Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Goodman Fielder won't see full year profit gains

Goodman Fielder won't see full year profit gains, hurt by dairy prices, grocery wars

By Suze Metherell

Feb. 12 (BusinessDesk) – Goodman Fielder, Australasia’s largest food company, says the rebound predicted for the second half won't be enough to lift full-year earnings as it grapples with soaring milk prices and rivalry in baking goods. The shares dropped 7.4 percent.

Normalised earnings before interest and tax in 2014 will be "broadly in line" with the previous year's A$185.6 million, assuming no change in market conditions, the Sydney based company said in a statement. First half EBIT on that basis fell 8 percent to A$77.2 million, suggesting a second half result of about A$108 million.

"The impact of yet another increase in the farmgate milk price in the first quarter, continuing high A$ wheat prices and a challenging trading environment means that the level of earnings improvement we previously expected this financial year has been delayed," said chief executive Chris Delaney.

Farmgate milk prices soared more than 40 percent in Goodman Fielder's first half, almost halving the profit margin at its dairy unit to 4.6 percent and slashing EBIT by 39 percent, even as sales rose. The company couldn't pass on the cost increase because of "continued aggressive competitor pricing".

The maker of household brands including Vogel's bread, Meadowfresh milk and yoghurt, and Meadowlea butter and margarine has been cost cutting, restructuring and divesting over the past three years, to focus on its core brands and reduce debt.

It posted a net loss of A$64.8 million in the first half, from a year-earlier profit, after taking one-time charges on asset sales and for restructuring. Revenue from continuing operations rose
4.8 percent to A$1.1 billion.

On the ASX, its shares dropped 5 cents to 62.7 Australian cents, and are down 3.6 percent in the past 12 months, against the Australian benchmark index's gain of about 6 percent in the same period. The stock is rated an average ‘hold’ based on the consensus of 11 analysts compiled by Reuters, with an average price target of 75 cents.

“The outlook remains really challenging. Sure the management says it was within expectation, but it was below the market expectations,” Brian Han, senior research analyst at Fat Prophets in Sydney, told BusinessDesk. “The cost side remains high with commodity prices, but it’s also the revenue side - they have no pricing power.”

“In order to get to that guidance they’re going to have a really big second half, and just how realistic is that?” he said. “That’s the market’s reaction.”

Gains were made in the baking unit as EBIT rose 22 percent to A$19.9 million, and its baking margin widened by nearly a fifth to 4.3 percent. In Australia its premium Helga's brand increased market share by 5 percent, while locally Freya's share increased by 4 percent. The company said high wheat prices and ongoing price competition within the supermarkets continued to be challenging.

EBIT at its grocery unit, which includes spreads, mayonnaises and dressings, fell 8 percent to A$27.7 million, as its margin contracted to 11 percent from 11.5 percent. Revenue fell 4 percent to A$251.5, as spreads faced competition from new supermarket brand products and ongoing discounting from dairy competitors.

The company's biggest earner was its Asia-Pacific unit, which includes a Fijian poultry business and other food staples. EBIT was A$31.million, down 3 percent on the previous year, as its EBIT margin shrank to 17.2 percent from 19 percent, in part impacted by higher costs in its Fiji operations.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Scouring: Cavalier Merger Would Extract 'Monopoly Rents' - Godfrey Hirst

A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly, says carpet maker Godfrey Hirst. The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition. More>>


Scoop Review Of Books: She Means Business

As Foreman says in her conclusion, this is a business book. It opens with a brief biographical section followed by a collection of interesting tips for entrepreneurs... More>>


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Housing: English On Housing Affordability And The Economy

"Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle. And those lead times increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed. The resulting excess supply could produce a price crash..." More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news