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Goodman Fielder

Wednesday 31st August 2011

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Food manufacturer and distributer Goodman Fielder (GFF), has reported its full year results, which were accompanied by a A$300 million impairment charge on its baking division, because of weak trading conditions. Brokers have different views on the stock with Credit Suisse upgrading Goodman Fielder to outperform from underperform, while Macquarie downgrades GFF to underperform from neutral.

Credit Suisse believes GFF’s share price has undershot its valuation, and bread prices are likely to improve from current levels over the next three years. It adds that while the company has announced a proposed restructuring along geographical lines, "we do not think such a move will create as much value as a company break up." Credit Suisse’s DCF-based target price for the stock is A$0.93.

Macquarie downgrades its rating after GFF reported a loss of A$166.7 million for the year to 30 June 2011, on revenue of A$2.5 billion (down 3.9% on the previous year). Macquarie lowers its net profit after tax forecasts for the years’ ending 30 June 2012, 2013 & 2014 by 35%, 34% and 34% respectively, and has a DCF-based 12-month price target of A$0.72, noting that it doesn't see any immediate share price catalysts.

Dan Stratful broker at Investment Research Group (IRG) says that GFF’s result ‘was a fairly poor result, and even net profit on an underlying basis (excluding the A$300 million non-cash impairment charge) was down 17% at A$133.3 million’ from A$161.1 million in the previous year. ‘The company had a tough year as soft commodity prices rose, volumes reduced and a strong AUD affected reported results’.

GFF’s new CEO has began a strategic review of the company’s business portfolio, designed to deliver a three-year phased plan to stabilise, restructure, and grow the company and to deliver a sustained business improvement.

GFF’s shares last traded on the Australian sharemarket at A$0.69 and on the NZ sharemarket at NZ$0.87.

Contact IRG on 0800 437 8489

Dan Stratful

Authorised Financial Adviser (AFA)

**A disclosure statement is available, on request and free of charge by calling 0800 437 8489.

Recommendation sourced from the IRESS software trading platform


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