Goodman Fielder net profits drop 77% as it refines operations
On February 16 Goodman Fielder announced an “unacceptable” interim net profit of A$21.5 million (US$27.7m), down 77% from A$93.1m at the same time a year ago.
“Under the latest business review, the company has defined the baking, home ingredients, and the dairy businesses as the company’s core businesses,” corporate affairs director, Ian Greenshields said in disclosing the company’s new retail business focus.
The firm said revenue for the six-month period was A$1.22bn, down 3.7% on the previous corresponding period. Earnings before interest, tax, depreciation and amortisation fell by 44% to A$117.9m
Goodman Fielder CEO Chris Delaney said in an accompanying statement the company had experienced a very difficult six months, no thanks to the weak trading conditions of the previous quarter spilling into the first quarter.
The company said that low consumer confidence, heavy discounting, home brand resurgence, and natural disasters combined to create volume reduction, an unfavourable product mix, margin decline, and a difficult cost recovery environment.
Delaney, however, remained optimistic, noting some key measures that were moving in the right direction.
“The improving trends, which were expected in the second quarter, materialised with early signs of stabilisation in product volumes and pricing, and more favourable raw material costs in the company’s dairy division,” he said.
“Project Renaissance, the company’s costs-out program, also began delivering early benefits…our baking market shares and pricing, which were impacted in the second half of 2011 were recovering as we exited this period.”
“Nevertheless we recognise that the financial performance of the company is still unacceptable, but we are confident that we are beginning to work our way back towards providing acceptable returns for shareholders,” Delaney remarked.
Project Renaissance was introduced during the last reporting period in order to review and then reduce the company’s overall cost base by A$100m by 2015, with A$40m in annualised savings to be delivered by 2013.
The project comprises four major programmes including Baking Australia overhead reduction; restructuring the Australian and New Zealand divisions; and manufacturing and supply chain efficiency gains.
According to the earnings call, significant early benefits have been achieved, reflecting annualised savings of around A$20m.
Goodman Fielder said it may put some of its non-core businesses up for sale, even as it closes some plants.
Greenshields told FoodNavigator-Asia the company would soon close plants in Bunbury in Western Australia and Rotorua in New Zealand.
It has also put Integro, the commercial vegetable oils business under the microscope for a second time. Integro supplies oils to commercial kitchens and manufacturers, and was once set to be sold to Cargill.
The company has four fats and oils refining facilities in Australia and one plant in New Zealand, but Greenshields said this business was no longer considered core along with the company’s flour milling operations.
The flour milling business is also under review, and may be put up for sale. Under this business, Goodman Fielder owns and operates two plants in New Zealand.
Greenshields said the company is also reviewing its other businesses in the two countries, including meat and convenience meals in New Zealand, and dips, biscuits and frozen pastries.
Correction: This story has been amended as it originally stated a profit drop of 400%, not 77%.