we advised in the prospectus that it was under discussion, it remains under discussion. The color is that obviously I have to be careful because we don't talk about specific customers. We typically have a percentage of a customer's volume, and it's true in retail and QSR. Over time with some customers, if we do a good job of new product development, of growing our volume, we grow to a share of a customer's volume. For instance, might be 60%, and their procurement policies might say it should only be 50%, something like that. Occasionally, they'll want to reset. They'll go through their own process. It's typically that sort of a process. It's not unusual.
Yes, our commentary at the IPO and in prospectus remains the same. There's nothing different there. We're just saying it continues to be discussed.
Okay. Just last one from me, just a quick one on, probably a little bit less spoken about given all the company-specific initiatives. Just in terms of feed conversion ratios, and I guess the impact for the industry in terms of the ability to continue to drive a low-price product relative to other protein classes. Are you still seeing those FCR trends coming through positively, or is it as good as it gets? Just your view on that.
No, the trend continues. In any short-term period, you might get some ups and downs, the trend continues. Especially strong in New Zealand, and also in Australia. The volume pressure we put through Australia means we're pushing the boundaries sometimes of some of those things, but we still see improvement in FCR. If you look at the longer term, the genetic improvement that's flowing through, particularly now as we have invested and reset our breeder facilities and capability, we expect to be significant. No change there from our commentary in the IPO period.
Great. Okay. Thanks, guys. That's all from me.
Your next question comes from the line of Michael Peet from Goldman Sachs. Please ask your question.
Morning, Mick and Ian.
Good morning, Michael.
A bit more on that seasonality. I'm just looking at the 2016 splits, first half, second half. Is the big difference there in the second half falling quite a bit? Is that to do with what you mentioned on the rebalancing when you started the barbecue bird volume? What am I missing there?
You're looking at last year's?
I'm looking at last year. Yep. Quite a bit of seasonality in the EBITDA, first half to second half.
If we deal with top line first, because by the time you get to EBITDA, there's probably other things going on. Generally speaking, there's not a lot of seasonality in I'll qualify this in a minute, but there's not a lot of seasonality in chicken. There obviously is in turkey. Turkey's about maybe 4% of our volume in Australia, and through the period November, December, probably more like 7 or 8%, so it goes to roughly double in that period. Turkey will add a bit of seasonality. The qualification is that there is a little more seasonality now coming, we're seeing around the barbecue birds. Barbecue birds on really hot days, demand for those birds spikes. There's, I would say, more seasonality being introduced.
This is obviously the first summer we've been through with barbecue birds at that price point, so we're seeing more seasonality there. In terms of EBITDA flow-through, though, I'm not sure there's too much there. Ian, do you want to comment?
I think the only thing to comment, to be fair, Michael, is Project Accelerate, the timing and phasing of that will shift around a little bit. Obviously, we did the prospectus on the best basis we could at the time. As these initiatives come online earlier, later, et cetera, that does shift around the gross profit and the EBITDA a little bit. There is a caveat I put on that.
I'd imagine that obviously on Craig's point, it actually builds as you go forward. I don't know what I'm missing, but I think looking at the This is the first time we've got the first half split for this last year. I've got AUD 87.3.
Yeah.
I've got the second half implied there is AUD 80.2. There's a big drop in the second half, and I'm just wondering, did it cost you on the rebalance that you mentioned when you first started off?
Yeah. If we look at, there's probably a number of factors in there that get through to EBITDA is my only comment. If we deal with that, yes. From the launch of the barbecue bird, of course, it took us two or three months to be able to come into full supply for the obvious reason, which you have to set the eggs and start from there, which takes time. Secondly, it's skewed because of a dramatic change in demand profile. It skewed the field, so more small birds, fewer big birds. It skewed your operations and so on. Therefore, it took a while for that to rebalance and convert to profitability. There's an element of that in what we're saying now, that the volume growth in Australia is great.
It'll take a little while to settle that volume and convert it into, or to get the operating leverage from it, if you like.
Okay. I think you've pulled it out on the pro forma basis, the provisions obviously wound down. Is that just the part of provision for closure of that, or could you just give us a bit more clarity on how-
Yeah, sure. The bulk of it is Cardiff, obviously, as that closed down in the first quarter. You've also got, as part of the transformation, there were a number of exits of personnel that were obviously provided at the year-end and occurred through Q1 as well. That's consistent with what we said in the IPO, which most of that was behind the IPO, as Ian said, occurred in Q1.
Great. Just on feedstock costs and what are you seeing there, and how far forward are you locking in?
A reminder that if we're not the biggest feed buyer in the country, we'd be close to it. We buy forward usually around nine months. If anything, at the moment, we're pushing a bit longer because we're coming off a relatively low base. We don't expect that will be the case further, for obvious reasons here in Australia, with a very good season and a lot of grain around. Also remembering that because we cover them, we buy forward rather than cover. We're not subject to the short-term spot price fluctuations. We trade through that for want of a better term. Also that while grain prices are down here, soy prices, which is the second big ingredient, is internationally priced, and over the same period, they are trending up, not down.
Generally speaking, we would say feed prices are unlikely to drop further. Essentially, we're extending coverage where we sensibly can.
Great. Thanks for taking the questions, guys.
No worries.
Your next question comes from the line of Jordan Rogers from UBS. Please ask your question.
Good day, Mick. Good day, Ian.
Hey, Jordan.
Most of my question has been asked, just wanted to know, you gave great color on what you're doing on Project Accelerate. Just to quantify that around how you're tracking, you're targeting to get around half of the 160-200 this financial year, where the run rate is? Are they at the half just gone or as of today?
We're very much in line with that expectation that you mentioned. While we grapple, of course, with all the everyday challenges in this business, which is why we mentioned the expanded volume more overtime and so on. We're getting the benefits. We wouldn't have been able to handle the volume increase without some of the automation and so on. We also need to settle that extra volume, rebalance our business, and get some of that volume processed, and not on overtime, if you like. That's probably the only comment I would make, but we're tracking where we expect to be.
Around the AUD 80 million at the end of this financial year?
Yeah.
Just another one, just around quantifying a bit more. You just talked around the feed cost not changing materially. From here, can you just give any indication around what the percentage change was for feed costs in the half just gone on PCP or in AUD millions?
No, I can't. I mean, a good proxy for our feed price is ASX wheat and CBOT soy. If you have a look at that, you'll get a good feel.
Okay.
Remembering that we're buying forward and that a large percentage of our volume is covered by feed price pass-through mechanisms. Hence, while you can get an external read on the inputs.
Yeah
How that translates to the bottom line, probably the only other indicator you'll get is that our volume's up a certain amount and revenue's up by less than that, say, which indicates the pass-through or as a proxy for the pass-through element. No, it's hard to put a number on it specifically.
Okay, sure. Great. Thanks, guys.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from the line of Adam Simpson from Macquarie. Please ask your question.
Yeah, good day, guys. Most of the questions are answered. Just on the external feed business, I think you commented that your customer was rolling off a contractual arrangement. Would that be material in the second half? Will we notice that? Just any comments on how you're seeing the outlook for the rest of that business?
Yeah. From a volume point of view, we'll probably notice it, but it's not material from an earnings point of view. The outlook for that business, while in New Zealand, where a fair component of the business is dairy, that's firmed up a bit. Again, you can use the dairy price as a proxy for that to some extent, but also, I guess, weather conditions in New Zealand. The outlook there would be better than the first half. Over here, it's pretty steady because chicken and pork feed volumes are pretty steady. Similarly have price adjustment mechanisms linked to input costs. We don't do dairy over here, and horse feed is a packaged product business and very steady in terms of volume and margins. The volatility probably comes out of New Zealand and the dairy component.
Great. Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. There are no further questions at this time. I would now like to hand the conference back to today's presenters. Please continue.
All right. Thank you very much. Thanks for your time. I look forward to catching up somewhere. Thank you.