DSO 2.5 ⇓

DIO 11.8 ⇑

DPO 2.3 ⇓

DWC 3.5 ⇑

The highest inventory load and longest average working capital cycle of all sectors, which lengthened in 2021.

Despite difficult trading conditions for rice and wine producers tied to weather-related events and export market constraints, respectively, there was an uplift in general activity across the Agriculture sector in 2021 with 73% of our sampled companies reporting higher revenues. This was driven by strong demand for Australian grain as weather-related crop challenges in the Northern Hemisphere impacted operators in other regions. However, notably, only half of the sample was able to achieve EBITDA growth as rising labour and transport costs associated with COVID impacted margins.

From a working capital perspective, the average DWC of our sampled companies increased by 3.5 days (to 85.8 days) in 2021, driven by an 11.8 day increase in DIO and 2.3 day reduction in DPO. Of particular note, the sector reported the highest DIO and DWC of all sectors covered in 2021.

A key contributor to the higher DIO was the increased local crop production. Whilst 64% of the sample reported an increase in DIO, the grain producers carried over a month’s more stock(on average) than they did in 2020. In addition, some participants experienced the ongoing challenges associated with transporting goods due to closed borders and larger customers pushing the burden of holding inventory back onto them during the COVID period. This was evidenced by the average DIO peaking in H2 2021, relative to the previous three half-year periods.

Interestingly, of the companies that reported a higher DIO, only 43% also reported an increase in DWC. This was due to approximately two thirds of these companies lengthening their supplier payment cycles (higher DPO) and shortening their debtor collection cycles (lower DSO) to help manage the increased inventory load. In fact, across the sample, participants were able to reduce DSO by an average of 2.5 days (relative to 2020).

From an international perspective, the average DWC of our sampled companies was higher than those sampled in other regions, with inventory the main differentiator. Asian, European and North American companies held 1 – 2 months’ less inventory than their Australian counterparts in 2021.

In terms of the sector outlook, the Australian Bureau of Agricultural and Resource Economics and Sciences has forecast continued growth in production and demand for Agricultural products underpinned by favourable seasonal conditions, an expected lifting of COVID travel restrictions and higher discretionary spending increasing demand for fibres, oilseeds and sugar.

“Higher cash conversion … from solid trading and working capital management.”

Inghams Group Limited
FY21 Annual Results Presentation


COVID-19 Impact

Net working capital performance

Cash Impact ($'m)*

*A positive cash impact is a “release” of cash from working capital (improvement). A negative cash impact is additional cash invested or “locked up” in working capital (deterioration).

Agriculture - Financial Year
Days 2020 2021 Change
DSO 50.8 48.3 (2.5)
DIO 119.5 131.3 11.8
DPO 81.2 78.9 (2.3)
DWC 82.3 85.8 3.5
Agriculture - Half Year
Days H1 2021 H2 2021 Change
DSO 48.1 50.5 2.4
DIO 100.8 140.6 39.8
DPO 85.4 83.4 (2.0)
DWC 57.8 94.6 36.8
Best & Worst
Days Best Worst Spread
DSO 18.9 111.7 92.8
DIO 29.3 298.4 269.1
DPO 129.9 29.1 (100.8)
DWC (5.8) 216.4 222.2
International Benchmarking
Days AU Asia EU US
DSO 48.3 29.5 56.2 33.4
DIO 131.3 64.0 89.2 67.5
DPO 78.9 21.9 93.3 62.4
DWC 85.8 64.8 53.0 37.5