Industry trends hurt margins at Goodman Fielder but sales rise

Posted by Daniel Palmer on 26th August 2009

Goodman Fielder, Australia’s largest publicly listed food manufacturer, has reported a 6.5 per cent surge in sales despite headwinds from “depressed consumer confidence” and increased private label pressure.

The company saw profits rise to $177.7 million from $27.7m last year, largely due to asset sales and last year’s write-offs.

“During the majority of the year operations continued to be impacted by an extended period of substantial and rapid increases in commodity costs,” the company noted. “This has been a feature of the company’s business environment for the past three years.”

“These severe conditions ameliorated during the second half as international commodity pricing began to retreat from record high levels. By the end of the period the company was beginning to realise the benefits as higher priced inventory levels were progressively cleared.”
Goodman Fielder reported that economic conditions in Australia and New Zealand had led to “an industry trend down to cheaper alternatives”. As a result, the company’s branded market shares were hurt in both the bread and dairy categories.

The sales decline of branded goods was partially offset by their increased supply of private label bread to Coles but margins were reduced. Despite this, they are optimistic that private label growth has now plateaued.

“The company’s ongoing focus on new product development and heavy investment in brand support is countering this trend and, at the end of the period, it appeared the decline in New Zealand had been arrested and that the company’s market shares were recovering,” the company said. “In Australia Fresh Baking branded market shares have returned to historical levels.”

In May, the firm reported a change in strategic direction to focus on core brands. As a result, they announced plans for a sale of their Commercial edible fats and oils business, which remains an ongoing process. A “number of parties” had expressed “keen interest in the division”, Goodman Fielder advised.

Outlook
“The outlook for FY10 is encouraging,” the manufacturer of Helga’s bread stated. “The company expects to see efficiency gains resulting from its capital expenditure program and plant rationalisations begin to flow through, underpinned by its strengthened focus on branded everyday foods.”