Animal nutrient maker Ridley has run out of chooks to mush up into animal food — which could hit its bottom line by $7 million.

Ridley (ASX:RIC) today updated the market on work at its processing facility in Maroota, NSW after its chicken supplier Red Lea went into administration last month.

The faciity renders animal by-products to make high-performance feed ingredient solutions for healthier farm animals.

Red Lea was unlikely to resume supply in the fourth quarter, causing an earnings hit of $6 million to $7 million. About 30 per cent of taht was incurred in the first half of the financial year.

Supply from Red Lea had been falling since last year, resulting in a two-third reduction in offal volumes by December which had so far cost $2.6 million.

Ridley (RIC) shares over the past three months.
Ridley (RIC) shares over the past three months.

Shares in the company dropped as much as 5 per cent on the news – settling to $1.28 at midday AEST on Monday.

The shares are down about 15 per cent since touching $1.52 last month.

Ridley was working through a realignment of the site which could include a pivot to mackerel processing to make fish meal and oil or high protein poultry meal from “spent hens”.

Ridley was “continuing to work through a range of alternative strategies to address the raw material and finished goods Aquafeed inventory legacy issues associated with the prior cessation of supply to Huon and as reported in the half year results presentations”.