Goodman Fielder issues profit warning
Listed food company Goodman Fielder, whose brands include Molenberg bread and Meadow Fresh dairy products, is bringing forward planned staff cuts amid "deteriorating" market conditions.
At its interim result in February, the food giant expected its normalised operating profit for the year to June 30 would be "broadly in line" with the A$185.6 million ($199 million) reported last year.
But in an update on trading conditions today, the company said it expected profit to be 10 to 15 per cent below the analysts' consensus of about A$180m.
Since February, "trading conditions in Australia and New Zealand have deteriorated and manufacturing and supply chain cost savings under Project Renaissance have been delayed", Goodman Fielder said.
"This has required the company to revise its earnings expectations for the fourth quarter."
The company has accelerated its cost cutting plans and is now expecting to make an extra A$25 million in savings, mostly from reducing headcount, by the 2015 financial year rather than 2016.
The redundancies are expected to be recorded as significant items in this year's accounts.
The lower forecast earnings also mean the company's net debt position is not expected to reduce by at June 30 as previously anticipated.
"However, Goodman Fielder's financial position remains strong and the company continues to operate comfortably within its debt covenants," the company said.
While it has yet to complete an analysis of the carrying value of its business, Goodman Fielder expects to record non-cash impairments, reflecting the deterioration in the trading outlook across its portfolio.
In the baking division, volumes increased in the third quarter but the average selling price was down.
Also, A$10m to A$15m out of about A$32m in Project Renaissance savings which were expected to be achieved in this financial year have been delayed until next year.
"Continuing reliability issues across the manufacturing and supply chain network have required the company to continue to invest to maintain customer service metrics which is impacting earnings in the short term," the company said.
Increased competition hurt the grocery division, which is expected to be further impacted in the fourth quarter by difficult trading conditions and lower customer inventory levels.
Earnings in the New Zealand dairy business are likely to be affected by an increase in the farmgate milk price from $8.30 to $8.65 per kg of milksolids.
Earnings expectations in the Asia Pacific business remain largely unchanged.
Operational metrics in the Fiji Poultry business continue to improve and full-year normalised operating profit for Asia Pacific is expected to increase on the prior year.
Goodman Fielder shares were unchanged at 65c per share in early trading on the NZX this morning.