Goodman Fielder knocks profits down on competition, floods

Posted by Nicole Eckersley on 28th April 2011

Bread giant Goodman Fielder has announced a reduction in its expected profits following a “soft” third quarter, with businesses affected by retailer competition between Coles and Woolworths, fallout from the floods, commodity costs and the high Australian dollar.

“At the time of the release of the company’s Interim results, the company anticipated that NPAT for the year would be in line with the prior year’s normalised earnings. The company now expects FY 2011 NPAT to be in the range $140 to $150 million following a soft third quarter offset by a more promising outlook for the last quarter,” said the company.

“Market share reduction, increases in agricultural commodity costs and adverse currency translation costs have contributed to the decline, and the company has been unable to reduce its cost base quickly enough to compensate,” Chairman Max Ould said today.

“Timely cost recovery in our Australian Baking and Home Ingredients businesses has proved to be very difficult to achieve in the current climate of fierce retailer competition.

“During the third quarter the company sought to recover its increased costs through price increases on its products and we took a firm position with our major Australian trading partners,” Mr Ould said. “This resulted in retailer resistance to price increases and some negative but largely temporary impacts on on-shelf ranging. As a result the third quarter saw a reduction in volumes, coupled with delays in cost recovery.

“At this point we believe that the fourth quarter will see an improvement on the third quarter as price increases are being achieved and ranging is returning to normal. However the poor performance of the third quarter will not be recovered prior to the end of the year, despite steady or improved performances from our New Zealand Dairy business, Integro Foods and
our Asia Pacific operations.”

The company said it had underestimated the impact of the ongoing effects of a number of natural disasters in New Zealand, Queensland and Victoria which have resulted in the loss of some business and higher than expected operating costs.
“As the market is aware we are currently in the process of identifying a successor to our CEO Peter Margin who will retire from the company at the end of this week. While no appointment has yet been made, the Board is close to making a decision and an announcement is anticipated shortly,” Mr Ould said.