Goodman Fielder fattens margins

Last updated 14:48 25/02/2010

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Goodman Fielder, Australia’s biggest baking company, posted a 25 per cent jump in first-half profit after cutting manufacturing and logistics costs and benefiting from more stable raw material prices.

Net income rose to A$90.3 million ($116.5 million), or 6.7 cents a share, in the six months ended Dec. 31, from A$72.3 million, or 5.5 cents, a year earlier, the Sydney-based company said today.

The shares fell almost 4 per cent to A$1.48 as profit lagged behind the A$92.4 million forecast in a Bloomberg survey and it provided no full-year guidance.

Goodman, whose products range from Meadow Lea margarine to White Wings baking mixes, Helga’s bread and Meadow Fresh milk, has been rationalising its brand portfolio to concentrate on its most-profitable lines, and in December agreed to sell its edible fats and oils unit to Cargill Inc. for A$240 million, subject to regulatory approval.

Fresh baking led the improvement in earnings margin in the first half, as it expanded its product range.

The profit gain “was underpinned by substantial and continuing efficiency improvements in manufacturing and logistics performance,” the company said.

“These gains were augmented by margin expansion which flowed from a less volatile commodity cost environment, a significant increase in investment in the company’s brands and improvements in the company’s branded product mix,” it said.

The company’s EBITDA margin for fresh baking, the company’s biggest business, widened to 14.6 per cent in the first half from 11.2 per cent a year earlier as earnings jumped 32 per cent, even as sales edged up just 0.7 per cent to A$496.8 million.

For fresh dairy and meats, the margin expanded to 13.9 per cent from 7.5 per cent as revenue fell 8.5 per cent to A$222.4 million. The EBITDA margin on home ingredients rose to 20.1 per cent from 18.6 per cent as sales fell 3.3 per cent to A$258 million.

For Goodman’s Asia Pacific business, the margin widened to 18.9 per cent from 12.6 per cent on a 15.3 per cent decline in sales to A$159 million.

Commercial was the only business that showed a decline, with the EBITDA margin shrinking to 5.8 per cent from 11.2 per cent as sales dropped 20 per cent to A$229.9 million.

The company said its businesses are continuing to “perform solidly” into the second half, in the face of a “more moderate commodity cost environment” though the outlook was too uncertain to make a full-year forecast, which would also be affected by the timing of the sale of the edible oils business.

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- BusinessDesk

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