Goodman Fielder H1 profit down

Sees year earnings rising

Spreads maker and bakery goods company Goodman Fielder Ltd has posted a 21.9 percent fall in first half profit due to a difficult trading environment.

The trans-Tasman operator said net profit for the December half year was A$73.9 million (NZ$94.73 million), down from A$94.6 million the prior corresponding period.

Sales were strong and rose 12.2 percent to A$1.48 billion.

However, commodities costs were volatile during the half year and consumer buying patterns altered, weighing on the bottom line.

Goodman Fielder said it expects trading conditions to pick up in the second half of 2008/09 and be even more positive in 2009/10.

As a result, it has forecast a strong rise in annual profit for this financial year.

"Net profit after tax for the current year is expected to be in the range of A$170 million to A$185 million," it said in a statement on Wednesday.

Its 2007/08 net profit was A$27.7 million.

During the first half, high commodity costs impacted margins and added A$120 million to the company's cost base.

"Although international commodity costs are now retreating from an extended period at record high levels, little benefit was realised in the period due to time lags inherent in purchasing contracts and in clearing higher cost inventory of grains and oils," Goodman Fielder said.

It also noticed that negative economic conditions had hurt consumer confidence, resulting in a drift to cheaper alternatives such as house brand products.

"This has impacted margins and had a negative effect on earnings, which the company continues to combat by maintaining brand support and bringing new products to the market," it said.

Goodman Fielder said its key challenges were the impact of a recessionary economic environment on consumers and continuing volatility of commodity costs.

"We anticipate a softening of demand during the remainder of the financial year as our trading partners reduce inventory to preserve cash and to take advantage of falling commodity costs," it added.

"As well, we expect a competitive pricing environment as industry participants endeavour to clear higher cost inventory.

"The company will benefit from softening commodity costs as this will assist with margin recovery, particularly in our baking, dairy and Asia-Pacific businesses."

Goodman Fielder declared an interim dividend of 4.5 cents, down from six cents in the first half of 2007/08.

Goodman shares were down 11 cents to A$1.29 at 1236 NZT.

- AAP