Struggling Australian food firm Goodman Fielder has lowered its full-year 2012 (FY12) earnings forecast as costly restructuring of its baking units and rocky trading conditions slam revenues.
The Sydney head-quartered food giant said 2012 revenues would be hit by up to A$275m in costs for divestments, restructuring and struggling sales.
In a trading update released yesterday, the firm said FY12 earnings would be at the lower end of the A$230-$245m range outlined in its February interim results.
Last month Goodman Fielder announced an overhaul of its bakery businesses ‘Project Renaissance’ in a bid to reduce costs (save A$100m by 2015) and improve efficiency amid struggling sales. It closed three bakery facilities and plans to consolidate efforts with an upgrade of its Townsville bakery to create a ‘manufacturing hub’. See HERE .
It also has several business units ‘under review’ and has divestment plans for its oils and milling units.
While ‘Project Renaissance’ remains “on track”, restructuring costs mainly relating to the bakery consolidation scheme are anticipated to hit A$70-75m, Goodman Fielder outlined in its statement.
The Australia/New Zealand Baking division is yet to see the benefits of this project, it said, as it continues to struggle amid “increased competitive pressure, including price reductions for supermarket private label bread and the resulting pricing pressure on proprietary branded bread, together with higher labour and logistics costs”.
“While Goodman Fielder believes its strategy to address these market challenges will increase earnings over the medium term, the company continues to adopt a prudent approach to its review of the carrying value of the Baking business as part of the process of preparing its financial accounts for FY12,” it added.
Divestment plans for its oils and milling businesses, the review of certain business areas and the struggles of Baking and Home Ingredients NZ will set the company back an additional A$190-200m in non-cash impairments.
FY12 earnings will be released on 14 August 2012.