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Goodman Fielder Delivers First Half Profit

Goodman Fielder Delivers First Half Profit In Line With Expectations

Australia¡¦s largest food company, Goodman Fielder Limited, has recorded a post-tax profit before rationalisation and restructuring costs in line with market expectations of $57.7 million for the half year ending 31 December 2000.

As forecast, the half year result was slightly down on like-for-like earnings in the previous corresponding period of $60.9 million. The headline result for the corresponding period last year of $68.4 million included a one-off tax benefit of $7.5 million. After rationalisation and restructuring charges, the net profit result for the first half this financial year was $37.5 million.

The Chairman of Goodman Fielder, Mr Jon Peterson said the result was in line with the outlook statement at the Annual General Meeting last November that forecast a subdued first half largely due to the worldwide slump in gelatin pricing.

¡§There was solid underlying performance by all businesses in the first half, except GF Ingredients,¡¨ Mr Peterson said. ¡§Encouragingly, the performance of the core retail business confirms the conclusions and direction of the strategic review and action plan that has been announced separately today which will result in a much more focused approach to our retail branded operations, particularly in Australasia.¡¨

The Chief Executive of Goodman Fielder, Mr David Hearn, said headline sales were adversely affected by the divestment of Steggles poultry, Vetta pasta and Starch Australasia and currency translation effects but that earnings before interest and tax from continuing businesses was slightly higher at $118.3 million.

¡§The roll-out of the group-wide software system, SAP, in Meadow Lea Foods and moves by major retailers to reduce stocks also adversely affected sales in the short term,¡¨ Mr Hearn said. ¡§However, underlying performance in the core business was strong, particularly Cereals & Snacks which continued to out-perform.

¡§These results include net after tax rationalisation and restructuring charges of $20.2 million arising from the continued productivity improvement and cost reduction programs across the business, particularly Milling. These charges include a gain of $10 million on the sale of Starch Australasia. The impact of the divestment of Leiner Davis will be recorded in the second half.¡¨


The Chairman of Goodman Fielder, Mr Jon Peterson, said strong underlying performances by all businesses and increased bread and gelatin pricing provides confidence about a much stronger second half.

¡§Goodman Fielder is already seeing a stronger performance from Milling & Baking in the second half and the Board is confident that the company can deliver a record six month profit,¡¨ he said.

¡§On the basis of the stronger second half, we are forecasting that the company will now deliver full year earnings growth of approximately five per cent over core earnings last year of $123.4 million.¡¨

Capital Management

The Board of Directors has declared that a 50 per cent franked interim dividend of 3.5 cents per share will be mailed to shareholders on 12 April.

The Chairman of Goodman Fielder, Mr Jon Peterson, said the Board intends to review its dividend policy later this year to ensure the most tax effective approach for shareholders.

Mr Peterson also said the Board is planning to make a major capital return to shareholders once the proceeds of the Leiner Davis sale had been received.

¡§The sale process is on track and we plan to seek approval for a major capital return to shareholders in the first half of next financial year,¡¨ Mr Peterson said.

¡§We anticipate a capital return to shareholders in excess of $200 million which will provide a substantial increase in earnings per share.¡¨

For further information:

Jill Dryden

Managing Director

Porter Novelli Auckland

09 373 3786 work

021 242 0486 mobile

Key Points

The key points of the first half results for the 2001 financial year include:

„h Sales revenue was down 4.6 per cent to $1,533.4 million.

„h EBIT from continuing business was up 1 per cent to 118.3 million.

„h Net operating profit after tax before rationalisation and restructuring costs is down 5.3 per cent to $57.7 million compared with underlying earnings of $60.9 million in the previous corresponding period (which excludes the $7.5 million one-off benefit arising from the corporate tax reforms which increased the headline earnings figure to $68.4 million last year).

„h $42.7 million in rationalisation and restructuring costs arising from the milling restructuring in Australia and New Zealand and a range of other productivity improvement projects. This charge is equivalent to what were formerly abnormals before accounting rule changes came into affect this financial year.

„h Net debt was down nearly seven per cent to $772 million.

„h The gearing ratio was also broadly unchanged at 60 per cent and interest cover remained a healthy 6.3 times.

„h An effective tax rate of 34 per cent in line with the new corporate rate compared with an artificially low tax rate last year of 28 per cent due to the one-off benefit arising from the corporate tax reforms.

Key Indicators

31/12/00 31/12/99

Net Debt (A$M) $772 m $829 m

Debt/Equity (%) 60.0 % 64 %

Interest Cover (times) 6.3 times 7.0 times

ROFE (%) 11.0 % 11.4 %

Average interest rate (%) 7.6 % 6.9 %

Effective tax rate (%) 34.0 % 28.1 % (1)

EPS before rational. charges 4.5 cents 5.3 cents

Dividend (cents per share) 3.5 cents 3.5 cents

Payout ratio (%) 77.6 % 65.7 %

(1) Includes tax rate change benefit

Financial Summary


31/12/00 31/12/99 % Change

Net external sales 1,533.4 1,607.1 -4.6

Total trading EBIT 120.3 126.3 -4.8

Net Interest -31.5 -28.9

Tax -30.0 -27.4 (1)

Minority Interests -1.1 -1.6

NOPAT 57.7 68.4 -15.6

Net restructuring charges -20.2 -19.6

Net profit 37.5 48.8 -23.2

(1) Includes $7.5million benefit from change in Australian tax rate

Divisional Results

Earnings before interest and tax


31/12/00 31/12/99 % Change

Milling & Baking 54.2 57.2 -5.2 (1)

Edible Oils 30.0 30.2 -0.7

Cereals & Snacks 30.9 21.4 +44.4 (1)

Ingredients 8.1 10.1 -19.8 (2)

International 16.6 12.0 +38.3

Other -21.5 -13.8

Trading EBIT 118.3 117.1 +1.0

Discontinued businesses 2.0 9.2 (3)

Total EBIT 120.3 126.3 -4.8

(1) Food service business of Ernest Adams transferred to Bluebird
(3) Adjusted for the sale of Starch Australasia
(5) Discontinued businesses include Steggles, Vetta and Starch Australasia

For immediate release 9 March 2001

Goodman Fielder announces strategic review action plan

A four step action plan to be implemented over the next three years will transform Goodman Fielder into the leading retail branded food business in Australasia and the Pacific region.

The Chief Executive of Goodman Fielder, Mr David Hearn, said the action plan will be implemented quickly, with most changes in place by 1 July, and will deliver significantly improved performance.

¡§We expect to generate double digit earnings growth each year for the next three years, and drive our return on funds employed above our target of 15 per cent via a much more intensive approach to asset management,¡¨ Mr Hearn said.

Mr Hearn said the four key steps of the action plan are to:

1. Concentrate on our Australasian retail branded businesses;

3. Build a much more focused portfolio of power brands;

5. Radically simplify all aspects of the business; and

7. Work core assets much harder and reduce our capital base.

¡§The sale of Leiner Davis and Germantown is part of our plan to move quickly to simplify the business and focus on our core portfolio of retail branded food business in Australasia and the Pacific,¡¨ Mr Hearn said.

¡§The next major step will be to integrate our three major businesses in New Zealand; GF Milling & Baking, Bluebird and Meadow Lea into a single powerful national food business.

¡§We will then move quickly to replicate that process in Australia by combining Uncle Tobys and Meadow Lea into a billion dollar retail grocery business that will have the resources to more than match any competitor in Australia.

¡§These organisational changes will enable Goodman Fielder to focus on and increase our investment in fewer ¡¥power brands¡¦ such as Uncle Tobys, Meadow Lea, Praise, Buttercup, Sunicrust, Helga¡¦s, Country Bake, Quality Bakers and Bluebird in Australia and New Zealand.

¡§We intend to split out our non-retail businesses which we will run more aggressively for cash. Specifically we will separate out GF Milling from GF Baking to run as a separate and lean, cost-competitive businesses on a stand alone basis.¡¨

¡§We will also combine all of our food service operations into a single focused business unit.¡¨

Mr Hearn said the action plan will have a significant impact on performance of the business over the next three years.

¡§We expect earnings per share to grow at a significantly faster rate as a result of our new approach to capital management,¡¨ Mr Hearn said.

¡§As foreshadowed when we announced the sale of GF Ingredients, the Board intends to use the sale proceeds to make a significant capital return to shareholders next financial year. We anticipate this capital return will be in the order of $200 million and will therefore require shareholder approval.¡¨

Mr Hearn said the clear conclusion of the strategic review was that Goodman Fielder should focus on becoming the leading retail branded food business in Australasia and the Pacific region.

¡§The action plan will transform Goodman Fielder,¡¨ Mr Hearn said. ¡§The company will become the lowest cost food manufacturer in its markets with superior skills in supply chain management, customer management and consumer insights.

¡§We will become a focused retail business based around a portfolio of ¡¥power brands¡¦ that will underpin significant improvements in performance.¡¨

For further information:

Jill Dryden

Managing Director

Porter Novelli Auckland

09 373 3786 work

021 242 0486 mobile


„h Managing director of the integrated New Zealand operation is Ron Vela, formerly Managing Director of Bluebird Foods and NZ Shared Services. Mr Vela has been with the Goodman Fielder group in New Zealand for more than 16 years and has extensive experience at business unit level and headed the company¡¦s previous New Zealand corporate operation.

„h The combined New Zealand businesses of Goodman Fielder Milling and Baking, Bluebird Foods and Meadow Lea Foods will have a turnover in excess of $700 million and its portfolio of major food brands such as Quality Bakers, Ernest Adams, Meadow Lea, Bluebird and Uncle Tobys leads the market in 20 major food categories.

„h Goodman Fielder in New Zealand has more than 3300 employees and operates from 25 sites around the country.

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