Supermarket discounting hurts Goodman Fielder profit
Australia’s largest bread maker, Goodman Fielder, has felt the pinch of Supermarket discounting during its half yearly results for 2012 – 2013.
The results released today report a normalised net profit after tax of $41.2 million – down 4 per cent from the previous period. Revenue was also down 9 per cent to $1.2 billion, largely due to supermarket price discounting in the Australian bakery sector.
Goodman Fielder CEO Chris Delaney said that he remained confident about Australian trading conditions which had been “very challenging” due to “lower volume and pricing.”
“However, the progress we are making, particularly in securing price increases in our Baking and Grocery divisions, is expected to result in improved performance in the second half of the year,” Mr Delaney said.
“We improved the alignment with our key retail partners which resulted in the successful agreement to implement meaningful price increases related to the ‘cost to serve’ model in Baking in Australia and also price increases to recover input cost inflation in our Baking and Grocery divisions in Australia and New Zealand,” he added.
Normalised EBIT declined by 17 per cent to $95.3 million reflecting lower volumes in Baking and increased mix pressure from private label and competitors in Grocery, “which required further investment in price and promotion.”
However, Goodman Fielder’s statutory net profit after tax was up to $35 million, following the sale of the Integro oils business to Graincorp on October 2, 2012. The $10.9 million after-tax gain on the sale is expected to be used to pay the group’s debt.
The group also announced that net debt had been reduced by 35 per cent to $498 million. Its ‘Project Renaissance’, plan to achieve $100 million in recurrent savings by 2014- 2015 was also reported to be on track, with an expected $16 million in savings for the end of financial year.
“While we still have significant work to do, I remain confident that the improvements we continue to make will enable the company to restore acceptable levels of returns to shareholders in the medium term,” Mr Delaney concluded.