Goodman Fielder: H1 profit falls on rising commodities costs

Macquarie Park / AU. (gfl) Goodman Fielder Limited has delivered a robust result in a challenging environment for the six months to 31 December 2007. The company performed well in the first six months of the F08 financial year with most businesses delivering at or above expectations and revenue rising strongly.

Revenue for the first half of the financial year 2008 was 1’316,8 million AUD, an increase of 8,3 percent over the prior corresponding period. This was underpinned by strong revenue growth of 15,5 percent in our dairy business in New Zealand. Normalised net profit after tax was 108,7 million AUD; up by 7,2 percent. Reported net profit after tax was 94,6 million AUD which includes a provision of 20,3 million AUD for one-time costs associated with the closures of major manufacturing sites at Mascot (New South Wales) and Geelong (Victoria).

Operating cash flow increased by 20,9 percent to 95,3 million AUD as a result of improved earnings and strong working capital management. Among the highlights of the FY 2008 first half result were the continuing strong performances of the Fresh Baking and Home Ingredients businesses and the effectiveness of the company´s ongoing management of unprecedented high commodity costs. The company also secured a number of major house brand contracts, successfully completed the integration of the Copperpot and Independent Dairy Producers acquisitions, and maintained its ongoing commitment to new product development.

«The cost of agricultural commodities continued to escalate to record high levels during the period as a result of strong global demand in the face of world wide shortages», Goodman Fielder CEO Peter Margin said. «The company has been very focused on margin protection in an environment of considerable cost volatility. The management of rising costs has been a primary goal for all of our businesses, with the increases being offset where possible with productivity and efficiency improvements, or being passed on in the marketplace. Our Fresh Baking business continued its strong momentum from the prior year despite the commodity costs pressure. Its market share was impacted slightly as a result of the price increases».

GF Fresh Baking	H1 F08 Results	H1 F07	Variance
Revenue	499,4 million AUD	467,5 million AUD	06,8%
EBIT	073,6 million AUD	066,5 million AUD	10,8%
EBIT Margin	14,7%	14,2%

The Fresh Baking business delivered a strong financial performance. Effective price realisation and manufacturing efficiency gains contributed to the good results. During the period the company continued its investment in brand development with its new product development program resulting in three new product lines being launched onto the market. Marketing support was also maintained through the period.

The Fresh Baking business continued the process of revitalising its manufacturing base through a combination of enhanced management capability, plant rationalisation and the implementation of lean manufacturing disciplines. During the period a superseded plant in Geelong was closed and a new frozen par-bake facility was established at Clayton in Victoria.

In New Zealand the Fresh Baking business is putting significant effort into redeveloping the well known Irvines and Ernest Adams brands in the savoury and sweet pie category. New management, new product development and brand investment are being used to unlock the potential that exists in the category.
Info: 2008 Half Year Report and Results (PDF | 21 pages | 1,35 MB)