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Goodman Fielder, selling assets and taking charges, narrows annual loss

Tuesday 14th August 2012

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Goodman Fielder posted a narrower full-year loss as the branded food and ingredients company presses on with asset sales, rationalising its line-up of businesses in a subdued Australasian market.

The net loss was A$146.9 million in the 12 months ended June 30, from a loss of A$166.7 million a year earlier, the Sydney-based company said in a statement. Sales fell 1.7 percent to A$2.5 billion. Margins in Australia and New Zealand shrank as a tough retail market made it hard to pass on rising input costs.

Impairments, restructuring costs and foreign exchange losses amounted to A$267 million, less than the A$300 million charge against goodwill in its Fresh baking division, which includes brands such as Vogels, in the previous year. Goodman took a further A$143.5 million charge on its baking division this year.

The company is cutting costs and streamlining its brands while repaying debt to strengthen its balance sheet as it heads into a 2013 year likely to be characterised by a challenging environment and competitive pressures.

"The business is now much better equipped to respond to market challenges following the significant restructuring the company has undertaken over the past 12 months," it said. "Consumer confidence in Australia/New Zealand will remain subdued with the overall consumer spending outlook to remain challenging."

Goodman's shares rose 4.1 percent to 51 Australian cents on the ASX. Normalised earnings before interest and tax fell 20 percent to A$233 million in the latest year, within the guidance the company gave with its first-half results. The shares, which are rated a 'hold' based on a Reuters poll of 12 analysts, have gained 9.2 percent this year.

The company won't pay a final dividend.

Net debt fell about 24 percent to A$728 million following a A$259 million capital raising. Goodman is restructuring its businesses under its Project Renaissance strategy, which is aimed at "realigning the cost base to meet current conditions and reposition for future growth." It aims to achieve A$100 million in annualised savings by 2015.

The baking division, Goodman's largest by sales and earnings, reported a 4.3 percent decline in sales to A$979 million and a 29 percent drop in 'normalised' earnings before interest, tax, depreciation and amortisation to A$93.2 million. Its ebitda margin shrank to 9.5 percent from 12.8 percent.

Reduced volumes and the loss of a private label supply contract were compounded higher costs for labour and logistics. Its cost-cutting response, including the elimination of 338 jobs across the region, weren't enough to offset volume and price declines, it said. It is in the process of closing three Australian bakeries.

Home ingredients sales fell 5.7 percent to A$450 million and normalised ebitda dropped 16 percent to A$81.1 million, while the ebitda margin fell to 18 percent from 20.1 percent. Weak consumer demand meant it struggled to pass on increased commodity costs for oils and flour.

Fresh dairy revenue decline 2.7 percent to A$411 million and normalised ebitda fell 10 percent to A$46.4 million. Its ebitda margin shrank to 11.3 percent from 12.2 percent.

Milk volumes declined in New Zealand, where a major competitor, likely to be Fonterra, cut its own retail prices while wholesale prices for milk paid by Goodman didn't fall by the same amount.

Asia Pacific sales climbed 11.5 percent to A$333.5 million normalised ebitda rose 13 percent to A$66.3 million and its ebitda margin grew to 19.9 percent from 19.6 percent. Highlights included increase sales of MeadowLea and Meadow Fresh brands, a strong position for its Crest poultry brand in Fiji and sales of Flame brand flour in Papua New Guinea.

Its Integro commercial oils business, which it is in talks to sell, recorded a 1.9 percent gain in sales to A$339.9 million while normalised ebitda fell 24 percent to A$30.6 million. The margin in that business fell to 9 percent from 12.1 percent.

Goodman said it expects to conclude the sale of Integro by the end of this month. It is also in talks with a number of potential bidders about the sale of its New Zealand milling operations.

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