Goodman Fielder year profit down 88.4%

Goodman Fielder has reported a fall in annual profit and has said it does not expect much improvement in earnings this financial year due to uncertainty surrounding the outlook for the economies of Australia and New Zealand.

Net profit for the year ended June 30 fell 88.4% to $27.7 million from the prior corresponding period.

Excluding impairment charges and restructuring costs, net profit from continuing operations was $220.7 million.

“The company sees little improvement in the underlying earnings in fiscal 2009 due to uncertainty around commodity costs and future economic conditions in Australia and New Zealand,” said a statement by Goodman Fielder.

“The company is more optimistic for the fiscal 2010 year and expects to see the benefits flow through from significant capital expenditure and resulting efficiency gains, combined with softening commodity prices.”

During 2007/08, revenue rose 10.2% to $2.68 billion.

On a normalised basis, Goodman Fielder said its net profit was in line with the prior year’s $218.7 million, despite having to absorb $234 million in increased commodity and logistics costs.

Its bottom line result was hit by one-off restructuring costs associated with plant closures and a noncash impairment charge of $170 million to the goodwill of the Fresh Dairy division in New Zealand.

The spreads and breads maker, said “substantial and rapid” increases in commodity costs impacted margins and added $204 million to its costs.

“In the second half of the year international crude oil pricing also reached record high levels, resulting in an increase of $30 million in logistics costs,” it added.

“A rapid deterioration in the New Zealand economy towards the end of the financial year also impacted earnings as did the weakening New Zealand dollar.”

Earnings before interest and tax (EBIT) for Goodman’s fresh baking business fell 12.9% to $131.4 million.

“This was the first time in the last five years in which the business did not record double digit profit growth,” Goodman Fielder said.

Earnings for its commercial unit, which supplies flour, fats and oils, fell 4.6% to $66 million, due to rising oil and wheat costs.

But home ingredients EBIT rose 13.8% to $101.3 million.

The result included the first full year of earnings from the Copperpot dips business as well as a few months benefit from biscuit maker Paradise Foods, which it acquired in March.

Meanwhile, EBIT for the troubled dairy and meats arm fell 31.9% to $34.4 million.

“The dairy business had a difficult year with rapidly escalating commodity costs resulting in raw milk costs increasing by over 60% in the year,” said the statement.

“Aggressive cost recovery initiatives resulted in the business taking four price rises but inevitable timing lags and a growth in private label sales had a negative impact on margins.”

Goodman Fielder declared a final dividend of 7.5 cents, taking the total for the year to 13.5 cents.

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