Goodman Fielder sees grocery consumers “reverting to usual buying habits”
Goodman Fielder, Australia’s largest publicly listed food manufacturer, has told shareholders at their Annual General Meeting that the outlook for the coming year is “encouraging” and believes that the major headwinds of the past two years are behind them.
“The Board is of the view that Goodman Fielder has now successfully managed its way through the two most formidable challenges which the company has faced in its recent history – the effects of the global financial crisis, and three years of all-time high commodity costs,” Chairman Max Ould said.
“The effects on the company were profound. The world wide financial crisis, which following the collapse of the US sub-prime mortgage market, resulted in significant changes in consumer buying patterns as they either curtailed spending or sought cheaper alternatives. This resulted in a trend to lower margin products, such as private label, while the rapidly escalating commodity costs increased the company’s cost base by around $350 million – the approximate equivalent of two years’ net profit.”
Mr Ould said the management of the company had helped them negotiate the trying conditions and believes they have “emerged in very good shape” and are consequently poised to deliver strong growth.
Importantly for the food manufacturer, food commodity prices have retreated to “more normal levels” while the growth of private label has moderated.
“I am pleased to be able to report … that consumers are reverting to their usual buying habits,” Mr Ould advised. “These trends became evident in the final quarter of the last financial year and have continued into this financial year.”
“Our raw material pricing for our consumer brands is back within a manageable range and the incursion of private label on most of our category market shares is either retreating or has levelled off.”
In a presentation to shareholders, Managing Director Peter Margin added that they had begun the financial year well, with “strong run rates (continuing) through the first quarter”. As a consequence, the maker of White Wings, Praise and Helga’s believes the outlook for the full year is “encouraging”.
Commercial oils sale
Earlier this year Goodman Fielder said that a renewed focus on consumer brands would see them put their commercial industrial business (which processes edible fats and oils) up for sale.
This process is ongoing but the food manufacturer expressed confidence that a deal was imminent, with discussions underway with their preferred bidder.
Mr Ould also took the opportunity to announce to shareholders the resignation of Non-executive Director Gavin Walker, who is currently Chairman of the Corporate Risk Committee and Member of the Audit Committee. Mr Walker has also been serving on the Board of Lion Nathan and has decided that, given the Lion merger with National Foods, it would not be suitable for him to stay on both boards.
“(He) has advised that, following the recent merger of Lion Nathan and National Foods, he has continued his role with the merged entity and he now has a potential conflict of interest due to both companies’ interests in dairy,” Mr Ould said. “He has therefore indicated that he intends to resign from the Board before the end of 2009.”
“On behalf of shareholders and my fellow directors, I would like to express my appreciation of the very significant contribution that Gavin has made to the company. His experience and insight will be sorely missed and we wish him well in the future.”
The search for a replacement has begun.
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